[Editor's Note: This guest post is by Daniel Wrenne, CFP CLU, ChFC, CFP, a financial planner, student loan advisor, and a paid advertiser on the site (although this is not a sponsored/paid post). I've advised before not to give up on Public Service Loan Forgiveness, and continue to recommend building up a PSLF side fund in the unlikely case it goes away. I also advise to keep a copy of every promissory note you've ever had, all communication with bureaucrats, annual signed certification forms, and every payment you've ever made.]

Public Service Loan Forgiveness is getting some ugly PR.  I’m sure you’ve seen the news that 99% of applicants are being declined.  Naturally, this has caused some major concern among borrowers going for PSLF.

The Current State of Public Service Loan Forgiveness

Unfortunately, this news didn’t surprise me.  In my work, I have had the privilege of helping hundreds of physician families sort out their student loans.  And for many years now, I have seen recurring signs that point to this outcome.  In fact, I wrote about this PSLF time bomb in 2016 before anyone had applied.  Like the media, I agree that PSLF has major issues brewing that will continue to cause problems for borrowers.  And what we’re seeing now is only the beginning.  That’s the bad news.

The good news is that loans are being forgiven.  Unlike the media, I don’t think the government will go back on its PSLF promise (for existing borrowers).  We’re seeing lots of issues around PSLF, but so far all of them are avoidable and fixable.  It’s just a matter of recognizing those issues as soon as possible so that you minimize negative impacts.

Learn from Others' Mistakes

Today, I’ll share a story that involves one of these issues.  This particular issue is extremely costly and tends to fly under the radar.  It’s not a quick or easy fix.  I suspect it’s the cause of many of the recent PSLF declines.  And after our experiences, I wouldn’t be surprised to hear of borrowers running into this problem and giving up on PSLF altogether.

We started working with a dual physician couple several years ago.  Like many couples we deal with, they were extremely busy with life and work.  They were starting in practice, buying a home, having children and catching up on all the other things in life they had put on the back burner during training.  Also, like most young physicians, they had a mountain of student loan debt.  Both of them were working for PSLF qualified employers.  However, they felt unsure about how they were tracking toward forgiveness.  Putting all of their eggs in the PSLF basket felt daunting to them.  And they didn’t have the time, interest or expertise to navigate all the intricacies of maximizing PSLF.  So they hired us to help.

Dig into the Data: The NSLDS Report

We always begin by organizing and analyzing a client’s current state of financial affairs.  All of the most important information about a borrower’s student loans lives in their National Student Loan Data System “NSLDS” report.  We use the NSLDS report to get their student loan data in order.  The NSLDS is like a transcript of lifetime student loan activity.  It includes some data that cannot be found elsewhere.  And it’s absolutely necessary to have this data to begin analyzing student loans.

When we started working with student loans, there weren’t any good tools to help organize and analyze them.  Not much has changed since then.  Fortunately, my dad is a spreadsheet pro.  He created an awesome spreadsheet macro that turns the ugly and difficult to analyze NSLDS .txt file into a very pretty, organized and functional excel spreadsheet.  It’s literally saved us hundreds of hours while increasing the accuracy of our data.

If you’re not planning to work with an advisor, a tool like this is a must-have!  We’re happy to share this spreadsheet with you in exchange for joining our email list.  Click here to enter your email and get the spreadsheet.

Verify Payment Data

In order to do good planning, you need to understand where you are today with your payments.  For PSLF, we want to look at the NSLDS data to find the “Loan PSLF Cumulative Matched Months” for each loan.  This lists how many months have been verified by the servicer as PSLF qualified.

public service loan forgiveness

Daniel Wrenne

This client had been making what they thought were qualified payments for several years now during residency.  Yet, they had a big fat zero listed for all their loans.  Not to worry!  This is pretty common and normally has an easy fix.  Get all your payments verified as soon as possible by completing the employment verification form(s) so you can actually see where you stand.

This client promptly completed the employer verification and in the meantime, we used their NSLDS data to come up with our own estimate.  Our spreadsheet (mentioned above) uses the NSLDS data to automatically estimate the number of payments made for each loan based on payment history.  It looks at all date periods where the “Loan Status Description” is “In Repayment” and estimates the total payments made during those periods.  This is not perfect at estimating PSLF payments, because not all payments are PSLF qualified.  Plus, it’s difficult to determine if a payment was actually made during irregular time periods.  But it’s a great starting point.  Using this method for this particular client, we estimated 40 payments.

Our hope was that their servicer would report back 40 qualified payments and were good to go.  But if there was a discrepancy between our math and the servicers math, we wanted to know that ASAP so we could understand why.  And if there were any errors, we wanted to correct them ASAP.  The process for correcting servicer’s errors can be time-consuming and tedious.  It’s not something I’d want to be doing after making 10 years of supposed qualified payments and getting a surprise PSLF decline letter.

Servicing Errors

After several months our client finally received word back that the loan servicer had calculated their PSLF qualified payments.  Only nine were counted as qualified payments!  I read the letter and everything looked right.  The date periods.  The employers.  The loans.  But there was no chance only nine were correct.

Soon after receiving these results, we called the loan servicer with the client to find out why there was such a large discrepancy.  Their initial answer was that the type of payments they were making were not PSLF qualified.  An example of a non-qualified payment might be a graduated or extended graduated payment.  The client had trouble remembering that far back and started to doubt themselves.  Although surprised, they admitted it was possible they could have mistakenly been on the wrong plan.  At this point, the client was extremely discouraged and ready to give up on PSLF.   Fortunately, we’ve seen many servicer errors and felt this situation was well worth a fight.

Build a Case to Prove Errors

This is where you need to immediately begin building a case to prove any errors.  We had the client locate and share as much of their prior loan correspondence and documentation as possible.  We were looking primarily for their old Income Driven Recertification “IDR” applications to prove they were, in fact, entering into a qualified repayment plan every year.  Unfortunately, these were not available online and the client hadn’t saved copies.  So that option was out.

Plan B.  We called the servicer and requested the clients’ lifetime loan document records.  Fortunately, we got a good person on the phone this time.  This servicer suggested that we request an internal review and recalculation.  And they would notify the client of their conclusion.  I was hoping to see documents myself but this seemed like a good alternative option to try.  So we opted for this.

Fast forward several months later and the client received a letter from their servicer.  They have concluded their review and found the total qualified payments were actually at 40.  For this particular client, the 31 missing PSLF payments were easily worth $50k.  The outcome ended up ok, but going through this process was a big pain they would have liked to avoid.

Unfortunately, we see issues like this regularly.  Sometimes it’s servicer errors.  Other times, borrower mistakes.  But the common thread with these lurking issues is lack of awareness.  So when I see the 99% decline rate for PSLF, I’m not surprised.  The good news is that, so far, some people are getting their loans forgiven.  But you have to have your ducks in a row.

How to Avoid PSLF Problems


Gold Level Scholarship Sponsor

How can you avoid this type of issue?  Here are several steps to take to avoid having something like this happen to you:

  1. When going for PSLF, verify employment at least annually.
  2. Don’t trust the servicer’s calculations.  Always double check their math.
  3. Don’t count on your memory.  Keep great records and notes so you can prove your case with confidence if necessary.
  4. Errors happen and can be fixed.  If you discover an error, work to correct it as soon as possible.

What do you think? What problems have you had with PSLF? Are you verifying employment and payments annually? Do you have a PSLF side fund? Have you given up? Comment below!