Do I need to consolidate for PSLF if I only have direct loans?

[greencan]

I am a second year pediatric resident. I only have Direct Loans from medical school (subsidized and subsidized). I have been doing PAE and my servicer is Great Lakes. I’ve been reading that to qualify for PSLF I may have to consolidate loans but I hope I'm misinterpreting this.

1) Is consolidating only beneficial if I have FFEL loans and I want them to qualify? Or do I have to consolidate both my subsidized/unsubsidized loans as part of the application process for PSLF (i.e., I wasted a whole year making payments to Great Lakes and these will not count toward PSLF)?

2) If I do consolidate will the interest that I’ve accrued this past year capitalize?

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[RangerBob]

If I'm not mistaken, FFEL loans are not eligible for PSLF--only direct loans are. But you don't need to consolidate your direct loans.

I consolidated my M1 FFEL loans into one direct loan so that they'd be eligible for PSLF. I remember looking into it at the time and I think that was the only way to bring FFEL loans into the direct loan program so they could get forgiven. I did not consolidate any of my direct loans since they were already eligible and there was no benefit to consolidating them (and a couple drawbacks--higher interest rate, inability to selectively pay off loans, and capitalization)

If you do consolidate, any interest on loans you consolidate effectively capitalizes since you'd have a new loan with a principle for the total amount (principle + interest) on the loans you consolidated. And you have a new loan, so the "PSLF clock" restarts for that new loan.

 

[SigmaFS]

What RangerBob said. I would add just consolidate your FFELP loans if you have a mix of Direct & FFELP. As RangerBob mentioned, only direct loans are eligible for PSLF. By consolidating just your FFELP loans, you convert to Direct Loans, therefore PSLF eligible, and you won't reset the clock to zero on any current Direct Loans.

 

[greencan]

So currently I do not have any FFEL loans. I started school in 2010 and graduated 2014. Loans are not consolidated and direct subsidized/unsubsidized Stafford loans; therefore I believe they qualify for PSLF without a need to consolidate.

So at this point I don't feel there's any point in consolidating as it would just raise my interest rates (albeit by a fraction and not that it matters if PSLF sticks around for another 10 years but there's always the prospect that the law changes and the program is dissolved to modified). My initial fear as I stated in my original post was that I read all this stuff online about consolidating being obligatory for PSLF which I've come to conclude is not the case for my situation.

My loan servicer is not Fedloan but rather Great Lakes and I've been making payments through my intern year (I'm now a second year) -- so at this point I have to submit an employment verification form (my residency coordinators are filling this out) and transfer the loan server from GL to Fedloan since they have some exclusive right to handle all PSLF claims. I spoke with someone from Fedloan on the phone and they said that they would retroactively count my payments I've been making (since starting residency).

I'll post back on how this results (i.e., if they do indeed retroactively count my payments towards the 120 payment requirement). My main fear (worst case scenario) was that I'd have to consolidate to qualify and therefore all my past payments would not count toward the 120 requirement.

 

[SigmaFS]

So currently I do not have any FFEL loans. I started school in 2010 and graduated 2014. Loans are not consolidated and direct subsidized/unsubsidized Stafford loans; therefore I believe they qualify for PSLF without a need to consolidate.

So at this point I don't feel there's any point in consolidating as it would just raise my interest rates (albeit by a fraction and not that it matters if PSLF sticks around for another 10 years but there's always the prospect that the law changes and the program is dissolved to modified). My initial fear as I stated in my original post was that I read all this stuff online about consolidating being obligatory for PSLF which I've come to conclude is not the case for my situation.

My loan servicer is not Fedloan but rather Great Lakes and I've been making payments through my intern year (I'm now a second year) -- so at this point I have to submit an employment verification form (my residency coordinators are filling this out) and transfer the loan server from GL to Fedloan since they have some exclusive right to handle all PSLF claims. I spoke with someone from Fedloan on the phone and they said that they would retroactively count my payments I've been making (since starting residency).

I'll post back on how this results (i.e., if they do indeed retroactively count my payments towards the 120 payment requirement). My main fear (worst case scenario) was that I'd have to consolidate to qualify and therefore all my past payments would not count toward the 120 requirement.

For PSLF, you are not required to consolidate via Direct Loan Consolidation if your loans are currently direct loans. I would, on an annual basis, submit PSLF Employment Certification Form to your loan servicer, Great Lakes. Here's a link to the form: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf

Also, keep in contact with Great Lakes to verify receipt of form and confirm qualified payment status.

Good luck!

 

[greencan]

For PSLF, you are not required to consolidate via Direct Loan Consolidation if your loans are currently direct loans. I would, on an annual basis, submit PSLF Employment Certification Form to your loan servicer, Great Lakes. Here's a link to the form: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf

Also, keep in contact with Great Lakes to verify receipt of form and confirm qualified payment status.

Good luck!

Just providing an update -- everything worked out.

First response from MyFedLoan on 9/15 (in response to my E-mail inquiry):

"Thank you for contacting FedLoan Servicing!
Since you have indicated that your loans are Direct Loans, you would not necessarily need or want to consolidate your loans. If you consolidate your loans now, you would lose any payments you have already made that may count towards the 120 qualifying on-time payment requirement for the Public Service Loan Forgiveness.
Please complete and return the Public Service Loan Forgiveness Employment Certification Form (ECF) to start in the Public ServiceLoan Forgiveness program. As long as the ECF is approved, your loans will then be transferred to FedLoan Servicing."

So I went ahead talked to my residency coordinators who helped me complete the Employment cerification form. I talked to Great Lakes (around 10/5) and their staff seemed pretty clueless on how PSLF works. The person I talked to didn't know that MyFedLoan is the central servicer for all PSLF eligible accounts. They thought they would continue to service the loan despite my pointing out that on their website they even say otherwise; i.e., they weren't aware that the loan servicer (them) would change (to MyFedLoan) once I put in the Employment Verification form application.

On 10/15 I got this confirmatory e-mail e-mail from Great Lakes:

"The U.S. Department of Education (ED) will soon transfer the customer service of your federal student loan account to FedLoan Servicing (PHEAA), another member of ED's federal loan servicer team. Your loans are not being sold. ED will continue to own your loans; however, a different servicer will manage your loans and assist you on ED's behalf.
ED is transferring your loan account to FedLoan Servicing (PHEAA) because you requested to participate in the Public Service Loan Forgiveness (PSLF) Program. FedLoan Servicing (PHEAA) is ED's servicer that provides customer servicer for all federal student loan borrowers who are potentially eligible for PSLF and tracks their progress toward qualifying for PSLF. This change in servicer will not impact the existing terms, conditions, interest rate, or available repayment plans of your federal student loans.
Your loan account will be transferred to FedLoan Servicing (PHEAA) on or about 10/26/2015. If ED doesn't transfer your account as planned, we'll let you know."

Hopefully this e-mail thread helps out current and new residents who are or will be in my situation (i.e., did not consolidate but have been making IBR/PAE payments and you are NOT currently under MyFedLoan).

* If you want to qualify PSLF you have to submit the Employment Certification Form (ECF) to MyFedLoan (when I graduated in 2014 this form wasn't out, I assumed things would retroactively count somehow in the future).
* Submission of the EVF doesn't have to be done right away but it's nice to know that your payments are actively being counted toward the 120 payments. It think it gets you peace of mind and if things change in the future (PSLF is cut down partially or completely) hopefully this will "grandfather" you into the forgiveness program.
* I did NOT consolidate my loans at medical school graduation (no real incentive too since I had all Direct Loans [subsidized/unsubsidized]
* All my payments made through intern year (~12 months) will be retroactively counted toward the 120 payments
* Great Lakes (my original Loan servicer) will be changed to MyFedLoan