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Do 1099 Independent Contractors Qualify for PSLF?

Home Student Loan Management Do 1099 Independent Contractors Qualify for PSLF?

  • Avatar BCBiker 
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    Joined: 01/10/2016

    I feel so terrible for those who thought they were on track. While the wording was confusing I think it is relatively clear that an IC is not a non-profit and an IC is always her/his own employer not who the IC is contracted with. Basics are so critical to avoid being screwed or misled. I hope you find a way to get back anything lost due to inaccurate information from dept. of education.

    #190361 Reply
    Liked by yanita, Zaphod
    ChadCFP ChadCFP 
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    Status: Financial Advisor, Website Sponsor, Small Business Owner
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    Joined: 10/04/2017

    Thanks, and thanks for the recommendation for Adam Minsky. Will reach out… At least I do love my job. And appreciate your help here. If I find any definitive news out, for better or worse, will make sure to post.

    Click to expand…

    You’re welcome, and please circle back with updates or additional questions. As you know, the forum is happy to help!

    Chad Chubb, CFP ® | WealthKeel LLC
    https://wealthkeel.com/wci | Gen X & Gen Y Physicians

    #190386 Reply
    Liked by yanita
    Avatar Kamban 
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    Status: Physician
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    It is a sad state that people who thought they qualified for PSLF and they did not. Perhaps the wording of PSLF should be clear enough that even a 5th grader can understand it.

    But I am also curious why people who work for county and underserved areas had IC rather than being a employee with W2 wages. I once worked in an underserved area and even though I had no PSLF and got terrible wages for 2 years, it was on a W2.

    So is the county and other areas now choosing to give 1099 to avoid future pensions / benefits?. Or are the participants thinking that 1099 might help more with retirement savings in independent 401K and the like and not considered that being an IC might jeopardize their PSLF status.

    #190395 Reply
    Liked by yanita
    Avatar yanita 
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    Status: Physician
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    Kamban: yes, I believe that county hospitals in California tend to contract certain specialties (ED, GI, gen surg, ID etc) because its felt a win-win – essentially “cheaper” and less risky for the hospitals (no payroll issues, sick time, benefits, pension, union, overtime, with at will firing/hiring which all are significant sources of pain and stress for gov’t entities) allowing them to compensate at slightly higher rate than they would be otherwise. My hospital didn’t know that IC jeopardizes PSLF. We are now investigating if I can be switched to W-2 status.

    When starting my contract, I spoke with other advisors, FedLoan representatives, and dept of education representatives. The PSLF language was not concrete regarding definition of employee, leading advisors to be divided in their recommendations. But individuals over the phone at fedloans and dept of education indicated that as long as my check was coming from qualified employer and i was working full time hours (at least 40hrs week, based on def of full time at my institution) and I wasn’t incorporated, my payments would qualify. Of course we have all been on rocky ground with this PSLF, but I was trying to do due diligence… and still failed. Thanks again for having this forum/resources available.

    #190489 Reply
    Liked by Kamban, Tim
    Hank Hank 
    Moderator
    Status: Attorney
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    Joined: 03/27/2017

    Yanita, if you’re in California, you might want to see if the county should have classified you as a W-2 rather than an independent contractor in light of the state supreme court’s Dynamex decision. That said, the Assembly is working on a legislative fix for what some see as overreach by the Supreme Court requiring physicians and dentists to be W-2 employees when they might prefer to be independent contractors.

    #191134 Reply
    Avatar Tim 
    Participant
    Status: Accountant
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    Joined: 09/18/2018

    “ Of course we have all been on rocky ground with this PSLF, but I was trying to do due diligence… and still failed. Thanks again for having this forum/resources available.”

    I really hope you are successful. As many government programs, the noble intent gets lost in the words and interpretation and we end up paying for an army of bureaucrats with no benefits given or abuse of the intent.

    Good luck.

    #191141 Reply
    Liked by yanita
    Avatar Puddlejoon 
    Participant
    Status: Resident
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    Disability Insurance

    Spoke with FedLoan multiple times, seems okay to be IC as long as entity is 503c and is signing the paper. Pay directly to your SSN rather than your EIN. The final application for forgiveness is almost the same form as the certification. FedLoan will process it before handing it to DoEd. I’m optimistic. But thx for all that have contributed to this conversation.

    #196818 Reply
    Liked by Tim
    DMFA DMFA 
    Moderator
    Status: Physician
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    Joined: 06/24/2016

    There *is* precedent for successful grievances against FedLoan for erroneously telling people they qualified when they in fact didn’t.

    This article is actually written by the aforementioned Adam Minsky: https://www.forbes.com/sites/adamminsky/2019/03/06/major-court-decision-boosts-public-service-loan-forgiveness/#6875f29315e7 which talks about how because the good-faith plans of people were based on information they received from FedLoan in a supposedly official capacity which were then overridden.  The cat’s out of the bag at that point; while one can casually say “hey, it’s the government, you shoulda known better,” that’s a major financial dent causing a total reboot of one’s plan despite acting in good faith on supposedly official and accurate information.

    So if you are being told your payments are not acceptable when they previously were, you have cause for grievance and should attempt to have those payments recognized and remain in the program…if that requires suit, well, what’s worse, your legal fees or being stuck with the payment and its ridiculously-accrued interest?  (hopefully not both)

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #196892 Reply
    Liked by jfoxcpacfp, yanita
    DMFA DMFA 
    Moderator
    Status: Physician
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    Joined: 06/24/2016

    Yanita, if you’re in California, you might want to see if the county should have classified you as a W-2 rather than an independent contractor in light of the state supreme court’s Dynamex decision. That said, the Assembly is working on a legislative fix for what some see as overreach by the Supreme Court requiring physicians and dentists to be W-2 employees when they might prefer to be independent contractors.

    Click to expand…

    I’m dealing with that decision right now with looking for outside work…not directly relevant to PSLF, but annoying me that I can’t just be a sole prop.  Different convo, though.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #196893 Reply
    Liked by Hank
    DMFA DMFA 
    Moderator
    Status: Physician
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    Joined: 06/24/2016

    I feel so terrible for those who thought they were on track. While the wording was confusing I think it is relatively clear that an IC is not a non-profit and an IC is always her/his own employer not who the IC is contracted with. Basics are so critical to avoid being screwed or misled. I hope you find a way to get back anything lost due to inaccurate information from dept. of education.

    Click to expand…

    Someone just thinking they’re on track and the authority telling them they’re wrong is a bit of a whoopsie on individual’s part…that’s very different than the authority telling them they’re good-to-go and then pulling the rug out from under them after a year or more of letting interest accrue.

    I agree that ICs shouldn’t have been included.  I thought it was clear what is an isn’t an employee (ICs are by definition not).  I think the clarification is an important one, and it would not surprise me if some FedLoan drones certified some ICs while (correctly) denying others.  However, prior to the point it was clarified, those whose payments were certified at the very least need to have the opportunity to keep their payments certified and be given opportunity to get qualifying employment, if not simply allowed to remain in the program even though they would not qualify (as was the judgment in the recent court case) or receive damages in some way.

    The can of worms is open now, though.  Those whose payments were initially (correctly) rejected, and then changed to a higher-cost repayment program, are now shut out of a benefit that their peers (incorrectly) now have.  That’s pretty unfair.

    Stuff like that will probably end up undoing the program, but again, should that occur, if that precedent continues, then those enrolled in the program would likely be given opportunity to complete it.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #196897 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5396
    Joined: 01/12/2016

    Yanita, if you’re in California, you might want to see if the county should have classified you as a W-2 rather than an independent contractor in light of the state supreme court’s Dynamex decision. That said, the Assembly is working on a legislative fix for what some see as overreach by the Supreme Court requiring physicians and dentists to be W-2 employees when they might prefer to be independent contractors.

    Click to expand…

    Exactly.

    Preference doesnt really matter does it? Its a stretch for most contractors in these situations to actually be contractors whether they prefer it or not. I’d prefer to be a contractor all else equal so I could personalize my benefits, but I think the foundation is pretty clear and makes perfect sense legally.

     

    Institutions dont contract people out of some altruistic or headache avoidance issue, it is solely to dodge expensive taxes and liabilities (workers comp, paid family leave, etc…). So, you are certainly not making more, you’re getting less and the institution is paying less overall. You should make significantly more as an IC to account for this, but not usually how it works.

    #196901 Reply
    Liked by yanita
    Avatar yanita 
    Participant
    Status: Physician
    Posts: 11
    Joined: 06/24/2018

    Puddlejoon: I spoke with fedloans too, and Dept of education, and got similar information… But its hard to argue with this new form that states beyond shadow of a doubt that the acceptable definition of employee is a w-2 employee…. are you able to get anything about IC from FedLoans in writing????? I finally just wrote to Adam Minsky, student loan lawyer recommended by others here, this week and am happy to share whatever I learn…

    #196930 Reply
    Hank Hank 
    Moderator
    Status: Attorney
    Posts: 1116
    Joined: 03/27/2017

    Have you written to your congress-critter and the two U.S. Senators from California?  While Kamala might be too busy forgiving bad behavior by the CA public utilities commission and running for President two months after being sworn into office, it really should be Congress’s job to oversee this federal public service loan forgiveness program.

    #196933 Reply
    Liked by Zaphod, yanita
    Avatar yanita 
    Participant
    Status: Physician
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    Joined: 06/24/2018

    DMFA: Thanks for this posting and article by Adam Minsky. You got right to the heart of the matter.

    #196935 Reply
    Avatar yanita 
    Participant
    Status: Physician
    Posts: 11
    Joined: 06/24/2018

    Have you written to your congress-critter and the two U.S. Senators from California?  While Kamala might be too busy forgiving bad behavior by the CA public utilities commission and running for President two months after being sworn into office, it really should be Congress’s job to oversee this federal public service loan forgiveness program.

    Click to expand…

    Not a bad idea! And actually has been recommended by other people as well. But I haven’t done it. First order of bidness is trying to get my current position turned into a W2… and finding out what an actual lawyer says about this situation.

    #196939 Reply

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