By Dr. James M Dahle, WCI Founder
The Public Service Loan Forgiveness (PSLF) program was established as part of the College Cost Reduction and Access Act of 2007 to encourage borrowers of direct federal student loans to work as employees of government and nonprofit institutions. The rules of the program were not very well understood or publicized for the first few years the program was in place. However, within 3-4 years, bloggers and journalists, along with their readers who had direct federal student loans, began to recognize the substantial potential benefits of this program and made plans to take advantage.
Is Public Service Loan Forgiveness Legit?
I first wrote this article in 2018 for Forbes in response to media reports that did not paint PSLF in a very good light. Some articles implied (incorrectly) that 99% of those who applied for PSLF and otherwise deserved it did not get it. Others wrote about how difficult it was for borrowers to get FedLoans (now Mohela) to actually acknowledge that they deserved PSLF. Fortunately, those days are now past. Doctors and others are now receiving PSLF regularly. Here are a few examples from the WCI podcast:
- A Public Service Loan Forgiveness Success Story
- Pediatric Intensivist Gets PSLF with No Hassle
- Family Physician Receives PSLF
As mentioned above, the PSLF program started in 2007 and required 10 years of payments. We all expected to see lots of people getting PSLF in late 2017 and 2018, but it wasn't happening. Naturally, people who had been working toward PSLF for years started to worry. However, there were really three issues going on simultaneously.
The first was simply that very few people actually started making qualifying payments in 2007, 2008, 2009, or even 2010. Nobody knew about the program so there simply were not very many people who could have qualified for PSLF. As we move into 2022 and 2023, there are thousands and thousands of people who will now have their 120 payments. By June 2022, more than 164,000 people have received PSLF. Many have received PSLF recently due to the limited PSLF waiver.
The second issue was the incompetency of FedLoans to service PSLF. It did not have its processes worked out and had not yet trained its employees to deal with this program. It didn't even seem to be able to accurately count to 120 payments. Over the last few years, FedLoans has become much better at this, and the process has been simplified. Instead of a final “PSLF application” at the end, borrowers now simply have to send in their annual employer certification forms, and FedLoans takes care of the rest. Recent recipients no longer have to hire attorneys and spend days on the phone with FedLoans to prove all of their payments should count. FedLoans is exiting student loan servicing in the summer of 2022 and transitioning all borrowers on track to PSLF to Mohela.
The third issue was a simple math issue. The reports were using the wrong number as a denominator. They were saying only 1% of those in the program were receiving forgiveness, not that 1% of those who deserved forgiveness were receiving forgiveness.
The bottom line is that the program is legit. People really are getting the forgiveness they deserve, and there is no reason to doubt that, barring legislative changes, it would be any different for you as a current borrower. Even if there are legislative changes, you are highly likely to be grandfathered into the program. Of course, you still need to make sure you understand the program requirements and comply with them.
More information here:
Is Public Service Loan Forgiveness Worth It for Doctors?
PSLF Requirements
The program allows any remaining direct federal loans to be forgiven once 120 qualifying on-time monthly payments have been made while directly employed by a qualifying employer. Direct federal loans include Stafford loans, PLUS loans, and direct consolidation loans. FFEL and Perkins loans do not qualify until they have been consolidated into a direct consolidation loan (in October 2021, though, the federal government allowed for FFEL and Perkins loan payments to count toward those 120 PSLF payments IF you consolidate by Halloween 2022).
Qualifying payments must be made under one of five programs:
- Income Contingent Repayment (ICR)
- Income Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Standard 10-Year Repayment Plan
The potential benefit is largest for those with the highest loan burden—indebted physicians and dentists. As tuition skyrockets and word of the program spreads throughout educational institutions, it is no surprise to see in the 2020 medical school graduation questionnaire that 45% of graduates plan to enter into a loan-forgiveness program. This is an increase from 39.7% in 2014 and just 11% in 2010. Bear in mind only 75% of graduates have student loans at all, so this is actually 60% of indebted docs that are going for forgiveness.
The key to having a large amount forgiven is to make as many relatively small payments as you can during residency and fellowship. The earlier payments start being made, and the longer the training period, the more that will be left to forgive after 10 years.
Note that until October 31, 2022, the requirements are less rigorous thanks to what is called the “limited waiver.” If you don't qualify under the standard terms, be sure to check out the limited waiver.
More information here:
From Fourth Year to the Real World, Part 2: Transitioning from Med School to Residency
How to Avoid PSLF Problems
Public Service Loan Forgiveness has had some ugly PR in the past, even if it has gotten better in recent years. So, what is a borrower to do to ensure their student loans are forgiven? You need to 1) make sure you qualify and 2) make sure you can prove that you qualify.
Memorize the Requirements
It's not that complicated. You can become an expert in PSLF.
- Work full-time (as the employer defines it but at least 30 hours a week) as an employee of a nonprofit or government employer
- Have eligible loans (direct federal; don't refinance them because they then become private loans)
- Be in an eligible repayment program (usually an IDR like PAYE or REPAYE)
- Make payments on time (defined as no more than 15 days late)
- Fill out the PSLF forms correctly and make sure your employer fills their part out correctly
If you screw up any of those requirements, don't be surprised when you don't get PSLF as planned.
Keep Careful Records of Every Payment
Since PSLF could be worth hundreds of thousands of dollars to a doctor and since the loan servicing companies sometimes have trouble keeping track of payments, it is critical to keep track of all of your payments yourself. Imagine you had to sue the Department of Education to get PSLF. What evidence would you want to have? Even if it doesn't go that far (and it probably won't), it will be a lot easier to prove you made your 120 payments if you actually have your own set of records of those payments. Don’t trust the servicer’s calculations. Always double-check their math.
Certify Employment Early and Often
Although not required, the PSLF Form should be filled out every time you change employers and at least once annually. Keep a copy. Technically, this form can be filled out retrospectively, but when so much money is on the line, it pays to be on top of all the details. Possession of years of forms certifying your participation in the program may also come in handy in the event the program changes and you wish to be grandfathered into the old terms. Mohela has an upload portal, which is a more sure-fire way for a representative to receive your employment form. It also keeps a record of when you submit your forms to facilitate your record-keeping.
Avoid Moral Hazard
A few people, upon learning of loan forgiveness programs like PSLF, consider borrowing even more money than they need. If the loans are going to be forgiven anyway, why not borrow as much as you can and pay as little toward it as possible? This is ill-advised for two reasons.
Just keep swimming . . . just keep swimming . . . you'll arrive at PSLF eventually.
First, most medical and dental students are maxing out their direct federal loans anyway, so any extra loans they took out would not be eligible for PSLF anyway; they will be private loans.
Second, in the event that something happens to the PSLF program and the borrower is not grandfathered in, the borrower will end up paying all that principal and interest back. A professional student who wishes to become financially successful should live as frugally as possible, knowing that everything paid for with borrowed dollars may cost two or even three times as much due to the effects of compound interest by the time the debt is paid off years later.
Will PSLF Be Grandfathered?
Keep the faith! Negative news about PSLF has caused many to abandon their course toward PSLF, essentially being scared out of the program. True pessimists might argue this is intentional on the part of the government to reduce costs, but either way, it has caused a lot of people to lose out on the promised benefits.
It would be very unusual for a program change like this to occur that did not grandfather in those already enrolled in the program. In addition, PSLF is mentioned in the promissory notes—legal contracts between the borrower and the lender. Even if Congress or the Department of Education changes the program and does not make provisions to grandfather in current participants, those borrowers should have an excellent legal case that should, at a minimum, result in a significant settlement.
More information here:
The (Nearly) Perfect PSLF Situation for a Physician
Save Up a PSLF Side Fund
The ultimate backstop, of course, is the ability to pay off your loans without the aid of the government. Most high-income professionals can, by living very frugally, pay off their student loans within 2-5 years of the completion of their training. Even those who are going for PSLF should still plan to do this. However, those payments should be made into their own investing accounts. This way, if PSLF is changed and they are not grandfathered in or if they simply change their professional plans, they can move on with their lives with minimal financial consequences. The only cost in this situation is the difference between the interest rate they paid to the government and the interest rate they could have refinanced to with a private company.
It is fully understandable for a borrower planning on PSLF to be concerned, but it is not time to give up on the program. Instead, learn the rules, keep careful records, and start saving up a PSLF side fund—just in case.
What do you think? Are you going for PSLF? Why or why not? What do you think will happen with it long-term? Comment below!
[This updated post was originally published in 2018.]
Completely agree with your take on this. Even if the government decides to get rid of PSLF, I believe that those already enrolled will be grandfathered. I am not sure what would happen to those who are currently in medical school with intentions of doing this, though.
I have a couple of colleagues that I’ve been hounding about certifying their PSLF paperwork annually. With busy clinical jobs and life at home, it seems challenging for some people to keep up with all of the hoops that must be jumped through for this program. But, if they stand to be forgiven several hundred thousands of dollars – it seems worth it.
Of course, my fear is that people skip the PSLF side fund and inflate their lifestyles while they bank on PSLF (and are too busy/distracted to fill out the paperwork) just to find out later that something was amiss. Instead of having $300,000 in loans this number may have compounded to $400,000 or $500,000. Without a side fund, this can be a crippling number.
This is why I think living frugally for a few years after training, even if you plan on doing PSLF, is critically important.
TPP
When people realize the amount of money they’re talking about is a year’s worth of earnings, perhaps they will be able to dedicate a little more time and effort to learning about and actually performing the tasks required.
I agree you need to live like a resident no matter your PSLF plans.
This all gives me palpitations. Everytime I read an article about PSLF I get a sinking feeling that I am doing something wrong, get a little anxious, double check everything again and then calm down a bit. I look forward to the day they are gone.
I might be in the minority of FedLoan users but I’ve had a reasonable experience with them. I just submitted another certification form and have 71 payments!!! I submit once a year or whenever I change employment.
It looks like they recently started sending out a sunmary of qualifying payments as well. No mistakes on mine.
Good luck to everyone battling this monster!
Glad to hear no mistakes on yours. The anxiety is real though; I’ve heard about it from many. Some have even “freaked out” and just refinanced and starting paying them off even though they should qualify for PSLF, just to get rid of the anxiety about possible unknown future events.
I enrolled in PSLF July of last year, and was very excited about it. However, after knowing that ~1% of those applied were forgiven, it made think a lot about this. Even I continue with it and set aside money in a safe fund, I’ll still be screwed given the interests being charged on high amount of the loan. moreover, based on IBR, I’m ready paying a lot due to my high income. Whereas, if I start aggressively paying off my loans, I’ll be debt free within 4-5 years (based on my plan), and I won’t expose myself to risks. The main thing is, I hate unpredictable events, and I cannot wait for another 9 years to figure out whether I am going to be forgiven or not. I am just going to pay it off. Luckily my employer has loan repayment help program and I’m taking advantage of it.
Yes, you’ve recognized the risk in the “side fund” strategy. Calculate out how much extra interest it would cost you and decide whether you’re willing to risk it.
What company offer loan repayment programs?
Completely agree.
I recall back in 2018 or 2019 the Government Accountability Office released their report highlighting all of the factors about why the PSLF approval rate was so low. The # of approvals over the # of applications was dismal and put a dark cloud over our plans.
But when you dove into the report, the entire report essentially boiled down to “The department of education and FedLoan do a terrible job of laying out the essential requirements of the plan.” The “memorize the requirement section” above is more simple that most information previously provided by FedLoan.
One of the larger reasons for denial that wasn’t covered in this WCI write up is that “Paid on Time” also means NOT PAID AHEAD (ignoring any temporary waivers). Lots of public school teachers did their best to pay off their loans in 10 years aggressively and requested foregiveness of the balance, but Uncle Sam said “Nope, you clearly can afford more than your required payment, therefore you are responsible for paying the entire balance”. A ridiculous point of the program,
So one thing does not figure at all. One of the repayment plans listed as “qualifying” is the Standard 10 year repayment plan. That’s 120 payments. It’s a mute point, you will have already paid back your loan. I just consolidated my various government loans into one big honking one choosing the standard repayment plan. For some reason they put me on the Standard plan alright – a 30 year one. Payment amounts are great but wow, that total interest paid is something else! Is this the Standard payment plan you are speaking of?
No. The only standard payment plan whose payments count toward PSLF is the 10 year one. Yes, if that’s the ONLY plan you make payments under, you will have nothing left to forgive after ten years. But if you’re in an IDR plan (and residency) for 5 years and then the 10 year standard plan for 5 years, there should be something left to forgive.
THE PAYMENTS YOU ARE CURRENTLY MAKING WILL NOT COUNT TOWARD THE 120 REQUIRED FOR PSLF.
Shouldn’t users also be encouraged to save for the tax liability when the debt is forgiven? Is everyone aware that forgiven debt is considered income, or will we have a rash of outrage articles like below?
https://www.usnews.com/education/blogs/student-loan-ranger/articles/2017-11-08/know-the-tax-implications-of-eliminating-student-loans
While forgiveness of $100 to $200K is something to celebrate, the entire amount forgiven could be at your marginal rate – if you don’t have money saved to cover the taxes, your celebration could be short-lived.
PSLF is tax-free. Your concerns are valid for IBR/PAYE/REPAYE forgiveness after 20-25 years though. There is a tax bomb associated with that. But not with PSLF.
I have been battling mistakes on my PSLF payment tracking for over a year. I have over 7 years of qualifying payments. All my previous employment and loans have been verified to qualify, and I have been sending in annual employment certifications and had been monitoring my payments on MyFedLoan.org. Just over a year ago, I signed into MyFedLoan.org as part of my monthly routine, and noticed that the number of my qualifying payments had dropped by over 2 years worth! I obviously freaked out and called Fed Loan Servicing’s customer service line. They told me “that’s weird,” and said that they would initiate a “manual review” of my account. I have continued to call and check back every month since then, only to be told that it should be any day now that my account review should be completed. I asked one customer service agent what would happen if I hit my 120 qualifying payment but my online account didn’t reflect it? She told me she’s sure my account will be updated by then. (It’s been 1 year and 4 months since she made that statement) She did verbally verify that they had all my information and that I will be eligible for forgiveness in October of 2021.
So yes this is all very nerve-wracking. There are some signs that Fed Loan Servicing is trying to up their game. Their website is constantly being updated to include more information and options regarding PSLF. For instance, previously there was no link to apply for PSLF unless your account showed 120 payments. Now there is a link for you to apply for forgiveness whether or not your account displays 120 payments, and they will “manually review” your account if you feel your payment count is in error. The customer service agents seem to have a little more information about my account every time I call, however it still feels like I’m getting the run around. I’m starting to think that even if my loans are forgiven, it’ll take at least 2 years from the day I submit a forgiveness application until it is actually forgiven.
This is my exact scenario.
The good news is you still have 3 years for them to work out the kinks.
I have similar scenario though not as many years into program as you. Last time I called they told me that they are handling recounts based on how close to 120 payments a person is regardless of when they called to request recount (I’ve been waiting >2 years for my recount). It’s maddening.
Sounds like it is time to hire some more counters to me.
I am a current resident making payments on an IDR and recertifying each year with the eventual goal of PSLF. My concern is that many post residency jobs may not qualify for PSLF. My understanding is that even at academic medical centers, MDs are paid through a physician group that is separate from the non-profit status of the hospital at large. Is this accurate? For those of you out of residency that remain eligible, what types of positions do you have and is there any resource to find out what positions exist that are eligible versus those that are not?Thank you.
That is true at some but I wouldn’t say most academic medical centers. I’d say employee status is far more common. Obviously it matters (although there are some that argue it doesn’t, but I wouldn’t count on that working.) I don’t know of a great resource on this info, but what would you do with the info anyway? It’s not going to change anything you do until you finish residency is it, and then you’ll know if your job is a 501(c)3 employee job or not.
Thank you for your response. While there may not be anything actionable from that information, if I were to find out that the likelihood of employeement at a 501(c)3 in a region or specialty that I plan to practice in is very low, then I would strongly consider refinancing while in residency. In line with the title of this post, I don’t want to “give up on PSLF” but if the odds of finding an eligible position post-residency are not favorable, then it may make sense to look into refinancing now. With the possibility still alive I’m continuing to minimize my payments and the effective interest rate through the interest subsidy from REPAYE. Although this is the ideal strategy for PSLF, it may not end up being the right move if I end up being unable to find a position that is eligible and refinancing/repaying down the line.
Outside of asking indivuual people or employers, I can’t think of a way to find this information out. If anyone does know any statistics on 501(c)3 physician employers by region or specialty that may be useful for people in this considering this decision. There are a lot of unknowns in this equation, but I always think more information is better. Thanks!
You should already refinance your private loans and even if you could, you probably shouldn’t refinance your federal loans as the effective rate under REPAYE as a resident is likely lower than the rate you can refinance to. That’s why I said it isn’t actionable.
Long time follower, first time commenter. Could you further explain the “effective rate under REPAYE as a resident is likely lower than the rate you can refinance to?”
I was also thinking along the same lines as the previous commenter as a current PGY1 trying to weigh the pros/cons of refinancing now with SoFi resident option vs continue down the PSLF path with REPAYE as I currently am.
In REPAYE, low earners with high debt may have some of their interest each month forgiven. So if you have an interest rate of 6% on a debt of $200K ($1000 a month in interest) and payments of $0/month, you would have $500/month in interest forgiven. That would make your effective rate 3%. So if you can only refinance to 5%, you’d be better off in REPAYE because the effective rate is 3%.
If you’re not sure if you’ll work for a 501(c)3, stay in REPAYE until you are sure you won’t be working for a 501(c)3. You can refinance your private loans of course.
hopefully, the Department of Education in Washington will forward with their plan to forgive all student loans regardless of how long it takes for struggling students to have their outstanding student loan debts forgiven.
I strongly agree! I believe that having a copy and keeping the receipts or records of the payments is a must. This will definitely help you secure yourself and you can use these records as proof. Thanks for sharing this article.
Hi Jim, I was wondering if you had any more information on how people are handling problems with PSLF. We have been making regular payments for 5 years– supposed to be 60 payments now, but as we started to look into our file in closer detail, they have revealed that a number of these payments have not counted towards the 120. Even though we are on direct debit and don’t ever miss a payment. In fact, if you pay more than the monthly payment, it hurts you because next month they deduct less (automatically), and so the second payment doesn’t count. Regardless, without that, they still seem to be randomly choosing which of the payments actually count towards to 120 and which don’t. We have called customer service and gotten the run around. Do you know if there is legal help to try to straighten out what’s going on? Thanks greatly.
You can try this guy, tell him I sent you. I’m trying to recruit him as a site sponsor.
https://minsky-law.com/
Keep careful records obviously because it might require legal action to get what you deserve!
How difficult is it for someone coming out of a radiology residency to find a job in a non profit hospital that is non private practice related. Thanks
I get that question a lot (mostly from people heading into residency) but as far as I know, that data isn’t available anywhere. My guess is that is about 10% of jobs, but in some areas, it could be higher.
The concern I have is taxation. Currently PSLF forgiveness is tax free. But is there any verbage that states the government couldn’t change this in the future? This could apply to current or future borrowers.
No, the program exists at the whims of Congress, but if the rules were changed current participants would likely be grandfathered in as they have been for similar changes in the past. If you’re worried, keep a PSLF side fund. If you’re really worried, refinance them and pay them off yourself.
One of the students I stayed with when interviewing at an expensive private school said “It’s a great school, but I wish I didn’t have so many zeros behind my name”. I went to a lower tuition school, partly with this in mind. PSLF was an option as I currently work at a nonprofit, but after running the numbers looking at refinancing and paying our loans versus pursuing public service loan forgiveness it was about even. Now we’re on track to pay off our loans 3-5 years after residency. Even if the news about PSLF isn’t as dismal as it is being portrayed, my wife and I are so happy to be free from the worry and uncertainty surrounding the program. I now counsel upcoming med students to strongly consider tuition when choosing a school.
I find it frustrating that those who consolidated before 2007 had a lower interest rate than the direct loans currently and direct loans weren’t even an option back then when this act came out. It was so disorganized that they didn’t know what loans would be eligible or any guidance when it first started. I called before I applied and asked Navient, my FedLoan, and PSLF and still got wrong info because I have FEEL loans. It makes me so mad. I wish I took a higher paying job at first then did the public service route.
Hello everyone, appreciate all the help on this website. My wife and I are trying to figure out if we should stick out PSLF or refinance. We both have made about 4 years of qualifying payments into PSLF. I became an attending this year and she becomes an attending this summer. Our combined income will be between 500-600k. Our combined public debt is about 500k. Is the potential forgiveness after 6 more years of payments significantly more than the potential amount saved from refinancing to a lower interest rate that it would be worth the trouble? Or does refinancing and paying off over 5 years make more financial sense?
If you’ve made 4 qualifying payments and the job you want is a qualifying job, you will come out ahead going for PSLF. Whether it’s significantly more depends on how you define that, but it wouldn’t surprise me to see you guys get $300-400K forgiven. If you need help running the numbers, I’d hire one of these guys:
https://www.whitecoatinvestor.com/student-loan-advice/
Do we have any success stories on PSLF on this platform for physicians?
I’ve made 78 qualifying payments toward PSLF with 42 left (4 yrs residency, two 1-yr fellowships) and am 3.5 years away. I’d LIKE to think that I have all the boxes checked on expected eligibility, but all these denied PSLF stories are disheartening.
No, most are like you with only 70-100 payments still. There is a FB group dedicated to docs going for PSLF and a poll there a year ago showed there was basically nobody with more than about 100 payments in it. I expect to start seeing significant numbers of docs getting it in 2022 and rapidly increasing from there.
I’m about to start residency and want to start my PSLF side-fund but am nervous I’ll do this the wrong way. For the past few months I’ve been inhaling every WCI podcast I can find and I’ve read your book but I’m still very new to anything other than my one credit card (I got during med school), my checking account, and my hometown bank’s saving account I’ve had since I was 16. Do I just start putting money away in a savings account or CD even though it doesn’t earn much interest because it’s safe? Do I open some kind of Fidelity account (my 401k from pre-med school was through them)? Any advice is appreciated. Thanks everyone.
The idea of a PSLF side fund is that’s where you put the money you would put toward student loans as a new attending during the “live like a resident” period. While you’re a resident, you likely have a better use for your money like buying groceries or maxing out a Roth IRA or getting the match in your 401k. You’re not supposed to be able to save it up during residency, but I guess it’s possible if you’re moonlighting or only have a tiny loan burden.
If inhaling too much of my podcast I hope you’re wearing an N95.
I’m a dentist and in PSLF, married, and working/living in Community Property State. My wife is starting up medical school but her to school isn’t in a community property state. Would we still qualify for the tax benefits even thought she isn’t living/studying in a community property state (Her home state is a community property state)? Like would we still be able to file separately for taxes to equalize income while she finishes medical school? Thank you very much!
Sure. Why not? How you file your federal income taxes has nothing to do with community property as far as I know. Am I missing something? But I don’t know what you mean by “equalize income.” When you file separately, only your income goes on your taxes.
For example, if my AGI is 200k, and we equalize my income. Instead of paying 10% of 200k for 20K to PSLF, my income would be 10% of 100k for 10k towards PSLF. Here is the video, I’m referring to.
https://www.youtube.com/watch?v=XoF_EHLVAFQ
Fun. Learned something new today. I ought to do a blog post on it. Here’s the IRS info on it:
25.18.1.2.4 (03-04-2011)
Tax Assessment and Collection under Community Property Laws
For income tax purposes, if spouses file separate returns, each spouse is taxed on 50% of the total community property income regardless of which spouse acquired the income. Poe v. Seaborn, 282 U.S. 101 (1930). In addition, each spouse is taxed upon 100% of his or her separate property income. Community property may also affect basis in property.
https://www.irs.gov/irm/part25/irm_25-018-001#idm140332591340704
Yes, I would appreciate more insight into this! I know I should talk to a CPA about this but I feel like they would be just as clueless as me. I’m wondering what the benefits would be long term for PSLF, specially the 4 years she is in medical school before she makes a resident salary.
The basic scheme is you pay more in taxes in order to have more of your student loans forgiven. So you simply weigh the additional tax against the additional forgiveness.
New follower to WCI. Stumbled upon the site when researching whole life — thanks for this amazing resource Dr. Dahle. Just realized that after 8 years of working for a 501c3 company, none of my loan payments qualified for the PSLF due to the loans being FFEL instead of Direct. If I consolidate to Direct now, I won’t qualify for income driven repayment plans — as all my options result in full repayment after 10 years. I guess my income to debt ratio is too high. My options are: A. Continue paying my $155,000 ($870/per month x20 additional years) at 2.625%, or B. I can consolidate my loans to Direct loans, maintain the same interest rate at 2.625% and spread the payments out over another 30 years at about $550/month. At 2.625% interest, everyone tells me it’s “free money” due to the low rate essentially at inflation levels. I am definitely disciplined enough to take the $300 difference in monthly payment and invest it in the market hoping to achieve a ROI of >2.625%. I could also just keep making the payment schedule as is but then have the loans in the Direct loan program. I’m seeking advice on two counts. First, if it’s a financially break-even, is there any advantage to consolidating my loans from FFEL to Direct even if it doesn’t allow me access to any of the income driven repayments? Hard to speculate, but perhaps carrying a Direct loan owned by the Fed Dept of Education is more likely to offer some future financial advantages (loan forgiveness) not available to FFEL loans. Second, am I being misled that because my rate is 2.625% that I shouldn’t pay it off early and instead continue to direct those moneys to other investment opportunities — perhaps even consolidate to the new 30-yr term with lower payment and invest the difference via dollar cost averaging? Any thoughts or advice will be appreciated. Mahalo!!!
You’re welcome.
I’m sorry to hear about your loan SNAFU.
I disagree with “everyone”. I paid off a 2.75% mortgage early. No regrets there as being free of that has given me the cash flow and risk tolerance to invest aggressively elsewhere. Besides, 2.625% is pretty good for a guaranteed return these days. Where else are you getting that without taking significant risk?
Why not pay it off? You’re an ENT, right? Isn’t that something like 3 months gross pay? Why can’t you just pay it off this year? (Joking a little, but only a little. I seriously would pay it off this year.)
Thanks WCI. Fair assessment for sure—except I live in Hawaii where life is paradise, but compensation is dismal, mortgage is 1.2 mil for a 1800 sq ft home, and private school is $26k per child per year (x3 in my case). All after tax dollars of course. Did pay off about $60k of private loans my first two years out of training, but that was before Hawaii. Paradise tax they call it…… Despite all the above, the WCI site has been a real financial education, taught me of the mistakes I’ve made (not to be repeated), and given me a much clearer path forward. Wish I discovered it earlier. I’ll spread the word and the lessons learned. Mahalo!
High cost of living areas do make it tougher, but not impossible. In reality the “paradise tax” is working another 5 years (or whatever) to get to the same place. If it’s worth it to you, go for it.
Hi ENT Doc,
I just read your post and I hope I’m not too late in responding. I have a co-worker who has been working for our non-profit community clinic ever since graduating from dental school. She had a similar situation to you and did not even think about starting the process for PSLF until 7 years out of school! So she started the process, planning to spend another 10 years toward PSLF even though should could’ve been only 3 years away if she had started earlier. Anyway, with all the exceptions/waivers that were made since Covid-19, she ended up getting her loans forgiven in 3 years even though she didn’t have the right loans/consolidations to begin with because she had been working for the right company all these years.
I think it’d be worth it to give them a call and see if you can also qualify for something similar!
Thanks Emily!
Yes! I hit the ten year mark employed by a 501c3 last month. From what I’ve read, I believe I may now qualify for PSLF. I fired off an application for loan forgiveness a couple weeks ago and what a nice reprieve it would be if I qualified. Thank you for your willingness to share this information. Mahalo!
I’m enrolled in the PSLF program and hope to have my loans forgiven either late 2023 (if 8 months of my FFEL loans are approved under the limited waiver program) or mid 2024.
I don’t find the process onerous at all, all it takes is filling out a form, getting my employer to sign it, and uploading it to the website. I have been doing this diligently every year since 2015 and twice this year. Most 501(c)3 employers are reasonably well versed with signing this form, at least in my limited experience. Also, at least in my case, Fedloans was close to accurate with the number of payments. We’ll see how MOHELA does.
I did not do a PSLF side fund but my student loan burden is not egregious.
Of course, enrolling in PSLF was not a hard decision for me since I knew I wanted to be in academia.
I’m still on track to pay off my loans within 5 years after end of training.
To all pursuing PSLF hang in there!
I was fortunate enough to have my FFEL loans forgiven after the introduction of the limited PSLF waiver this past October. These loans previously did not qualify for PSLF until the new waiver was enacted, thus I had made about 12 years of payments. As promised I was given credit for all back payments. The process took about 6 months beginning last October when I learned of the limited waiver from one of Jim’s posts.
Long time reader, first time commenter here too. I’m surprised you don’t mention the PSLF limited waiver that is currently open. A mistake I made 13 years ago (and didn’t realize until recently) would be eligible for this program being in academics. I only had 40k in loans being an MDPHD and most of that has been paid off by the NIH LRP, however no longer eligible for that because I take private funding towards my lab (stupid rule IMO). Anyway I have 14k left and I think this waiver applies to me and others in the wrong payment plan, to quote a recent email from the us dept if education in my inbox:
“The waiver cuts red tape in helpful ways. Any period where you made payments while working in public service will count toward PSLF. Right now, for example, it doesn’t matter whether you were late on a payment or on the wrong repayment plan.“
I get that criticism a lot. “Why didn’t you mention such and such in your post?” despite the fact that I have entire posts elsewhere on the website dedicated to such and such. If I included everything in every post all of the posts on the website would be 10,000+ words long and no one would read any of them.
At any rate, the limited waiver ends in a couple more months. One can read more about it here:
https://www.whitecoatinvestor.com/pslf-changes-limited-waiver-benefit-ffel-borrowers/
Didn’t mean to sound critical, just seemed worth mentioning. You do great work, thanks for everything!
I’ll add the link to the post.
Indeed, another shout like Brian’s to those pursuing PSLF. Hang in and stay the course if this is part of your plan! As an academic doc, this had been the plan since residency. We were just forgiven this January. Dr. Dahle, if you or Andrew ever need/want further information as another data point I’d be happy to share my experience.
I will say our payment counts were frighteningly all over the map even with filling out the employment certification forms yearly since residency. Some times up, some times our payment count actually went down after our servicer was switched. Our loans also switched hands so many times (Nelnet, Granite State, FedLoan) over the years it was almost baffling when we got the forgiveness letter.
Stay strong out there, and like Dr. Dahle says, make a plan. It’s what non-planners (like me) need to succeed:)
Patrick
I think it is an important perspective to hold that for a certain sub-group here, this is all going to turn out to be a phenomenal deal. For example, I happened to get 48 months credit for pslf while in residency , during the payment freeze, and I am still benefitting from the freeze over a year into attending life…. I have paid in just under $1800 total towards my >200k bill, and owe only 58 more months of service at a job I love. To me, it seems it is nearly impossible to come up with a compelling reason not to stick with pslf if you’re at a qualifying job in similar cases. Between REPAYE interest subsidies early on, the interest freeze thereafter, some of us accrued less than half the interest we originally assumed before starting residency.
Even in the worst case that PSLF ended in a definite way (even for those who should be grandfathered in), many physicians in training benefited in a huge way from just the interest freeze. It’s a good reminder that while rules constantly change, there is always a way to “win”. Thanks for all you do!
I attest that I received PSLF even a bit sooner than my calculations were targeting, due to Fedloan finally getting their act together. The CARES act at the beginning of Covid basically ended my attending payments b/c I just got all my loans wiped out a few months ago, had about $150k left. It was awesome to only make attending payments for a little over half of the 10 year period. Stick with PSLF! If I would have listened to Dave Ramsey I’d be 150k+ behind.
Hey, would you mind giving a brief description of what happened at the end of your 10 year period? We have been doing the annual re-certifications. We have one year to go. What does the process look like towards the end and when were you actually “forgiven”?
I submitted my annual ECR like I always did in January of this year. Also did the IBR recertification in early March after doing my taxes ‘just in case’, like I have been every year, b/c I learned not to trust servicers to be highly competent and keep me on the same IBR payment plan rather than switch me to another one and potentially discount me a month in the process. As usual I received confirmation that my ECR and IBR recertification forms were received and being reviewed, and that I didn’t meet criteria for a reduced monthly payment or a ‘financial hardship’ (note: the IBR thing probably didn’t matter as much in the end; also a tip: I made sure to get all account communication by mail rather than e-mail b/c with so many e-mails I historically missed some important time-sensitive things in the past).
A few months later I was sent another letter saying that my loans were eligible for forgiveness as I had met the PSLF requirements per the last ECR submitted (of note every single year I sent them documentation proving they were miscounting my PSLF eligible months and got communication back that it could take up to one whole year to process).
Finally, I submitted the PSLF forgiveness application (basically like an abbreviated annual ECR), and a month or less later received a letter showing that action was taken in my account with zero balances everywhere.
Hope that helps.
By ECR I meant employment certification, now it’s just the annual PSLF form. I would submit the PSLF forgiveness application once you reach the 120th month.
Hi Alan,
I previously posted above in Dec 2018, and I’m happy to report my PSLF went through in Feb 2022. I actually did not submit an application for forgiveness because my account was still showing the wrong number of payments. For instance, they had 3 different loans on my account each with a different amount of payments made, even though I had been paying all loans for the same amount of time. I figured I’d make a few extra months of payments just in case, and worst case they would refund those payments.
Turns out, they went ahead and forgave me out of the blue. I got an email saying I had a message in my account. I logged in, and the message showed my new balance of zero. After all the back and forth, my reaction was very muted. No excitement, just a kind of “Oh.” I was probably still bracing myself for a mistake. I’m assuming since my account was under “manual review” back from 2017 when I first noted the mistakes, a reviewer must have tallied up my 120 payments and put the forgiveness through the system.
All-in-all, even with the headaches, I believe it was worth it (especially if you somewhat like your job and don’t get burnt out like I did). Even though I have a little ways to go to figure out what I want to do with my career and to rebuild my “spark for life,” the good financial position I’m in now gives me a lot of flexibility to explore many other options or to work minimally where I’m at and just enjoy life from now on. Especially with the last year and a half of paused payments due to Covid-19 and following Jim’s advice over the past 10 years to save aggressively and live within my means with the goal of “retiring” early.
Sidebar (all my financial loan deets for those interested):
I’m a 39-year-old dentist and had $390K in dental school loans forgiven (with interest the amount was way over $500k at the time of forgiveness). I estimate I made around $250K in payments over the past 10 years, but I also received loan repayment assistance so my total out-of-pocket was probably closer to $40K. The dental school I went to now charges $520K for the 4 years of dental school. Crazy! For those considering dentistry as a career, read Jim’s posts about which careers are good financial investments. Or make sure you’re OK going to a cheaper school in the midwest and then staying to live in the midwest or south to practice if PSLF is no longer around, or OK living with your family and working your butt off for as long as you can. My friends in private practice may make more than me in terms of take home salary and work deductions on a yearly basis, but they have over a million dollars in debt between school and practice loans, and are “stuck” working full-time for at least another 15-20 years before they can even think of scaling back (so to age 55-60). Not to mention the additional workload they’ve taken on post-Covid with the serious staffing shortage that’s been going on. Suffice it to say, they’re a little jealous of me getting to work 2-3 days/week now.
Anyway, this was longwinded but hopefully informative!