PSLF and FedLoans

[ANCAdoc]

I'm on a regular repayment loan program with plans to refinance through SoFi or related servicer to lower my interest rate (out a couple of years). Goal to pay off as fast as possible.

My wife, however, just started her first attending job out of fellowship. She completed 5 years (just started year 6) of IBR payments ("qualifying payments") on Direct Loans ("qualifying loan type") with a qualifying employer (Medical School as a Resident/Fellow and now with the public non-profit county hospital). We are about to fill two Employment Certification Forms (resident/fellow and now attending job) to start the official PSLF record keeping process and my understanding is her Direct loans will then go to FedLoans.

I've read a lot of concerning things on NY Times, etc about this transfer process being a nightmare for some (new article today on NY Times).

A) For those gambling to use PSLF (I'm hoping for some kind of grandfather rule should the rules change) how has your process been with submitting the Employment Certification Form and having your Direct loans sent to FedLoans (if through Nelnet or another servicer first)? B) Did they keep track of the qualifying payments correctly? C) Did errors occur along the way and if so were you able to get those resolved in a timely manner?

Would love to get other physicians feedback who are going through this transfer process.

---

Members don't see this ad.

 

[shoal007]

Yes this is a concern of mine too. I was on granite State and switched to fedloans when I submitted my employer form (3 yes in). Now 2 years later with 5 to go I'm a little worried. I'll let you know when it happens!


Sent from my Pixel 2 using Tapatalk

 

[DrMidlife]

We are about to fill two Employment Certification Forms (resident/fellow and now attending job) to start the official PSLF record keeping process and my understanding is her Direct loans will then go to FedLoans.

It's the other way around. Consolidate w/FedLoans, then deal w/PSLF forms. The PSLF clock starts when FedLoans has your loans.

I've read a lot of concerning things on NY Times, etc about this transfer process being a nightmare for some (new article today on NY Times).

The transfer process is innocent here - it's straightforward to request transfer/consolidation to FedLoans. You have to transfer *every* federal loan to FedLoans, and you have to consolidate, and you have to choose a repayment plan that is consistent with PSLF, such as PAYE or REPAYE etc. Then you separately do the annual PSLF certification form.

It's not optional to read official government sources of info. Don't rely on whitecoatinvestor or NYT or FedLoans or your current lender to explain things (although they're fine as supplemental reading). Read the repayment and PSLF info on studentloans.gov. It's an easy read.

In 2027 when you've submitted 10 certification forms you then submit a nearly identical PSLF application. There's literally no way to get good advice on what things will look like then. It was literally last month when the first PSLF payoffs were due to happen, and there is literally no news yet on how that's going.

Generally I'm seeing people make mistakes when they nickel & dime the interest rate. Do you want (possible) nontaxable forgiveness of your six-figure balance in 10 years, or do you want to avoid the 0.25% increase in your rate when you consolidate? It's either or. Paper or plastic.

This stuff isn't fun, but in my experience it's not difficult.

 

[RangerBob]

It's the other way around. Consolidate w/FedLoans, then deal w/PSLF forms. The PSLF clock starts when FedLoans has your loans.


The transfer process is innocent here - it's straightforward to request transfer/consolidation to FedLoans. You have to transfer *every* federal loan to FedLoans, and you have to consolidate, and you have to choose a repayment plan that is consistent with PSLF, such as PAYE or REPAYE etc. Then you separately do the annual PSLF certification form.

It's not optional to read official government sources of info. Don't rely on whitecoatinvestor or NYT or FedLoans or your current lender to explain things (although they're fine as supplemental reading). Read the repayment and PSLF info on studentloans.gov. It's an easy read.

In 2027 when you've submitted 10 certification forms you then submit a nearly identical PSLF application. There's literally no way to get good advice on what things will look like then. It was literally last month when the first PSLF payoffs were due to happen, and there is literally no news yet on how that's going.

Generally I'm seeing people make mistakes when they nickel & dime the interest rate. Do you want (possible) nontaxable forgiveness of your six-figure balance in 10 years, or do you want to avoid the 0.25% increase in your rate when you consolidate? It's either or. Paper or plastic.

This stuff isn't fun, but in my experience it's not difficult.

Are you sure that's how it works? I was under the impression that filling out the certification form in of itself transfers all your loans to FedLoan, and that you do not actually need to consolidate your loans. Consolidating your loans would mean the borrower loses all prior eligible payments (since they have a new loan) and would be a bad idea. Payments made to other loan services under the eligible plans (for eligible loans) are all applicable towards PSLF. FedLoan is just the official servicer for PSLF so when any borrower makes it official they are going for PSLF (via the certification form), FedLoan then takes over the processing. But there should not be any loan consolidation involved, unless the borrower has non-direct loans.

 

[DrMidlife]

Are you sure that's how it works? I was under the impression that filling out the certification form in of itself transfers all your loans to FedLoan, and that you do not actually need to consolidate your loans. Consolidating your loans would mean the borrower loses all prior eligible payments (since they have a new loan) and would be a bad idea. Payments made to other loan services under the eligible plans (for eligible loans) are all applicable towards PSLF. FedLoan is just the official servicer for PSLF so when any borrower makes it official they are going for PSLF (via the certification form), FedLoan then takes over the processing. But there should not be any loan consolidation involved, unless the borrower has non-direct loans.

Ah. I missed a piece. This needs a flowchart.

For those of us just starting to make payments at the start of residency, there's no loss of eligible payments involved.

As you're pointing out, some federal loans are "direct loans" and others are...not. Only direct loans are eligible for PSLF. Federal loans that are not "direct" have to be consolidated to "make" them "direct." Loans made prior to 2011 are less likely to be "direct."

If you only have direct loans, then yes, the consolidation isn't necessary. But with each distribution and each loan type counting as a separate loan, I gotta tellya it's nerve-wracking to have more than one lender and one screenful to keep track of, along with everything else. (How many pages of legal documentation did you sign for your first doctor job? I had to plow through 264 pages. I've started liking "less" in general.)

I only vaguely remember that most pre-2011 federal loans were sometimes not only serviced by private corps such as Sallie Mae (now Navient) but the actual lender was the non-governmental private corp. So it's those loans that were not "direct" from the government that require consolidation in order to be PSLF-eligible.

Filling out a certification form to trigger loan transfer sounds completely wacky to me, but there it is on the form. Huh. FedLoans made me do stuff beyond this, but maybe no big deal, just account setup.

This is helpful: How to Qualify for Public Service Loan Forgiveness - ED.gov Blog

 

[ANCAdoc]

Are you sure that's how it works? I was under the impression that filling out the certification form in of itself transfers all your loans to FedLoan, and that you do not actually need to consolidate your loans. Consolidating your loans would mean the borrower loses all prior eligible payments (since they have a new loan) and would be a bad idea. Payments made to other loan services under the eligible plans (for eligible loans) are all applicable towards PSLF. FedLoan is just the official servicer for PSLF so when any borrower makes it official they are going for PSLF (via the certification form), FedLoan then takes over the processing. But there should not be any loan consolidation involved, unless the borrower has non-direct loans.

Agree, no transfer is necessary for Direct Loans, the government does that for you when you submit the form. I'm glad DrMidlife edited that. I agree with Dr. Midlife on the official PSLF website it is an easy read - this makes me concerned, especially when I read articles from NYT where the transfer process (should be simple) has been a nightmare for some borrowers. Just curious if any physicians have had this transfer hassle.

 

[SilverCat]

What would happen if new legislation ended the PSLF program? I'm asking as an incoming resident to a program that qualifies as a non-profit organization. I have a pretty heavy debt load, and am wondering if it would be worth it to apply for PSLF. Also, as a medicine resident, would this limit fellowship options?

 

[RangerBob]

What would happen if new legislation ended the PSLF program? I'm asking as an incoming resident to a program that qualifies as a non-profit organization. I have a pretty heavy debt load, and am wondering if it would be worth it to apply for PSLF. Also, as a medicine resident, would this limit fellowship options?

The general/prevailing opinions are:
1) PSLF will, at some point, be altered/eliminated
2) PSLF is likely to remain intact for those who have already borrowed money/signed an MPN. However, Congress could change it, so it's not a sure thing, though some legal experts feel it's unlikely.

If your goal is PSLF then yes, it could limit your fellowship options if you want to continue to make PSLF-eligible payments. That is because there are actually a decent number of for-profit programs out there--you see this more in community programs.

If I were in your shoes and looking at an IM fellowship (meaning you're at least 4 years from starting repayment), then I would sign up for REPAYE (get that interest subsidy), certify for PSLF yearly. Depending on what fellowship you go into and how the political climate looks in 3-4 years, then start analyzing whether you will actually chose your job based on PSLF (many physicians work at non-profits but because they're actually employed by a private/for-profit group, they are not eligible for PSLF--you need to see who pays your paycheck).

 

[SilverCat]

Thanks! I want to take a shot at this, because my debt will take far longer than 10 years to pay off, and I really want to do academic medicine and research.

 

[DDXDOC4U]

Are there any restrictions on frontloading Federal Direct Unsubsidized Loans in med school? I have heard of restrictions on frontloading GRAD PLUS loans but not on the Federal Direct Unsubsidized Loans - anyone with knowledge or experience to share on this aspect? Thanks.

Basically, I would like to take the lower interest Federal Direct Unsubsidized Loans wholly in the first semester and then in subsequent spring semester take the high interest GRAD PLUS loan. Is this not possible? Do I need to split half of each type of loan every semester... and why?

 

[RangerBob]

Are there any restrictions on frontloading Federal Direct Unsubsidized Loans in med school? I have heard of restrictions on frontloading GRAD PLUS loans but not on the Federal Direct Unsubsidized Loans - anyone with knowledge or experience to share on this aspect? Thanks.

Basically, I would like to take the lower interest Federal Direct Unsubsidized Loans wholly in the first semester and then in subsequent spring semester take the high interest GRAD PLUS loan. Is this not possible? Do I need to split half of each type of loan every semester... and why?

I believe they have to be divided 50/50 between semesters. You could borrow less than the full COA up front and maximize those unsubsidized loans, then borrow the remainder of what you want in Grad Plus loans when the FA deadline arrives (I think the deadline was around October to borrow more if you didn't borrow the full COA). However, that might still need to be divided 50/50 as well. I'm not sure it's worth the hassle--you might save a little bit in interest accrual over the years, but in my experience the simpler you keep things for Uncle Sam, the less headache you end up in.

If you really want to know if you can do this or not, talk with your financial aid director. Even if someone has done the exact same thing, I've found that not all FA directors are the same and able to accommodate the same requests, for whatever reason.

 

[TMP-SMX]

Depends on the residency and fellowship but even for profit hospitals pay their house staff through a nonprofit channel so those years may be eligible. Keep in mind that even nonprofit hospitals can pay their physicians in a "for-profit" physician group. Keep this in mind when looking for jobs.

 

[pgy0246]

What will happen if the non-profit hospital you worked at for 5 years, suddenly become profit on year 6
Would the first 5 years still eligible toward PSLF.

 

[TMP-SMX]

What will happen if the non-profit hospital you worked at for 5 years, suddenly become profit on year 6
Would the first 5 years still eligible toward PSLF.

No, but it's prudent to keep updating your certification yearly so you have documentation at that time. Some for profit hospitals have nonprofit physician groups. Also, some nonprofit hospitals may have for profit physician groups so depends who pays you.