Top PSLF Mistakes

Presented by: Heather Jarvis

NOTE: Slides do not show until 7:15 mark.

Run time: 1:05


Top 3 PSLF (public service loan forgiveness) mistakes


Hello, everyone. My name is Heather Jarvis, and I would like to welcome you to today’s web training about my favorite thing ever: Public Service Loan, forgiveness.


I love this particular visual aid, it really sums it up. Public Service Loan forgiveness is all about jumping through hoops, lots of hoops all at the same time. And so it can be wonderfully generous for some student loan borrowers, but it is excessively elaborate to qualify and so it has really caused lots of folks, grief in trying to secure the forgiveness that is provided. So I am hoping to help by putting some information out here for you. And I’d like to encourage you to ask questions as we go along. I will pause periodically and would be delighted to take those.


So, I’m gonna give them to you here as a preview of coming attractions, and then I’m gonna break it all down so that there’s no confusion about what I mean. But to begin with, one of the problems folks have had, people who went to school a long time ago, like I did, may need to consolidate their federal student loans before those loans are eligible for forgiveness. The federal loans that are eligible are direct loans, and people have been borrowing direct loans since the summer of 2029, 2020, 2010 from the federal government. So, for the last decade, the federal student loans have been direct loans that are eligible for public service loan forgiveness.


But people who have older student loans, as many of us do may need to take the additional step of consolidating those loans known as FEL loans before they can be eligible. And I’ll break that down for you a bit more as we go ahead.

It is also part of that process to enroll in an income driven repayment plan. Income driven repayment is essential to achieving loan forgiveness, and people who consolidate will be put into a standard term of repayment of as long as 30 years if they do not affirmatively choose an income driven plan. And so, that’s part of consolidating and selecting the repayment plan for folks with older student loans.


Another huge issue out of order here because why, you know, why do, 1, 2, 3, when you can do 1, 3, 2 is forgetting to file the employment certification forms. They are not technically required to be filed every year, but it is really smart to do so. And it’s also necessary that people evaluate the response from Fed loan to the filing of the Employment Certification Form, and verify that Fed Loan has counted the payments correctly and has counted all of the payments.


Now, the Fed loan has been known to miss counting some of the payments, so it’s super important to keep an eye on that.

And finally, the other sort of big error that can trip people up because it is a sort of hidden trap, is this whole concept of a paid ahead status, and what that means is that for a payment to count towards forgiveness, the payment must be made on the loan when the loan is in a repayment status.


So there are a couple of kinds of Federal loan forgiveness right There is the kind of forgiveness that’s not tied to employment. If you’re making payments on your student loans for a long time, 20 years, for most borrowers or 25 years for people with old loans.

If you make payments in an income driven plan over all that period of time and you still owe money, then the balance is going to be canceled and forgiven but the amount that’s forgiven.

In the case of the long term, income driven forgiveness, the one that’s not tied to employment is taxed as income to the borrower.

And the reason I mentioned this type of forgiveness during our public service loan forgiveness session, is because when, when people choose an income driven plan, they may be progressing toward both public service loan forgiveness and this longer term forgiveness, really, at the same time, because the long term forgivenesses is only tied to the selection of an income driven plan.


Now, people who have selected an income driven plan and are also employed full-time in public service, can be progressing towards faster cancelation of their loans under the public service plan. But if they, for some reason, don’t achieve public service loan forgiveness, they will have still, they will still retain the credit for the time they have spent in that income driven plan.

So, it’s nice for borrowers to understand that it isn’t, that they have to make a totally certain commitment to public service, for sure, for sure. And the way that public service loan forgiveness works is that the borrower has to make 120 so-called qualifying payments and that phrase qualifying payments is what it’s all about. It’s all about making 120 qualifying payments.


Now it takes at least 10 years to make 120 qualifying payments because there is no way to make more than one payment that is qualifying in a given month.

So, if every month payment is qualifying, it takes exactly 10 years to earn public service loan forgiveness. But for some, or perhaps even many, it may take longer than 10 years, if not every month, counted for some reason. And so, I urge you to think about public service loan forgiveness as a matter of qualifying payments and not to think of it in terms of 10 years of public service. Because 10 years of public service is just part of what is required.

I have done, in my previous lifetimes, more than one decade of public service and gotten Zero loan forgiveness. And so, it is a matter of, again, jumping through those hoops. And thankfully, public service loan forgiveness is not taxed as, as is the other type.


So the amount that is forgiven is the entire remaining balance after the making of 120 qualifying payments. And there’s no tax on that for a given amount.

Just as a small aside, I don’t see any likelihood of this, and I’m not, I’m not concerned about it, but I do think that the one part of public service loan forgiveness, that would be justifiable in terms of changing if Congress wanted to make a significant change to the detriment of borrowers And I don’t expect that that will occur. But if they wanted to, it would be fair in my view and legal, according to my analysis, for them to impose tax on the forgiveness, there isn’t really any thing about the future taxation of future income that borrowers can really properly rely upon.


So that said, I don’t think they’re going to make a taxable. But when I talk to people, including yourselves, I like to qualify it in a little bit and say that under current law, public service loan forgiveness is not taxable to the borrowers. I don’t think that’s going to change, but it could, and I wouldn’t really have a great argument for why it shouldn’t be allowed to.

Whereas, on the other hand, if they were to make changes that were actually reducing the forgiveness or somehow extending the requirements to earn forgiveness, I think we have very strong arguments in law and equity for why that would be unfair and unlawful and not permissible for various reasons.

So it’s all about counting the payments towards forgiveness. So, if you are a student loan borrower and you want public service loan forgiveness, start by figuring out whether you’ve already made any payments that count toward the 120 payments that are required.


So in order for a payment to be seen as qualifying, it has to be the right kind of payment on the right kind of loan. And it has to be that right kind of payment on that right kind of loan while the borrower is working in the right kind of job.

And it does require a full hundred 20 payments, as well as documentation of the meeting, of all of these requirements. So to make the right kind of payments, those are going to be payments that are made while enrolled in one of the income driven repayment plans. There are many, they all have their own acronyms. And we’ll talk about them a little more, and I have spoken about them and some of the other sessions we’ve been doing recently.

So, the right kind of payment is typically going to be one under an income driven plan. It is technically, also the case that a payment made well enrolled in a standard 10 year term of repayment will also count towards the 120.

But the path to forgiveness has to go through an income driven plan at some point or else the borrower would pay all the debt, his or herself before earning forgiveness. So, payments based on income are part of the deal.


Um, Jeffrey has a question, How does someone determine if their employer is a public service loan forgiveness qualified institution? Well, let me give you a little information about that, Jeffery, in terms of what the rules are.

And then, I’m gonna give you some additional information in terms of how you can document that and be certain, that they actually are recognized as a qualifying institution. So, I’m going to go through that here on just about the next slide, so I’ll, I’ll postpone my answer to that Jefferey for just a moment.


Eric asks, If, after 120 qualifying payments, are you automatically notified that you have finished? Absolutely not. There’s nothing automatic about it, and so part of the deal, Eric is to make sure that you are documenting your progress and also your completion of the 120 payments. So I’m going to show you more about how to do that.

All right, so you’ve got to make payments based on your income, on the right kind of loans. As I was mentioning. At the beginning, those are going to be federal, direct loans only.

And they cannot be in a default status when you’re making payments for them to count towards forgiveness. So, federal direct loans, and I’ll, we’ll talk about how to tell what kind of loans you have.

And this is while you’re working for a government, or non-profits, structured as a 501, C three, and working full time.

And I’ll describe what those things mean in more detail. And it definitely is all or nothing. You’re not going to get any partial, public service loan forgiveness. You could make 119 qualifying payments, and you’d get nothing forgiven under that scenario.

And then, as I was saying, a moment ago, proving it to the satisfaction of the government is also a significant burden on the borrower.

So, again, Jeffrey’s a right kind of job is going to always be a full-time position. And full-time is defined in two different ways.

It’s either the standard that your employer has as a policy, or 30 hours a week on an annual average, whichever is greater.

So if your job says You have to work 40 hours a week to be considered full-time, then you have to work 40 hours a week.

But if your job says, You only have to work 29 hours a week to be full-time, you have to work 30 hours a week on an annual average.

And you can piece together more than one part-time job if your total hours worked, or 30 or more.

And the jobs include all levels of government, state, local, federal, and tribal government. The agencies and the entities.

And it also includes Employment for non-profits that are structured as 501 C 3 organizations, as well as certain americorp positions, the Peace Corps service and a few other non-profits that are described by the phrase public service organizations.

So, in terms of looking up, which which organizations are, or are not qualifying employers’, there’s a link at the student aid dot gov site that will, under their public service loan forgiveness information, that will take you to a listing of, of non-profits. And it’s linked to the IRS. I think sometimes though, the easier way to do it is if you know if you already work somewhere or you can ask them if they’re a C three and they’ll have a specific letter from the IRS indicating that or if they’re a government. But there’s also a process for certifying employment.


I think as I made the one about applying for IDR, there is a Public Service loan Forgiveness Employment certification form And that has the very specific information about, ah, how you document your employment, and what you do is you go through and read it, you know, sign it and then the employer has to go through and say, yes, we are either a governmental organization, or we are tax exempt under 501, C three.

Or we’re not a C three, but we’re non-profit and we’re not a partisan political organization or labor union in which case they have to describe what they do and there’s a whole laundry list.

And this is the process for documenting your employment the Public Service loan, forgiveness, employments, certification.

OK, now, back to our slides.


Um, Jordan asks,  Can you clarify what a direct loan and default means? Does that mean payments made while still in school do not count as qualifying payments? While Jordan Default means that you have not made payments on your loans, when payments were required for nine months or more.

And it’s a loan status. And you can cure a default, but you would have to, before you could start making payments that counted towards forgiveness. There’s a different feature of being in school that is problematic, which is that when you’re in school, your loans first enter a deferment status, again, alone status, thing, where no payments are required on the loans.

Each loan that you borrow has a grace period. Typically, six months, before, which payments are not required.

So if you leave school, you have six month grace period. And then, you can choose your repayment plan, and start making payments that count towards forgiveness.

Now, if you had some loans, let’s say, from an undergraduate program, and you exhausted the grace period and entered repayment, and then you enrolled in a graduate program, you could theoretically make payments on the loans that had exhausted the grace period that could count towards public service loan forgiveness. But you would have to explicitly refuse the in school deferment that would happen automatically. So you’d have to send a letter and follow up on that.

And the new loans that you were getting potentially as a grad student in my example would not, you would not be able to make payments that counted on those until you could get their grace period to toll.

So, it’s usually not the case that you can make payments in school that count, although it’s not impossible in some circumstances.


And Lauren wants to know if you have to document every year or fill out the employment form every year. You’re not required to do it on any particular schedule, Lauren, But it’s smart to do it once a year. You can’t do it more often than once a year. But if you didn’t, like let’s say you didn’t realize that you should have been or whatever, you can go back and do it at any time for previous periods of employment. So, you know, theoretically, you could even wait for the whole 120 months and then go and try to get your your employers to document your employment. But that would be hard and risky for you.

So, it’s not, you don’t need to worry if you have missed filing some of those forms. You can file them now.

And if you’re in the same job for a long time, you know, and you filed one last year, and you haven’t gotten around to filing one, and it’s been 18 months, it’s no big deal, you can always file it.


But I advise you to go ahead and plan to do them about annually, because that’s what allows the system to recognize that you’re on track, and it gives you an opportunity to see if there’s any problem or question in the processing of your, of your loans or your payments or your status as a public service worker. And a lot of times, people end up having to kinda argue, was fed loan for awhile before they get the number of payments credited that they should be getting.

So it’s better to start that process earlier, but it’s not, you know, it’s not like you’re, you know, out of luck if you, if you missed one of those forums or whatever.

So OK, so there’s a lot of kinds of jobs that can qualify full-time, paid work for the government.

Or a non-profit is generally the way it’s done and it doesn’t have to be in your field or anything as long as you’re if you’re working for you the non-profit organization, it doesn’t matter what your role is at that organization. There are some special rules for members of the clergy. They cannot count certain of their hours towards forgiveness.


OK, so remember the five steps: you’ve got to make the right kind of payment on the right kind of loan, while you’re working in the right kind of job.

You have to repeat that 120 times, and you have to prove it to the satisfaction of the government, So what is the right kind of payment?

It’s going to be a payment made in an income driven repayment plan and almost every case as I mentioned. But you also have to ensure that your loan is in the right status as we call it. There’s this concept of loan status, and each loan has a status that changes over time, depending on the posture of the loan. So, when you first get a loan, it’s considered dispersed. And then if you’re if you’re in school, it goes right into a deferment status, and then when you leave school, it goes into a grace status.

And then when your grace is over, it goes into a repayment status.

And you, you can only make payments that count towards forgiveness on your loans or in a repayment status.


So if your loan has gone into a default status because you stopped paying on it, you would have to cure that default status before you could return to a repayment status.

The other thing about loan status is when I was talking about one of the top three mistakes, is this concept of a paid ahead status?

And the way that works is that, let’s say you’re enrolled in an income driven plan and your required monthly payment is, you know, $200 a month.

And let’s say you send $200 and, you know, up on the 10th of the month and then you send another $200 on the 20th for the following month.

Well, if they’re received too closely together, the loan servicer will consider them to be in one month. And, they’ll say, Oh, OK, This person paid $400 in, let’s say, June.

And they’ll say, OK, so, you get credit for making your June payment. And what they do is they postpone your next due date and they say, OK, well, you don’t even owe us a payment in July. So, then, even if you make another payment in July, it doesn’t count towards forgiveness because your loans were in this paid ahead status. And so, that’s why you want to avoid making your payments are excessively early or making lump sum payments. You need to make on time payments, but, by on time.

I mean, not more than 15 days late, but also not especially early, which is annoying thing.


So here’s how it works for members of the clergy.

If you are working for a 501 C 3 church, so churches have status as non-profit organizations by operation of law, and if you are working there, you will have to make extra notations and take extra care in counting your hours towards full-time status.

So, the, the regulations that control the Public Service Loan Forgiveness program have expressed some detailed requirements for clergy members in an effort to permit you to qualify for the program without running afoul of the constitutional prohibition. And that requires the separation of church and state.

And so, for that reason, you are not permitted to count the hours that you spend doing specific activities and those activities are listed and what they are, are, worship, services, religious instruction, and proselytizing.

So, if, you are, conducting, worship, services, religious instruction, or proselytizing, the time you spend at work doing those things in particular has to be excluded from the hours that you count up to see if you’re meeting the full-time requirement.

So, and I’ve worked with a number of theology schools and seminaries and spoken to quite a number of people in your line of work.

And my understanding is that it depends on the church that you’re positioned with, and it depends on a number of things. But that many, many pastors and clergy members work far more than 30 hours a week and spend time doing lots of things that are potentially administrative in nature or community based services. So, you know, certainly if you’re doing budgets, or building improvements, or, you know, community events, you can count those hours. And I would think it’s very clear that like you can’t count the time you spend actually in the pulpit.

But there’s a lot of gray area there, and so, there isn’t any more interpretation of what those phrases mean.

So, what I recommend to people is that you make some notations for your own information, about what you’re doing with your time, and keep those records, for at least a period of time. Because, I suspect that, at some point in the future, it may be that the Department of Education will give some additional scrutiny to your application for forgiveness and we’ll say, OK, so you’ve been certifying that you’ve been working more than 30 hours a week, but are, how do you know that you’re not counting?

No time that you shouldn’t be counting? At which point, it be great.

If you could just bossed out your calendar and say, Oh, look, here I made these notes that, you know, in this week, I worked, you know, 40 hours, do it, you know, feeding the poor or or whatever stuff is like, not explicitly religious in nature, so I hope that that answers your question.


Dan has a question for a resident orthodontist in a three year position where the orthodontist is not making a whole lot of money Wondering about a situation where the Stafford loans from Dental school are still in an in school status and the plus loans are enrolled and repay.

So interestingly, Dan, just as just in between here, is plus loans. Don’t technically have a grace period.

They, they give people a six month deferment automatically so it seems like they do but they don’t technically have a grace period.

So, yeah, so, sometimes, residency programs can be weird because a lot of times, they are within the educational institutions, and sometimes residents’ even continue to be enrolled in some level of courses.

And so there can be some question about whether they are where whether they are full-time students or more than 12 hours in order for that in school deferment.

So, I’ve got some other information with regard to that, Dan. And let’s plan to do this. Let’s see.


And I touch base offline here at some point after the program, because it’s an interesting case, and I want to direct you to some specific stuff, OK.

OK, now if I can start moving forward, again, through the slides, that would be peachey.

All right, so you gotta make the right kind of payments. And a big part of that is choosing an income driven plan. So let’s look at some of those plans a little more closely. There’s the original income contingent repayment plan hardly ever best for or for people. Usually more expensive can be useful for people who have parent plus loans in some cases. There is income based repayment to varieties pay as you earn and revised pay as you earn. The nuances are real and, you know, as a student loan borrowers, you should take care in determining which one is best for you.

You’ll want to recognize that they, they all look toward a figure called discretionary income.

Which is arrived at by looking at your adjusted gross income generally from your previous federal tax return.

And then allowing you to insulate 150% of the federal poverty rate that corresponds with your family size. So for example, a single person, 150% of the poverty rate is going to be roughly $18,000. And so the first, say 18,000, that you make, is going to be protected and then you’ll pay 10 or 15% of the amount that you earn in excess of that.

And for our, um, our clergy member in attendance, let me also mention that both clergy and military service members tend to receive some amount of non taxable income, like a housing type of allowance.

And so the, the that works in your favor, in terms of your adjusted gross income seeming rather low, as compared to your total compensation package, because not all of it is taxable as income to you.


Sarah, go Blue Devils. Sara’s arising three L at Duke and wanting to know about, if making payments while in school waves, the deferment, know, you can make payments when you’re in school, if you’d like. It won’t affect the the in school deferment but you may not be credited for making payments toward forgiveness but you can make payments anytime you wish.

And when you’re in school, some people are able to, for example, try to keep up with or or reduce the interest that’s occurring while they’re in school, but to be clear, if, if public service loan forgiveness is your plan, you have nothing to gain by making payments that don’t count towards forgiveness. So if you knew for sure you were going to get some debt canceled, you wouldn’t want to prepay your loans.


Alexandra asks, Is it beneficial for graduating students to hire a consultant to help with completing the Public Service Loan Forgiveness program, or is it doable for most people? So, Alexandra, I have a pretty nuanced view of what when it makes sense to hire someone and when it doesn’t. So, I appreciate your question.

My my initial response is to beware of charlatans, who are trying to take advantage of vulnerable people.

There are, you know, companies that are ripping off borrowers and you don’t need to pay anyone to, you know, to choose a repayment plan, or to consolidate your student loans, or any of the like. And you should be wary of folks that, you know, try to make things seem easier than they are. That said, if you are, If you are stable, financially, and you are working, and you have, you know, a lot of student debt, as many of us do, graduate and professional debt, you’re entering public service or not, you absolutely could benefit from having a professional who can help you evaluate your whole financial picture.

So, both, to make sure that you have the right kind of loans for for public service loan forgiveness and that you’ve accurately done projections about the costs and benefits are tradeoffs between the different income driven plans. That can be a valuable service that an advisor could provide.

But be careful about who you choose because there are many people that don’t understand these programs well, and, and, and Dan is, is mentioning, talk to a certified student loan professional, which I absolutely agree.

So, there’s, one of the things that I do among other things, is work with certified student loan professionals, work to teach financial advisors who are licensed to to do analysis of student loans.

And because my belief is that student loan borrowers don’t just need an expert like me and student loans, I mean, I could help you get your public service loan forgiveness straight, but I don’t know a whole lot about retirement savings or insurance or anything else, and it really makes sense to think about your finances holistically.


And so, the, the certified student loan professionals are, are ones that I vouch for because I know they’ve been through a program of education that includes a rigorous examination. And if they can do that, they can help you. So you can find those folks, and let me just put that URL here into the chatty chit chat.

It’s at cslainstitute.org

It, is where you can go to search for one of those advisors.

And they are, um, my personal favorites from my admittedly transparently biased point of view.

But, but, but, ah, Susan says she’s heard that 99% of people don’t get their loans forgiven and asks if that’s accurate. That is fairly fairly accurate so far, although it has gotten a little bit better.

And the reason for that though, Susan, is that very few people have met the requirements of the program, so it is shocking and horrible that so many applications for forgiveness have been denied.

But what’s shocking about it is that so many people applied when they hadn’t met the requirements. So it is not the case that the government is just denying applications. It should be approving.

The problem is that people have been making payments on loans that aren’t eligible because they didn’t know they needed to consolidate.

It’s that they’ve been making payments under the wrong repayment plan because they didn’t know they needed to choose an income driven plan.

And it’s because people haven’t made 120 payments yet and sometimes that’s because of issues like this pay to head status and the like.


Um, and Sheilah wants to know how to make lump sum payments without going into a paid ahead status. You can do that. You have to specifically request that from your loan servicer in writing.

Some of the servicing companies now have an ability for you to select that option if you’re making a payment online.

But, if you have a direct withdrawal or or if you’re pushing your payments out directly, you may need to send a letter to the loan servicing company that says, Listen, I don’t want this. And you can do it and then they’re supposed to stop.


So, Jake asks, if there is a legislative risk of public service loan forgiveness going away, and wondering, what, I think about the risk of the 20 or 25 year forgiveness going away.

So, here are my thoughts on that, is for either a kind of forgiveness to go away. It would require an act of Congress. I do think and have been concerned that there are efforts, or there are, there are some appetite among some Congress members to reduce or eliminate forgiveness.

But even those who hate forgiveness and want to get rid of it as soon as possible have said that it would be prospective.

There was a bill, made it all the way out of committee when both houses of Congress were in Republican control, that would have eliminated public service loan forgiveness for future borrowers. So no one has proposed pulling the rug out from under people who are already on track. Same goes for the long term forgiveness. And so what my firm belief is, Jake, is that we have to be vigilant to protect the future of these programs and improve them for future generations of borrowers, but that those of us who already own money, especially if you’re already making payments on that, what you owe, it is extremely unlikely that any future changes would be applied to you. Especially if they make things less good for you. That would be unprecedented, and it would be, in my view unlawful and unethical. and I think it’s extremely unlikely.

That’s, it’s not like Congress has never done anything that was, you know, sketchy. So it could it could happen, I can’t absolutely guarantee it. I think it’s very, very unlikely that that any rule changes would apply to people with existing student loans.


Chelsea wonders if the 120 qualifying payments are affected by not working for a few months or switching jobs. It’s OK, if you switch jobs, or if you have a time between jobs, the hundred and 20 payments. do not need to be consecutive.

So it could take longer than 10 years to make 120 qualifying payments, and that would be OK.

And you should note that you could also then request to have your income driven payment recalculated if your income goes down.

So it’s just possible that you would make a few payments that didn’t count towards forgiveness. And then you would resume where you left off.


Lorne asks, she says, I have three direct loans. Can I consolidate them into one? You can, but you, you, you should be cautious because you might not want to do that.

You, you could consolidate them, but you would, you don’t need to, in order to make them eligible for forgiveness. And if you’ve already made any progress towards forgiveness, you would lose that progress.

Even if you haven’t already made progress towards forgiveness, consolidation would give you somewhat less flexibility going forward. In the event that you didn’t get forgiveness and you say, wanted to pay more towards a higher interest rate loan, so consolidation is available, but it’s not necessarily advisable. So I would encourage you to, to be able to articulate a really good reason why you want to consolidate before you do it.


Sheilas wondering about payments made during maternity leave.

You can count payments that are made while you are taking leave authorized by your employer up to the full amount of the Family and Medical Leave Act, which is 12 weeks, in most jurisdictions. So, you can take 12 weeks for months and make, keep making those payments. They’ll keep counting towards forgiveness. But then, if you, if you take more time off than that, that’s fine, too.

It’s just that whatever payments you make won’t count towards forgiveness until you go back to work because you have to be working full-time for them to count.


So, married borrowers have to be cautious to understand that their taxes influence their income driven repayment a lot. This is the kind of thing that professional advice can be really useful for. Deciding whether to file taxes, jointly or separately can make a huge impact on your student loan payments. And can, and, depending on whether your spouse also has student loans, can also affect which of the payment plans are best for you.

But in my view, most people are going to be best off choosing between pay as you earn and revised pay as you earn, if they are eligible for pay as you earn. Whereas for people with older student loans who can’t qualify for that plan, we might need to consider the original income based repayment plan because of the advantages to that for some borrowers. In terms of whether you’re eligible for pay as you earn, that’s going to depend on when you first started borrowing your student loans.

And this ties into what I was saying about possibility for legislative change.


These income driven plans are so confusing, and there are so many of them, because the law has changed so many times. And because every time they changed the law, they keep the old stuff. Because old people, like me, or people with older student loans, had been counting on them or enrolled in them, are using them. And so they just keep trying to make things different or better by adding on new stuff.

And they leave the old stuff alone in place, usually. And they just say, well, this applies to you if you have loans from this period of time, and that applies to if you have loans from the other period of time.

So, people can choose the pay as you earn plan, if they didn’t have a, an outstanding balance on a federal student loan as of October first, 2007.

And they also got a federal student loan sometime on or after October first, 2011.

So that’s the sort of main qualification for pay as you earn. There are some additional requirements. But if you, if you have long term before 2007, you may need to give some consideration to the original income based plan or the revised pay as you earn plan.

But I don’t, I don’t love new income based repayment for anybody, So the reason for that is that the new income based repayment plan, the one that’s for new borrowers after July 2014, it doesn’t have the same rules about interest accrual, and capitalization that the pay and repaid plans have.

And what I mean by that is that no interest is accruing on our student loans all the time and under the Pay and repay Plans. If your monthly payment is less than the interest that’s accruing each month, then you get certain benefits. Under the repaid plan, they only charge you half of the unpaid interest. So, if there was a 500 bucks of interest accruing on your loans in a given month, and you’re required, payment was only $300, instead of instead of charging you the 200 that you didn’t pay that month, they would only charge you 100 under repay. So repay can be really good, especially for people who are in low earning positions and expect to earn more money later. So that’s like your doctors and residency and as well as your dentist and veterinarians.


The pay as you earn plan has a different interest benefit, and that it limits the amount of interest that can capitalize and capitalization is when interest that has accrued and not been paid, is added to the principal balance of the loan.

And that’s bad for us as borrowers. because, once interest is capitalized, it becomes part of the principal. And the principal balances the balance upon which interest accrues.

And so you don’t want capitalization, and then you end up being charged interest on interest.

The pay as you earn limits the amount of interest that can be capitalized. So having one of these interest benefits’ is better than not having them.

And the new income based repayment plan doesn’t have these provisions and is otherwise indistinguishable from pay as you are. So in my view, essentially no one should choose the new income based repayment plan.

Um, so, so again, you got to make the right kind of payments and be sure that you recognize it’s about choosing an income driven repayment plan.


I want to talk to you about temporary expanded public service loan forgiveness. These are different looking visual aids because there’s my little like avatar lady. These are some slides I use when I’m training financial advisors, but I thought they were pretty, pretty good. So I just plunk them in here for you guys. Fairly good. likeness of me, I don’t have blue eyes. I have Hazel eyes, but otherwise, it’s not that far off.

Um, so this is for people that may have been making payments that they thought were counting towards forgiveness but that were not because they were not enrolled in the right repayment plan. This was such a big problem for borrowers that Congress passed some relief, and came up with $700 million dollars that they would use to forgive debt. It is a first come, first serve kind of fund, but they’ve been pretty stingy about handing it out.

So there’s still money in that account, but it’s only available for people who have already been denied public service loan forgiveness, specifically due to being in a repayment plan that didn’t qualify.


And so they have issued some forgiveness, but not a whole lot. And the reason that they’re rejecting applications under this program is similar to why they rejected them under public service loan. Forgiveness to begin with, which is that a lot of the folks applying haven’t even been in repayment for 10 years. So you have to have been making payments on your loans for at least 10 years. And, so, lots of people don’t understand that, and are applying anyway.

And, a lot of people aren’t able to show that they, that they had paid as much as they would have had to pay under an income driven plan, which is one of the requirements, and some of them didn’t have eligible loans. So, a lot of applications have been rejected for these reasons. Which is, why it’s important to recognize that.

It’s about getting these details, right.

So, the way that someone can qualify for this fund, is if they apply for public service loan forgiveness and they don’t have to wait to get their application denied, they can go ahead and e-mail a request for the expanded program. And then, and then, wait while they’re getting denied public service loan forgiveness. And then they’ll have to provide documentation of the amounts of their payments, because they’re, they have to show that there, that the payments were as much as they would have paid under an income driven plan.

And they have to show it are two specific payments, the one right before they’ve sent that e-mail, as well as the 1, 12 months before, Unless they have had an unusual fluctuation in income.

Although, I’m not aware that they’ve actually granted any relief to people who have shown that, it is, it is possible.

However, So, um, so, public service loan forgiveness. You’ve got to make the right kind of payments, income driven payments on the right kind of loan. Federal, direct loans only.


So, if you’ve only been borrowing for the last decade, you’re OK. But if you had any federal loans from before the summer of 2010, verify that you have all direct loans. Because you might have some older loans from that previous program, known as FEL, Federal Family Education Loans, and those can be eligible for forgiveness.

But only if you consolidate them first and you don’t have to consolidate every loan, you might have a Grad Plus loan. That’s from the Direct Program, and you might have some fell loans that are not, and you can leave the direct loans out and just consolidate the loans, if you want.

But you can’t make a payment that counts towards forgiveness on a loan.

OK, so, You’ve got to make your payments on time.

I mentioned that you can’t get credit for more than one payment per month.

You don’t want to make your payments early, and you will have to apply for forgiveness. And the paperwork is really, really important. It’s part of the deal with this. Anytime you’re in an income driven plan, you’re going to need to verify and recertify your income annually as well as your family size.


It makes sense to certify your employment every year, although if you don’t, it’s OK. You’ll have to do it eventually. And recognize to that that there isn’t anything automatic as I was saying in response to, I think it was, maybe Eric’s question.

That you you have to apply for forgiveness and, and also recognize you have to be employed in public service when you apply. And also when they grant you the forgiveness. So, in a way, it’s more than 120 months of public service because you have to stay so employed or be so employed throughout the process of the application.

And, so, just to sort of sum this up, and then, I will take your final questions in our final minutes of today’s session, this is my second favorite visual aid, is to be my first favorite visual aid, but right now, it’s my second favorite visually, this is actually a real sign that is posted as I understand it on, in Hawaii. I believe on the Big Island, although I’m not for sure and it’s very weird.

Why? You know, why does data have to carry the lollipop and why is mom’s coconuts So, extra huge. You know, this is the way I think of the student loan system. You know, there’s pitfalls, dangers, things you would not expect like falling coconuts. Right.

And so, that’s why my top three public service loan forgiveness problems are that people don’t know or haven’t gotten word that they need to consolidate those older FEL loans and enroll in an income driven plan in order to start making payments that count towards forgiveness. That’s the main reason so many people are being denied that they have not done that. They don’t have direct loans, they’re not enrolled in an income driven plan.


It makes sense to certify your employment. And, please, don’t just file it and then, take whatever answer they give you because they’ll come back and be like, Oh, you made 12 payments towards forgiveness and you’re thinking, I think I thought I had made 24 payments towards forgiveness. You probably have and they may have not counted them all.

Because, you know, your loans may have been moved around for more than one servicer.

So, what you have to do is fight for your, right to get your payments to count.

And so, be careful also about making your payments early, or lump sum payments. You don’t want your loans in a paid ahead status, and you may need to notify your lender of that.


Alright, so, let me see what other questions you have.

But, uh, This enzyme is asking if grad plus loans are considered direct. They could be, but they might not be so grad plus loans. As well as Stafford loans were issued from the older fell program, as well as from the newer direct program. Any Grad plus Loan or other federal loan you would have gotten, since the summer of 2010 is a direct loan.

And the way you want to check that is visit student aid dot gov.

Login with your, with your federal student aid username and password, and if you, if you see the word direct in the name of the loan, if it says direct plus, it’s direct. If it doesn’t, then it could need to be consolidated first. So, definitely important to double check that.

And then Jordan says, asks, are there ever situations where public service loan forgiveness doesn’t benefit the borrower? Is it more beneficial for borrowers with more debt? I’m an educator, so my debt may not be as large as some other graduate programs. Good question, Jordan. Yes, you’re absolutely right. There are some situations and some borrowers who don’t have a lot to gain from public service loan forgiveness. And it is absolutely, it’s not necessarily more beneficial for borrowers with more debt, but it’s it’s more beneficial for borrowers with more debt to income ratio, right.


So, the more you owe as compared to how much you earn, the more you stand to benefit. So, while your education may not be as expensive as some of the professional programs are, your pay may be more shamefully low than some other professions are.

So, I have an oversimplified rule of thumb I can give you, And if your Federal student loan balance is about, as much or not, not a whole lot less than your annual salary.

Then, chances are, you know, all things considered. If you get normal kinds of salary increases over time, chances are that you would be able to make payments for 10 years based on your income, and still have something left to forgive.

But, if you earn twice as much money in a year, is what you owe on your student loans, then it’s unlikely that you would be able to make payments low enough to still have anything left to forgive after the 10 years. But it also depends on your interest rates and your family size and such. So, that is, you know, against oversimplified. There’s a tool I really love.

Foundation Nest Veterinary Information Network, that’s a non-profit that helps veterinarians And at the vins at … foundation dot org … foundation dot org there’s something called the student loan simulator. And I would suggest Jordan, try using that. Put in your balances and your interest rates and your income and see what pans out.

So I’ll just take these last couple of questions here and then I will let you all go And I do have, again, another web webinar same time tomorrow where I’m doing nothing but answering questions. So anybody who wants to come, everything’s fair game. We’re gonna do, we’re gonna do it until we get them all answered.

Are there any rules of thumb which show how much you may get forgiven depending on your income to debt ratio?

Oh, yeah, so, so, like I was saying, that … foundation dot org website is going to be really good for it. And then, and then my sort of, no rule of thumb, as I said, was like a roughly 1 to 1 balance on your federal student loans as compared to your salary. But again, overstep, you know, somewhat oversimplified. But I definitely encourage you to use that been foundation calculator.

So Lauren, there’s forms to the Forum’s you’ll need to submit.


There’s an employment certification form and you file that to show where you’ve been working, and you can file that as often as once a year, because they don’t assume that your stay in the job. Once you certify that you’re in a job, you have to repeatedly certify that you’ve still been in it.

And then there’s also, you, you have to enroll in a in an income driven plan and you may have already done that, and you can do that electronically as well. But then there’s also an application for forgiveness, which essentially looks very similar to the Employment certification form. But you wait and file that.

Later, once you’ve made all of your qualifying payments.


Olga, if someone selects pay as you are and after they consolidate, but they borrowed before 2007, would they be eligible?

So the answer is no, if you have an outstanding balance on a federal student loan, not including a Perkins loan, on October first, 2007, then that borrower is not eligible to choose pay as you earn, even if they later consolidate and the consolidation loan pays off that older loan and it’s gone, doesn’t matter. It’s still not eligible, Is the way the rule works on that.