CARES Act - To consolidate or not?

[ydalegrog]

Hi all,

Search function didn't return what I was looking for, so here it goes: As you know, there is a 0% interest on federal student loan until 9/30. For someone graduating in May, I am planning on entering REPAYE, but the question is whether I should consolidate my loans or not? They are all DIRECT, but I am not super positive about working for PSLF-eligible position after residency+fellowship, so there's that.

Arguments for consolidation was that: I can take advantage of REPAYE interest subsidy quicker rather than waiting for 5 months post-graduation to see all that interest accruing getting capitalized. But unclear if CARES act change the equation here if interest subsidy is going to be 0 anyway, although I can start paying down the "principal" (i.e. true principal + capitalized interest from medical school) that is finalized on graduation date if I consolidate as there won't be any interests accruing until September 30th.

Arguments against consolidation was that: I can't target higher-interest loans. Again, unclear with CARES act if having 3 months of 0% interest rate may make this argument weaker???

Does math change with CARES when deciding consolidation?

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[TMP-SMX]

Yes if consolidating will put you out of grace then do it now. Also avoid filing an employer certification form until October. What you don't want is an administrative forbearance switching to Fedloans (after filing your ECF) while you have 0% interest and your $0 payments on the CARES forbearance count as PSLF payments. Consider not making extra payments until an attending where you will have a better idea of if you are pursuing PSLF or not. Save it up or consider Roth IRA contributions. Yes the interest rates suck on your student loans but consider reduction overall of living expenses (live like a resident).

 

[MLNS]

Yes if consolidating will put you out of grace then do it now. Also avoid filing an employer certification form until October. What you don't want is an administrative forbearance switching to Fedloans (after filing your ECF) while you have 0% interest and your $0 payments on the CARES forbearance count as PSLF payments. Consider not making extra payments until an attending where you will have a better idea of if you are pursuing PSLF or not. Save it up or consider Roth IRA contributions. Yes the interest rates suck on your student loans but consider reduction overall of living expenses (live like a resident).

Hope the OP doesn't mind me jumping into the convo, but as a follow-up to the bolded, I don't understand why this matters/ why you wouldn't want this. PSLF payments count under the CARES act so why would one wait to file the PSLF employer certification form until the act ends? What am I missing? Thank you in advance for helping to fill in my gaps in understanding.

Cheers!

 

[TMP-SMX]

Hope the OP doesn't mind me jumping into the convo, but as a follow-up to the bolded, I don't understand why this matters/ why you wouldn't want this. PSLF payments count under the CARES act so why would one wait to file the PSLF employer certification form until the act ends? What am I missing? Thank you in advance for helping to fill in my gaps in understanding.

Cheers!

If someone is in direct loans but with a servicer other than FedLoans, filing the first employer certification form will put you into the black abyss known as administrative forbearance. This is different than the CARES Act forbearance. Those 1-2 months are unlikely to count towards forgiveness but we don't know for certain. It's probably better to play it safe and wait. It's better to skip higher amount payments in admin forbearance than the guaranteed $0 payments right now. We all don't really know about details like this as we don't know until someone tries it and gets feedback after the fact from FedLoans to see if the months counted for PSLF.

 

[MLNS]

If someone is in direct loans but with a servicer other than FedLoans, filing the first employer certification form will put you into the black abyss known as administrative forbearance. This is different than the CARES Act forbearance. Those 1-2 months are unlikely to count towards forgiveness but we don't know for certain. It's probably better to play it safe and wait. It's better to skip higher amount payments in admin forbearance than the guaranteed $0 payments right now. We all don't really know about details like this as we don't know until someone tries it and gets feedback after the fact from FedLoans to see if the months counted for PSLF.

Thank you for your response! My loans are with Great Lakes but my plan was to fill out the PSLF employer certification form (have my residency fill out their part at orientation) and then mail it to FedLoans. I was told by my schools financial advisor that when I do this FedLoans will take over my loans.

If it matters at all, my plan is to consolidate/ enter REPAYE as soon as I graduate and then I was going to have my residency fill out their part, as mentioned above, and then send it in. I suppose I am confused as to how this process will put me into administrative forbearance instead of FedLoans simply overtaking my consolidated loans, which are in REPAYE, from Great lakes.

Any insight would be very appreciated!

 

[TMP-SMX]

Correct when you file your employer certification form (please get an electronic copy from your employer for your record) you get transferred to FedLoans. The transfer time between the first servicer and when you are fully transferred to FedLoans is administrative forbearance.

As soon as you are out of school, consolidate your loans to waive the grace period. I wish I had this advice when I was starting. My first payments didn't count until May of my PGY-1 year. I can't recall when I filed my first ECF, maybe that's why it took even longer than the normal grace period. I also recall FedLoans screwing something up with putting me into IBR, which caused further delays.

 

[MLNS]

Correct when you file your employer certification form (please get an electronic copy from your employer for your record) you get transferred to FedLoans. The transfer time between the first servicer and when you are fully transferred to FedLoans is administrative forbearance.

As soon as you are out of school, consolidate your loans to waive the grace period. I wish I had this advice when I was starting. My first payments didn't count until May of my PGY-1 year. I can't recall when I filed my first ECF, maybe that's why it took even longer than the normal grace period. I also recall FedLoans screwing something up with putting me into IBR, which caused further delays.

Awesome, thanks a lot, doc!

So, then, just to confirm, if I implement my plan above I will not have to worry about administrative forbearance, Correct?

 

[TMP-SMX]

Awesome, thanks a lot, doc!

So, then, just to confirm, if I implement my plan above I will not have to worry about administrative forbearance, Correct?

You would. There's nothing to do to avoid administrative forbearance. Admin forbearance in consolidation to waive grace is better than the grace period though. Your interest is 0% either way because of the CARES Act whether in school or in grace/repayment. For many people, the first year of residency has payments of 0 anyway depending on spousal income and how you are filing taxes. We don't really know how the servicer are going to treat these forbearance periods during the CARES Act. It might be worth waiting to file an ECF until after the September pay period.

 

[ydalegrog]

You would. There's nothing to do to avoid administrative forbearance. Admin forbearance in consolidation to waive grace is better than the grace period though. Your interest is 0% either way because of the CARES Act whether in school or in grace/repayment. For many people, the first year of residency has payments of 0 anyway depending on spousal income and how you are filing taxes. We don't really know how the servicer are going to treat these forbearance periods during the CARES Act. It might be worth waiting to file an ECF until after the September pay period.

My loan servicer is already Fedloans, so I don't need to switch anything--does this caveat still apply?

 

[TMP-SMX]

My loan servicer is already Fedloans, so I don't need to switch anything--does this caveat still apply?

Yep then don't worry about an ECF they will just count up until now without having to transfer to FedLoans. Get into the habit of yearly ECFs and keep track.

 

[Lost in Translation]

Just to make sure I'm understanding this process correctly, the ECF is the same as the auto-populated form that you need to print out and have signed by your employer via the PSLF Help tool on StudentAid.gov, right?

 

[TMP-SMX]

Just to make sure I'm understanding this process correctly, the ECF is the same as the auto-populated form that you need to print out and have signed by your employer via the PSLF Help tool on StudentAid.gov, right?

Yes here

 

[Oedipa Maas]

Yep then don't worry about an ECF they will just count up until now without having to transfer to FedLoans. Get into the habit of yearly ECFs and keep track.

Hi, I just finished the consolidation process and was looking into the ECF and found this thread. You seem really on top of it so I wanted to ask a couple of questions to clarify. I am with FedLoan currently. So with FedLoan, it doesn't matter if we submit the ECF now or in October, correct? There will be no administrative forbearance? Also, my loan officer said I could submit the ECF once I had been with the organization for a year and they would count all of the months of that year towards payments. My understanding was that we had to submit the ECF once per year and I should do it now? Thanks in advance for all of the help!

 

[TMP-SMX]

From what I've seen from feedback for those that submitted an ECF during the CARES forbearance is that the counts aren't being updated right now. You should just wait until October but that yes once they correct things it will count as payments. Keep in mind that is separate from your annual certification of income dependent repayment and that is required annually. The ECF for getting payments to count doesn't have to be yearly.

 

[BorntobeDO?]

So what if I already consolidated and got on income based payments but submitted my ECF this month and don’t have fed loans as primary? Did I just enter into 2 months of administrative forbearance unknowingly?

 

[TMP-SMX]

They may hold off until after September to move servicer. Let us know how it turns out. When did you consolidate? Keep all of your payment records before transfer.

 

[BorntobeDO?]

I applied for consolidation in may, was approved in June. Applied for Repaye In may with consolidation but wasn’t actually approved till July. And then I sent the certification form for my employer in July. It has been like pulling teeth every step of the way. I have had better results with emails than phone calls so far.

 

[BorntobeDO?]

Fed loans sent me a letter that they are becoming my loan servicer now. Interestingly I got approved for only the first 2 months of residency and that is how I got moved. Apparently they certify the previous year not the upcoming, so I should have waited till after my first year was done to certify. But lucky for me my residency had an early start for orientation so I had qualifying time even in July, so the move still happened.

 

[Bigj5768]

Sorry for taking this over. I could use a little bit of help. I've already switched to FedLoans and turned in my ECF. I have Direct and Grad Plus loans I think over 20+ loans between the two. All at differing interest rate (3.7-6.8%) pre COVID. I don't have any payment towards my PSLF yet due to the grace period and forbearance from the CARES Act. Before I start with payments, should I consolidate my loans?

 

[RangerBob]

Sorry for taking this over. I could use a little bit of help. I've already switched to FedLoans and turned in my ECF. I have Direct and Grad Plus loans I think over 20+ loans between the two. All at differing interest rate (3.7-6.8%) pre COVID. I don't have any payment towards my PSLF yet due to the grace period and forbearance from the CARES Act. Before I start with payments, should I consolidate my loans?

What’s the reason to consolidate? If you’re referring to a federal consolidation, there are really only two benefits:

1) Simplification-one big loan instead of 14 of different sizes
2) Bring non-direct loans into the direct loan program, so they’re eligible for PSLF and REPAYE

The main downsides are
1) You loose any existing PSLF/IDR forgiveness qualifying payments. The clock “resets.” Sounds like this doesn’t impact you
2) Interest rate gets rounded up slightly
3) You lose the ability to selectively pay off higher-interest rate loans should you end up not pursuing loan forgiveness

 

[TMP-SMX]

Sorry for taking this over. I could use a little bit of help. I've already switched to FedLoans and turned in my ECF. I have Direct and Grad Plus loans I think over 20+ loans between the two. All at differing interest rate (3.7-6.8%) pre COVID. I don't have any payment towards my PSLF yet due to the grace period and forbearance from the CARES Act. Before I start with payments, should I consolidate my loans?

only consolidate if you have FFEL loans and even then leave the direct ones alone. If they are all direct then don't consolidate. Your CARES Act forbearance payments of $0 count.