when to consolidate and apply for PSLF?

Discussion in 'Financial Aid' started by letsgomedical, Aug 5, 2015.

  1. letsgomedical

    7+ Year Member

    Apr 10, 2010
    Likes Received:
    Medical Student
    I graduated from med school in May 2015.
    I am planning to do public service loan forgiveness, and from my understanding in order to apply to PSLF I need to consolidate my loans and then apply for IBR.
    I have 6 months of grace period after graduation to repay my loans, so I guess I have November until my grace period ends.
    I was told that PSLF application can take months to get approved..
    When is the best time to consolidate my loans?
    I was looking at the application and it said once I consolidate, i have to start repaying the loans or I can delay processing until my grace period ends.
    I am a little confused about this.. does this mean if I consolidate my loans now I'd have to start paying back next month, even before I PSLF application gets approved?
    I do have $7000 income last year, but i used the calculator link that they had at studentloangov website and it said i still pay $0 based on last year's income of $7000.. so I guess it means i'll be paying back $0 until file tax return form for 2015..??
    I would really appreciate any advice.
    Thank you!
  2. RangerBob

    Physician 5+ Year Member

    Sep 16, 2012
    Likes Received:
    Attending Physician
    You only need to consolidate your loans if they are FFELP (ie, non-direct loans). Most likely none of your loans are FFELP since that program got scrapped around 2010 or so.

    You can still consolidate if you want, and you can consolidate whenever you want (after graduating). Some people do this right after graduation so they can start working towards their 120 payments sooner (since your grace period disappears with the new consolidation loan--you start repayment immediately. You cannot otherwise waive your grace period. You can however, put any federal loan, including a consolidation loan, in forbearance. You can put all your federal loans in forbearance for all of your residency, but that'd be stupid since then you lose all those years of low PSLF-qualifying payments).

    There are drawbacks to consolidating however, including your interest rates all get averaged together (so you can't selectively pay off higher-interest rate loans, which you may want to do since PSLF isn't guaranteed to stick around), and your interest rate gets rounded up to the nearest eighth of a percent.

    There is no PSLF application--it won't be available until closer to 2017, and you only apply once you've finished all your payments. Right now what you can do is submit a form that tracks your payments, but you can only do this after you've made at least one qualifying payment. Most people certify on a yearly basis (ie, at the end of internship, and so on).

    Qualifying payments are any income-driven plan as well as the 10-year plan. The $0 payment you're talking about refers to an income-driven plan (you probably qualify for PAYE). Technically you're not supposed to use last year's tax return since it won't reflect your current income as an intern. You are supposed to submit a copy of your paystub/proof of income and your payment gets calculated based on that. It seems most recent grads ignore that and just submit your tax return, but then you have to specifically answer a question asking if your tax return accurately reflects your current income. If you're going to say "yes" to that when the answer is really "no," then you should at least talk with your loan servicer (FedLoan, Sallie Mae, or whoever) and tell them your situation and ask if you can do that. Half the time they will say "sure, go ahead" and half the time they will say "no, send us a current paystub." And it'll change each time you talk with a different representative. But at least this way you can document you're doing what they said you could do.

    Personally I would just send in your paystub and make the full payment. It's affordable on an intern's salary.
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    thegreatergood and Maruko like this.

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