Public Service Loan Forgiveness

[Grubbe-a-dub-dub]

Sadly, my grace period is coming to a close on many of my student loans. It looks like this topic was discussed a few years back, but my question is a little different.

To qualify for this program, you need to work for a non-profit organization for 120 months (your repayment period). Most academic jobs will likely fall under this category, but do any private practice jobs qualify? Probably a dumb question, but I feel like I'd be taking a risk banking on this program, not know what type of job I'll be taking in the future. I simply don't know what the job outlook will be in 4-5 years.

Any advice? I'm looking to use an equity loan to repay all of my loans at a much lower rate as these "direct" government loans, but if I do so I'll lose out on this forgiveness benefit (which I may not end up qualifying for anyway).

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[napoleondynamite]

PSLF is a huge racket for radonc. Your salary, even in academics means you will not come out ahead.

I was led completely astray and made huge sacrifices to make payments during residency because that would count as part of my 10 years. Then as soon as I got into practice they recalculated my monthly payment to basically pay off my loans within the time I had remaining..meaning I would get nothing forgiven.

If you have 300k in loans and are a pediatrician entering academics, then you will come out ahead. But if you are a radonc, the math will not be on your side. I learned this the hard way..I guess those payments at least prevented some compounding of interest, but did not serve the end goal I was shooting for.

 

[thesauce]

PSLF is a huge racket for radonc. Your salary, even in academics means you will not come out ahead.

I was led completely astray and made huge sacrifices to make payments during residency because that would count as part of my 10 years. Then as soon as I got into practice they recalculated my monthly payment to basically pay off my loans within the time I had remaining..meaning I would get nothing forgiven.

If you have 300k in loans and are a pediatrician entering academics, then you will come out ahead. But if you are a radonc, the math will not be on your side. I learned this the hard way..I guess those payments at least prevented some compounding of interest, but did not serve the end goal I was shooting for.

I don't see how that's possible. If your pay is so high that your monthly IBR payment is greater than your monthly payment on a 10yr repayment plan would be, your monthly payment should have capped at the 10yr repayment level. Thus, a radonc, even if he makes 50 billion dollars a year after residency should have 50-60% of their loans forgiven after practicing for a non-profit for 5 years after residency.

The best thing to do is not send in your IBR form starting 2 years after the year you graduate (i.e. If you graduate in 2015, submit that IBR paperwork in 2015 because they'll base your IBR payments on your 2014 pay. Submit it again in 2016, since they'll base in on 2015 and you'll only have 50% attending salary in 2015. Then stop sending it in). If you don't send the form in, you technically stay on IBR, but your payments should increase to the 10yr repayment level and you only have to pay that for a 3 more years.

ND: unless they defaulted you into some strange accelerated repayment, I don't see how you would have paid it off that fast.

 

[napoleondynamite]

I don't see how that's possible. If your pay is so high that your monthly IBR payment is greater than your monthly payment on a 10yr repayment plan would be, your monthly payment should have capped at the 10yr repayment level. Thus, a radonc, even if he makes 50 billion dollars a year after residency should have 50-60% of their loans forgiven after practicing for a non-profit for 5 years after residency.

The best thing to do is not send in your IBR form starting 2 years after the year you graduate (i.e. If you graduate in 2015, submit that IBR paperwork in 2015 because they'll base your IBR payments on your 2014 pay. Submit it again in 2016, since they'll base in on 2015 and you'll only have 50% attending salary in 2015. Then stop sending it in). If you don't send the form in, you technically stay on IBR, but your payments should increase to the 10yr repayment level and you only have to pay that for a 3 more years.

ND: unless they defaulted you into some strange accelerated repayment, I don't see how you would have paid it off that fast.

So I didn't enter IBR until my PGY4 year - so by graduation I had paid nearly 2 years under IBR and PLSF, not the full 5 years.

No, I don't have my loans paid off yet. I departed from the PLSF during year one of being an attending and am now paying my loans on a schedule that works for me. I will still have them paid off within 10 years, but the sticker price of the PSLF right into practice was too high to sign up for initially..most can afford increasing payments as salary increases, I just couldn't afford the full payments they calculated.

With any radonc salary you no longer qualify for IBR - which means they put you on a 10-year repayment schedule under PLSF..which for me would have made my payments shockingly high and not really put me ahead at the end of the day.

I suppose if you did IBR for the full 5 years of residency and then did academics for 5 years you would come out ahead..but you will still pay 50% of your loans in just those 5 years because they will calculate a 10-year payoff. So between that and the payments you're making during residency, you'd have to calculate whether it is worth it. In my situation, it definitely was not so I went back to a more graduated schedule that I adjust as my income increases.

Some of my bitterness admittedly comes from my own lack of understanding about the program, but also complete misinformation by the FedLoans peeps who put me on that course during residency..I was told my payments would reflect a 30-year payoff when I was done and if that were the case then you would come out way ahead.

 

[napoleondynamite]

I will add that with a change of employment the first thing they did was send me verification forms to be sure my new employer qualified me for PSLF - I had to submit those I think within 30 days if I remember right to stay in the program. At that point they booted me from IBR..I had understood, like thesauce that I would get another year out of IBR, but that was not the case either.

 

[thesauce]

So I didn't enter IBR until my PGY4 year - so by graduation I had paid nearly 2 years under IBR and PLSF, not the full 5 years.

No, I don't have my loans paid off yet. I departed from the PLSF during year one of being an attending and am now paying my loans on a schedule that works for me. I will still have them paid off within 10 years, but the sticker price of the PSLF right into practice was too high to sign up for initially..most can afford increasing payments as salary increases, I just couldn't afford the full payments they calculated.

With any radonc salary you no longer qualify for IBR - which means they put you on a 10-year repayment schedule under PLSF..which for me would have made my payments shockingly high and not really put me ahead at the end of the day.

I suppose if you did IBR for the full 5 years of residency and then did academics for 5 years you would come out ahead..but you will still pay 50% of your loans in just those 5 years because they will calculate a 10-year payoff. So between that and the payments you're making during residency, you'd have to calculate whether it is worth it. In my situation, it definitely was not so I went back to a more graduated schedule that I adjust as my income increases.

Some of my bitterness admittedly comes from my own lack of understanding about the program, but also complete misinformation by the FedLoans peeps who put me on that course during residency..I was told my payments would reflect a 30-year payoff when I was done and if that were the case then you would come out way ahead.

So if I understand you correctly, you switched to the graduated repayment plan (not a PSLF qualifying plan) early after graduation to lower your payments because you couldn't afford to do the 10yr repayment at that time. Fair enough. However, I don't think that makes PSLF "a racket." For those that are able to afford to stay on the 10yr repayment after graduation, they can get 50-60% of their loans forgiven after 5 years. And it doesn't make any difference how much you make in that scenario, so long as you're working for a non-profit.

 

[napoleondynamite]

Even in the best circumstances with signing up for IBR and PLSF during the first month of residency, I think the maximum payoff would be well under 50% is what I'm saying. You have to factor in the payments made during residency then 5 years on a 10-year schedule (as I said, I had to verify my employment with a nonprofit right after switching jobs, triggering income verification so the dream of living on the IBR for another year or two post-residency is not reality). Most academic docs are making 250-300 starting and the payment for me would have been more than half of my paycheck. Factor in other expenses coming out of residency - buying a house, paying off credit card debt or whatever, many would not be in a position to pay the high monthly payment.

Just know what you are signing up for. Find out what the monthly on a 10-year repayment will be for your loan balance to see if it will be a tenable situation. Everyone's situation is a little different, so I'm sure there are people who would benefit - but there is a big hit to your standard of living both as a resident making payments and then as a junior attending making huge payments.

Anyway, that's my own first hand experience, take it or leave it.

 

[thesauce]

I really don't mean to belabor this, but I do think there might be some confusion here that I want to clarify for others.

Even in the best circumstances with signing up for IBR and PLSF during the first month of residency, I think the maximum payoff would be well under 50% is what I'm saying. You have to factor in the payments made during residency then 5 years on a 10-year schedule

Correct. You're looking at about half being forgiven. It's unlikely to be "well under" half because your payments during residency are unlikely to do much more than cover the interest, essentially keeping your loans flat. However, depending on how much your spouse is making, that may change things.

(as I said, I had to verify my employment with a nonprofit right after switching jobs, triggering income verification so the dream of living on the IBR for another year or two post-residency is not reality).

Didn't realize that (and thank you for telling me). So the forgiveness is probably going to be closer to 50% for most of us.

Most academic docs are making 250-300 starting and the payment for me would have been more than half of my paycheck.

This part just doesn't make any sense. Under IBR, your payment can't be more than 15% of the amount above 1.5x the poverty line. Thus, it can't even be 15%, much less 50%. It could only be half if that's what your 10yr repayment is and you didn't apply for IBR. But if your 10yr payment is greater than your IBR payment, you demonstrate "partial financial hardship" and thus qualify for IBR payments. I'm really not sure what happened in your case.

 

[napoleondynamite]

Ok well let us know how it works out for you or how much "sense" FedLoans makes when the rubber hits the road and you actually start making payments rather than doing back of the envelope calculations or vomiting back the stuff you have read or been told.

What you said about IBR simply is not true. You will never qualify for IBR with an attending salary, no matter how high your payment becomes. If you're booted from IBR and still want to take advantage of PLSF they are going to calculate a 10-year payoff and depending how much you owe this can be a fat enough payment to not be worth it is all I'm saying.

I genuinely hope it works out for you - it did not for me and not for lack of trying.

 

[thesauce]

Ok well let us know how it works out for you or how much "sense" FedLoans makes when the rubber hits the road and you actually start making payments rather than doing back of the envelope calculations or vomiting back the stuff you have read or been told.

What you said about IBR simply is not true. You will never qualify for IBR with an attending salary, no matter how high your payment becomes. If you're booted from IBR and still want to take advantage of PLSF they are going to calculate a 10-year payoff and depending how much you owe this can be a fat enough payment to not be worth it is all I'm saying.

I genuinely hope it works out for you - it did not for me and not for lack of trying.

Ok. I really wasn't trying to be argumentative (and IBR/PSLF actually isn't applicable to me for a number of reasons), but I do appreciate the information. Thank you.

 

[Mad Jack]

You should really factor in that it is very likely that there will be retroactive changes to PSLF in the near future that cap it somewhere in the 50k range. Don't bank on something that might not be there in the future and let your loans balloon into the stratosphere.

 

[SJSM001]

I think MadJack's comment is key. It sounds very likely that if the program doesn't disappear, it will definitely be capped at 50k. It is probably wisest to proceed with paying what you can down if you have the ability, rather than banking on the PSLF program.

 

[maxxor]

You should really factor in that it is very likely that there will be retroactive changes to PSLF in the near future that cap it somewhere in the 50k range. Don't bank on something that might not be there in the future and let your loans balloon into the stratosphere.

Wouldn't this require new Master Promissory Notes? The PSLF language is in my MPF. I don't think they can just up and change that retroactively. Going forward for new borrowers, yes.

 

[Mad Jack]

Wouldn't this require new Master Promissory Notes? The PSLF language is in my MPF. I don't think they can just up and change that retroactively. Going forward for new borrowers, yes.

That's what I'd assumed as well, but the proposed legislation places a retroactive cap of something like 56k on PSLF. You can look into it yourself if you'd like.

 

[maxxor]

That's what I'd assumed as well, but the proposed legislation places a retroactive cap of something like 56k on PSLF. You can look into it yourself if you'd like.

I looked here. http://educatedrisk.org/analysis/of...ed-budget-pslf-caps-paye-benefits-limitations
It looks like you will be able to keep the "old" IBR/PSLF terms as defined in your MPN, but could opt-in to the expanded PAYE, which is subject to the 57k limits.

This is all assuming legislation is the same as the proposal. If that's the case, you will have to be certain to keep on the old terms.