[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
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.
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
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How can you avoid this type of issue? Here are several steps to take to avoid having something like this happen to you:
- When going for PSLF, verify employment at least annually.
- Don’t trust the servicer’s calculations. Always double check their math.
- Don’t count on your memory. Keep great records and notes so you can prove your case with confidence if necessary.
- 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!
It’s sad, but true, that you have to do all of this. Honestly, I think it is the responsibility of the medical school to teach the students about this stuff before they leave medical school. If you are going to pursue PSLF, it should be standard education to (1) consolidate your loans ASAP and enter into a PSLF qualifying program, (2) keep all of your records, (3) submit the ECF – employment certification form – every 6 to 12 months, and to (3) start a PSLF side fund as soon as possible.
I don’t think anyone who has worked through PSLF themselves or with someone else would disagree with these principles. Yet, we hear horror stories all the time of people who have to fight their way to get their qualifying payments recognized. A little work throughout the process can mitigate a lot of heartache later.
Thanks for fighting for your clients, and for providing an example of exhaustive options to fight back!
TPP
Thanks for the gratitude TPP! I agree most of the errors start early around med school graduation. Most could have eaisly been avoided. Yet, we still see a regular flow of our new clients that have problems that normally started right around then. So something isn’t working there.
In fact, I’ve dedicated lots of effort at putting on free student loan 101 type talks for 4th yr classes. I know, I know… we’re selling a service too. Like WCI, we’re running a for-profit business. We use education to drive a lot of that. And it’s really good info on student loan basics that would help a lot of those graduates.
What’s been somewhat surprising to me is how difficult it is to open doors and keep them open at medical schools. Once of those was our local medical school. And they probably need it far less than many others. They have a fantastic financial aid director that understands student loans and cares about the students. But even our local medical school’s compliance dept recently cut us out. I was told that their corporate sponsor (a big financial institution) threw a fit and didn’t want any companies besides their own in front of the medical students. And since they were paying big money for the sponsorship, the med school listened. So this is the first year we didn’t do any.
Fortunately, more and more med students are reading things like this and learning that way. So that’s helping a ton!
I think trying to get in front of students is smart. I’m starting a curriculum at Wake in January, and I have two flat fee-only financial advisors coming to talk as part of it. They will have explicit instructions to not take any names or solicit business (it is for educational purposes), but getting your face in front of that crowd can’t hurt. And I’m much more concerned about medical students knowing what a good advisor looks like.
That said, I understand all of the conflicts and politics that go on in that space. Keep doing what you are doing. The good guys will win this one eventually.
TPP
Quick poll: which of these makes you feel more icky? Using taxpayer money to 1) pay off the student loans taken on by some of society’s most privileged and highest earners or 2) taking taxpayer money to pay off student loans taken on by marxists with no understanding of economics 101 so they can study left handed puppetry and go on to earn as little as possible?
I know my dad, who worked as an installer for the phone company climbing telephone polls in all sorts of terrible weather, wouldn’t have been happy to have his hard earned money going towards either. I also know when you hear the public complain about this program, they’re complaining about subsidizing “rich doctors and lawyers” with no concern for the useless degrees this will finance. The injustice of both of these as well as the inflationary effects it exerts on overall educational costs when borrowers become less debt averse are great reasons the government should get out of this business altogether.
I don’t think you are going to find a lot of sympathy here, Matt.
The real problem isn’t the forgiveness plans it’s that undergraduate and graduate tuitions have climbed about 8% per year (often more than doubling regular inflation) and nothing has put a stop to this money making machine. It has produced a situation where many people have debt to income ratios that are upside down often by a factor of 2 to 3 (e.g. debt of $500,000 and annual income of $150,000).
If something needs to be systematically corrected, it isn’t ridding our country of forgiveness programs. The focus should be placed on stopping this student loan crisis created by unchecked tuition hikes.
Also, keep in mind that the average financial literacy of someone going into these fields is abysmal. In our debt-norm culture, people rarely even consider how much debt they’ll have. No one has taught them how to view decisions through this lens. All they want to do is become a doctor/dentist/etc and help people.
TPP
There’s a bit of a chicken or egg dilemma here, but I agree with much of what you’ve said. I think subsidizing and guaranteeing student loans have been a driver of tuition increases across the board, rather than a federal reaction to some other driving force. Financial illiteracy is a necessary precondition for this problem , but a wave of bankruptcies would have corrected the problem pretty quickly. The federally mandated nondischargable nature of the debt keeps the snowball rolling.
That said, I wouldn’t expect anyone to reject a financially beneficial option out of principle. I appreciate this article and efforts to help people make the most of programs available to them.
The Physician Philopher is spot on. As a dental student, I can tell you that every out-of-state and private school is over 500k now if taking out living expenses and fully financing it with loans, and med schools aren’t much cheaper. When the government took over the student loan business and began issuing grad-plus loans with no cap on borrowing like candy to 22-year-olds with no credit history, it caused the costs to skyrocket. The only thing keeping some borrowers from defaulting are these income-driven repayment plans that include forgiveness that I don’t think is sustainable. The solution would be to get the government out of the student loan business, as no bank would lend a student 500k for a starting salary of 130-140k, cap grad-plus loans, and hold schools accountable in some fashion for the students’ success, as they have no incentive currently to lower costs.
Our med school counseled us to go into deferement for 6 months and then start paying back. No mention of PSLF. I stumbled into IBR when I consolidated in April the following year.
The advice my school gave cost me 6+ months of near zero IBR payments!!!
Everytime I read one of these student loan posts I have a little heart attack and frantically read and look for ways I am screwing up PSLF. I appreciate being reminded about the ways to play PSLF defense and how to keep on top of these servicers!
Just like taxes the government makes things overly complicated and opaque that we need to hire someone to help sort it out.
The medical school gets paid either way so they do not have any interest in teaching the students personal finance or loan repayment techniques.
I have been planning on PSLF since graduating from medical school, and have been verifying employment annually since the form became available. I was on IBR during training and am now on REPAYE since transitioning to faculty. At present, my servicer states that I have 84 qualifying payments (hopefully soon to be 94 after this cycle of verification).
Two questions:
1. What is the likelihood that this could still blow up on me and I could get rejected when I actually apply for PSLF?
2. I think the number of qualifying payments is short by about 10, but I don’t know if I have all the supporting documentation to prove that. If I request an internal review, it is possible that they could adjust my number of qualifying payments downward. How can I protect against that, or is my best bet to leave well enough alone?
At the end of the day, nobody can guarantee PSLF will pan out. But I also haven’t seen any good data or examples that would indicate it won’t work out either. I’ve seen a lot of stuff about PSLF blowing up. And when you peel back the layers, it’s really based on errors that could have been fixed. So if you keep your ducks in a row, and sniff out all the errors early on, I don’t see any reason to believe it wouldn’t pan out for you. But the government can change the rules… so you never know for certain. So that’s why it’s good to keep a side fund – PSLF bailout fund – in case it blows up.
If you think there is an error, I would not leave it alone. I’ve never seen them adjust the #’s downward. But I suppose that could happen. However, my thought is that if they’re going to adjust the number downward now, they will definitely do it when the real $’s are on the line and you are apply for PSLF. So better to be aware of that now than later. That’ll give you time to fight it.
Thankful for sharing this useful post!
How do you actually use the spreadsheet you developed to import and use the nslds data?
There didn’t seem to be any instructions with it and it looks like a blank spreadsheet…
Open the spreadsheet in excel. Click the button “Load Student Loan Data” and then select your NSLDS file (you can download that from here – https://nslds.ed.gov/npas/index.htm ). It should then auto-create a table with the data from your NSLDS download.
Also, this file was built for the desktop version of excel. So it might cause problems if you’re trying to run in the cloud based version of excel.
I am trying this now, and that website is no longer active in its current form. I still got a .txt file from nslds, but it appears to have been updated and no longer compatible with the sheet. Got an updated excel sheet perchance?
Thank you for this post and the great information regarding PSLF. I have been enrolled in the PSLF program, but there were periods of times I was in deferment or forbearance which I understand do not qualify towards my “PSLF matched months.” Over a year ago I checked my NSLDS report which showed I had made (in some cases) up to 22 more PSLF payments that were not reflected by my lender (FedLoan Servicing). For example for several loans my lender shows I have made 55 qualifying payments for PSLF and NSLDS was showing I had actually made 77. Huge difference. I understand at times some of the numbers can be off on my lender’s site in that they seem to update the “matched months” annually, but it was impossible for them to be off by that many payments. Not to mention this also has big ramifications regarding which loans I choose to target at this time.
It has been over a year since I requested my lender evaluate and recalculate my qualified PSLF payments and they have still not gotten back to me. Initially they stated that a review would take a couple of months, and each time I ask they are still “working on it.” It has already been 14 months. As a result I had a the following questions:
1. How accurate is NSLDS compared to the info my lender has on file? I imagine because NSLDS has every listed month I was deferred and returned to IBR or REPAYE it should be accurate in terms of PSLF? They even seem to record my most recent payments on NSLDS so I would hope the PSLF matched months should be accurate? What sort of errors have you come across when using the NSLDS reprot vs. the lender…Is one more accurate than the other?
2. What are my options to getting this evaluation and recalculation completed? Is there anyone else I should contact in order to expedite this review process or am I out of luck and just have to wait what seems to be indefinitely?
Every time I hear these stories I become more glad that I don’t have any student loans any more. If Daniel doesn’t get back to you, you can shoot him an email or give him a call too. Link at the top of the post. He can probably bulldog the process a bit for you too since he has done it for other clients.
Hi Henry,
Sorry you’re having trouble with all this. We have seen instances where the NSLDS has higher payment counts than the servicer. In our experience, the Fed Loans numbers were correct and NSLDS was wrong. But can’t say for sure in your case. Have you counted your payments yourself? I’d trust your math over theirs.
I’d try and figure that out first (if you haven’t already) and if Fed Loans number is wrong, i’d stay on top of them until you get them to verify the correct number. And if they don’t, you could get the loan ombudsman involved. https://studentaid.ed.gov/sa/repay-loans/disputes/prepare
Hope that helps!
OK…so I have 130 cumulative matched months in my Excel spreadsheet file I downloaded from the NSLDS. My Servicer FedLoan says I have 114. I honestly am not sure who is right. Should I apply for the complete forgiveness of my balance? Do they use the NSLDS to determine the amount of matched payments? Any help you may have would be appreciated.
I think you should hire one of these folks to help you:
https://www.whitecoatinvestor.com/student-loan-advice/
I bet you’re eligible NOW for forgiveness because FedLoan doesn’t count well. It’ll take a few phone calls and letters most likely.
I was wondering if anyone had a link to a PSLF calculator that takes into account payments already made? The calculators I have found don’t let you enter payments already made or show you a chart/graph of how your loan balance changes over time. I will have 5 years of payments in REPAYE after fellowship is completed and I am trying to weigh various job prospects using PSLF as a potential benefit of some opportunities. There was a link to DocEden’s calculator that other people previously found helpful but it appears the site is no longer working. Thanks.
I have tried everything to try and make the spreadsheet for this work. I can’t even get as far as importing the data from the loans site. I’m using excel on my computer in its usual form (not online). Can your dad make an adjustment to file to make it possible to use? Where it says load student loan data, it doesn’t do anything, and when I try to convert the file, it erases that title part all together. I’m at a loss, but would love to be able to use this tool.
Sorry it’s not working for you. I’ve hear from a couple of others that it doesn’t work well on mac either. So if you’re using a mac, you might try a PC. OR if that doesn’t work, send me an email ( [email protected] ) with your NSLDS file and I’ll email you a few versions of the output (excel, pdf, etc). Hope that helps.