What’s Up With Student Debt and PSLF?
Is PSLF worth it?
In today’s world, the health of the student loan system kind of makes you wonder about its viability.
If you plan to make use of the student loan forgiveness programs, you’ll need to know a little more about how it works, and what you need to keep in mind while you are paying back your loans.
You’ll also need to know when it’s best for you to take advantage of the student loan forgiveness program.
Plus a lot of other details that surround student loan forgiveness programs!
Is PSLF Worth It? A History Lesson…
Why was PSLF created?
It was created to incentivize individuals to work in public service, particularly in nonprofit.
The rules are that you must work for a qualifying employer (tip: make sure that your employer qualifies). You’ll make 120 monthly (on-time) payments based on your IDR plan.
Once you reach the end of the 120 payments, the remaining balance of your loans will be forgiven tax-free.
Here is a brief snapshot of how student loan forgiveness programs have evolved.
- The ICR was the only income-driven repayment program until July of 2009.
- When ICR started it was 20% of your discretionary income (or expected payment over 12 years)
For some individuals, there were some other payment options that were lower. They were going to extended repayments.
These allowed people to get a lower monthly payment. However, they didn’t qualify for PSLF, even if they had Direct Loans.
Then other programs were introduced.
- In approximately July 2009, the IBR Plan (Income-Based Repayment), was introduced
- In 2012, there was PAYE (pay as you earn)
- In 2015, we had REPAYE
These allow you to pay a smaller percentage of your discretionary income. They also allow your loans to be forgiven sooner and they actually qualified for Public Service Loan Forgiveness.
PSLF Now VS. Then
Do you qualify now?
You probably read through the rules, consolidated your loans (to make sure they all qualified), and chose a repayment plan.
You probably chose an IDR. You were proactive in setting yourself up for success with the program, and then you went through the program.
There was a time starting from approximately 2012 when you chose a plan and you qualified. It was easy. Every loan was a direct loan, and IBR was the most common. You fill out your paperwork and in 2022, you’ll be forgiven. Your diligence was only required in making sure you had the right employer.
The number of physicians who qualify for student loan forgiveness programs is increasing.
This is a growing issue that will eventually erupt in 2025 when 147,000 people are eligible to get forgiveness.
The Future of Public Service Student Loan Forgiveness
Are you worried that one day soon the public service loan forgiveness program will become extinct?
Our clients are concerned when they read the clickbait headlines that scream most of PSLF applications are being rejected.
After spending so much time working, and trying to figure out how to pay off their student loan debt, which for some new attending physicians is approximately $298,000.
Well, you can see it would be natural to feel panic if you thought the program would disappear mid-stride!
There is a lot of nonsense that’s being put out there is everyone’s getting rejected. It used to be very hard. The people reading today don’t know what ICR is. It’s was a horrible repayment option.
That’s why everyone turned to the graduated, and extended payment plans. They thought it was better for them, but it wasn’t because they didn’t qualify for PSLF.
What is true?
You need to work for a 501c3, be in an income-driven repayment plan (IBR, REPAYE, PAYE) and make 120 qualified on-time payments. They don’t even need to be successive.
One scenario might go like this:
You are working in a job that qualified for PSLF, then left to try out working in private practice, but then you decided to come back to a job with a 501c3.
When you go back, you can pick up where you left off with your 120 qualified payments, as long as you’ve kept very detailed records.
That includes making sure you have a copy of the annual certification form.
Is PSLF Worth It?
The Department of Education released a report in June that states that 1,216 have received loan forgiveness under the program.
However, compared to the number of people who have put in applications, there were still over 100,000 people that were rejected.
How is that possible?
Let’s keep in mind that there are private companies contracted by the government to deal with your student loans (and everyone else’s payments and loans). One of these companies, which is FedLoan Servicing, handles the PSLF applications.
The bottom line on FedLoan Servicing is that they are incompetent.
That’s an understatement, and they are being sued by several states because of how ineffectual they have been at handling the job they were charged with overseeing.
A huge problem is the program was released without all the components in place (i.e. the fine print).
A second challenge is that Congress put through a temporary expansion program (TEPSLF). Fed Loans set it up that you had to apply for PSLF. Only once you were denied for it, you could apply for the temporary expansion program.
The expansion program allowed people who didn’t originally qualify for forgiveness, to qualify under the expansion program. It was a long and nerve-wracking process.
I’ve written about the process of calling into customer service (which is nerve-wracking in and of itself).
First, you’re talking to a customer service representative that has very little experience in your unique student debt situation. If there is any problem and you call back you’ll get another representative, and have to go through all your information again.
The student loan forgiveness programs (and student loans) have always been in shambles and unfortunately, that means borrowers lose.
In the PSLF report, one of the rejection reasons was out of 100,000 people, 55,000 of them were rejected because they didn’t have 120 payments.
Is that true? Is that correct?
Well, that will depend on which customer service representative you were talking to. Remember when I wrote that you must keep very detailed records?
That includes who you talked with, what date, time, subject, and resolution. It also means that you need to keep a copy of your annual employment certification form.
The annual employment certification form is updated by FedLoan Servicing, and if you don’t have it as proof they could claim a number that doesn’t reflect how many years you actually qualify.
What if you’ve submitted your employment certifications, but they claim a number that differs from what you claim?
You can dispute it, and request a recount. However, be prepared to wait…an entire year. That’s really the current wait time.
It’s a sad reality that we’ve only had one client (out of hundreds), that had everything correct. They had fought with FedLoan Servicing for years in order to get everything correct.
We have clients that have gone through funding, filled out all the paperwork, but the one thing they didn’t think about was making sure the dates lined up.
Here is an example of what I’m talking about:
We had a client that went through three years of residency and a one-year fellowship. They had six or seven payments in their residency.
They had 37 payments in their one-year fellowship. Now, that’s just not possible–because the math doesn’t add up. However, the payments combined were the right amount.
Remember earlier in the blog, when I said FedLoan Servicing was being sued by several states because of their incompetence?
The irony here is that any discrepancy may cause your information to be rejected.
Suddenly, FedLoan Servicing wants to be “accurate” with their work.
What will happen if your employer made a mistake filling out your forms?
It regularly happens, some detail or date is wrong. You might never even know what the exact problem is because the form will be summarily rejected. That means you must become a detective in order to figure it out.
Do you have an eligible loan?
It will save you a lot of hassle to verify that your loan qualifies. A small percentage of people don’t have loans that are eligible for student loan forgiveness programs.
You must have the right kind of loans to qualify!
Old Borrower VS. New Borrower
As a new borrower, what advice do I have for you?
Read the small print before you sign the MPN (Master Promissory Note). It’s a binding contract between you and the government for your loans.
It also explains PSLF, describes the program, and your payment options.
New plans can be made and offered to old borrowers, but it can’t be forced on them. A new borrower is somebody who has no loans that are old. They are not an already existing borrower.
While there was a lot of hype and clickbait, but this is not a time for knee jerk reactions. Student loan refinance companies will try to use emotional manipulation against you. They want to plant some doubt in your mind.
They’ll ask, “Why would you stay in this program when 99% of the people will be rejected?”
How does that help them?
They want you to refinance with them.
What does that mean for you?
That will take you out of the PSLF program, and once you’re out of the program, there’s no going back.
Do you know an attorney?
There are numerous attorneys who are interested in student loan forgiveness programs. It would be a very bad situation if a bunch of new attorneys were angry over being left high and dry by the PSLF program and decided to sue the government.
Imagine it…multiple attorneys suing in class action suits!
That’s just another reason you shouldn’t worry about the viability of PSLF.
Always an Angle
Let’s take a look at student loan refinancing companies.
They have what’s called an affiliate link, and there are affiliate links on Financial Residency.com. There are affiliate links on most pages, they are disclosed in a statement that says whoever owns the page might get paid having the link on there.
What they’re not telling you is that when you click the link, that person’s probably also getting something. It will depend on volume, but they will get a percentage of the loan.
Let’s just say you have $100,000 in student debt, you go to refinance, you get to your $500 sign up bonus. The person whose site you are on, may receive 1% of your loan balance as the commission or referral payment.
That’s for bringing you to refinance, sometimes it’s done on a per loan basis. If you have a $50,000 to $100,000 loan balance, they may get X amount of money.
There are a lot of people writing for doctors, and you all have a ton of debts. That could mean they make a lot of money.
I have a guide that has 10,000 words in it. There is one referral affiliate link in there for Credible. In theory, I would get paid for that if you choose to click on it.
I don’t want you to refinance unless you absolutely must do it. It’s not something to rush into without due diligence.
So, Is PSLF Worth It?
There is a lot of quality information in our world today.
You must take control and search for answers. That’s especially true if you’re six-figures in debt.
I’ve written about the price of putting your head in the sand before, this is no time to indulge in ignoring a problem that will only grow.
And don’t worry about the student loan forgiveness programs. If you’re already a borrower, and you’re already in repayment that means you are safely in the program.
You need to understand student loan forgiveness programs and find out the best way to pay down the debt that you’re carrying or the weight will crush you!
Tell us about your experience with student loan forgiveness programs. Check out and join the Physician Finance Community on Facebook!