1. Your first assumption about first year payments is wrong. Previously this was correct, but the way required payments are determined has changed. It's now your previous year's tax return (old system, payment would be $0) or based on current income when the grace period ends (during residency for most people, not $0).
2. If your required payment is $0, and you have qualifying employment, then those months do count towards your 120. I was off cycle for graduation and hadn't started residency yet when the grace period ended (by like 3 weeks), so my first year payments were actually $0. My understanding after talking to multiple sources (loan servicer, federal student loan office) is that those months will in fact count towards my 120, even though I paid no money.
This post is 100% accurate. I've heard of a few people still getting $0 payments (and they do count), but then you have to lie on a federal form. I noticed the last time I re-certified they added a blip about possible fines/prison time if you lie on the form. Unless you're in the situation of The Argus (still having no income at the time of application--about 2 months prior to the grace period ending), or consolidate right away (lots of threads on this), $0 payments are things of the past.
Specifically, the forms asks if your prior year's tax return accurately reflects your current income. I never got a straight answer to a dollar amount (is a $2000/yr difference in income significant? $5000? $10,000?). But there's clearly a huge difference from going from $0 to an annual salary of $50,000.
Also--your 120 payments for PSLF do not need to be cumulative. You can spend time away from the program.
Now, whether PSLF sticks around is a whole other issue. If I were a graduating 4th year I would heavily consider consolidating (prior to starting residency) so I could start making eligible PSLF payments ASAP. This fall is when the first cohort of PELF-eligible borrowers will apply for forgiveness. If Congress hasn't changed the program by then (of which there's a good chance), they are almost certain to modify it at that time as the media will report on physicians/lawyers getting six-figure taxpayer bailouts--just like the media did in the 80's when a few bad apples (doctors and lawyers of course) filed for bankruptcy to discharge their student loans. Now it's insanely difficult to get student loans discharged in bankruptcy.
There is the
possibility that any changes made to PSLF will not be retroactive--but they can be. The way I see it is the more skin you have in the game, the better odds of you not being written out of the program if they don't scrap it entirely. I guess there are a few levels of what I would consider people who are slightly safer:
1- (least safe). People who haven't borrowed anything yet.
2- Borrowers who have some loans prior to PSLF changes, and some loans after changes get made
3- Borrowers who graduated prior to PSLF changes being made
4) Borrowers who have started PSLF-eligible payments prior to changes being made, but haven't yet logged any payments
5) Borrowers who have logged any PSLF-eligible payments prior to any changes (you can do this after even one payment...)
6) Borrowers with more than 1 year of logged payments. More than 2 years. And so on. (Seems less likely they'd make changes only impact people with less than x number of eligible payments, but it's still possible)
none of the following exist,
yet
7) Borrowers who have 120 eligible payments but have not yet applied for the forgiveness.
8) Borrowers who have 120 eligible payments and applied for forgiveness, which is pending.
9) (safest) Borrowers who have been granted PSLF and their loans are paid off.
The further down that list you are, in my opinion, the safer you are from any changes that are made. I'm about 3 years into the program and I'm still not confident I won't be written out of it--whether completely, or that an arbitrary cap gets placed on all forgiveness amounts. Obama proposed that, and Democrats are traditionally friendlier to student loan borrowers. But there are various ways Congress could make the changes (they could just nix the entire program so that everyone loses PSLF, or maybe just people who haven't made eligible payments, or...), so if you're really, really hoping for PSLF, it could be worth looking into consolidating as you typically then start payments about 2 months after graduation.
I'm sure lawyers will have a field day if any changes get made. They are likely to prove to be very good friends of ours if anything happens to PSLF, as they need it more than we do (high debt, but worse job/salary prospects). Still, I'm not putting all my eggs in the PSLF basket.
