PSLF conundrum

[carrotbanana]

I'm finishing residency this June and very angry at myself for not consolidating my non-direct loans to direct to qualify for PSLF.

I left medical school with a combination of direct and non-direct loans and have been paying under IBR for the last 5 years of residency. I don't want to lose my 5 years of qualifying payments on my direct loan by consolidating ALL of my loans.

My question:
If I consolidate only my non-direct loans to direct (i.e. have two direct loans at the end of the day, one existing and one newly consolidated), will the 5 years of payments to the original direct loan remain unscathed and applicable for PSLF?

Also, could I potentially cash out with PSLF at two different time points? In 5 years for the original direct and in 10 years for the newly consolidated direct loan?

Thanks!

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[Lesley]

I'm finishing residency this June and very angry at myself for not consolidating my non-direct loans to direct to qualify for PSLF.

I left medical school with a combination of direct and non-direct loans and have been paying under IBR for the last 5 years of residency. I don't want to lose my 5 years of qualifying payments on my direct loan by consolidating ALL of my loans.

My question:
If I consolidate only my non-direct loans to direct (i.e. have two direct loans at the end of the day, one existing and one newly consolidated), will the 5 years of payments to the original direct loan remain unscathed and applicable for PSLF?

Also, could I potentially cash out with PSLF at two different time points? In 5 years for the original direct and in 10 years for the newly consolidated direct loan?

Thanks!

Anecdotally, thank goodness I am old and this stuff makes me so much more grateful to be on the other side of 60, I am looking forward to finding out the answer to this too. Could this student loan stuff get any more confusing, ambiguous or stressful for borrowers? How much worse could this become for young adults? No wonder most students don't know how much their student debt will cost them in the end. Just a guess but I have a feeling that in order for you to consolidate your new loans too, if it is agreed upon, your old debt may have to be repaid and the total of all debt wrapped up into a new loan with IBR/PSLF resetting as of that date. It's possible you may very well loose not only those 5 years of IBR but PSFL as well. Totally a guess, but, as I said, I would love to know the answer too. Could this student loan stuff with the myriad of options when not one person has yet had loans forgiven on either PSLF or IBR, let alone any taxes paid on any forgiven debt, be any less confounding?

 

[RangerBob]

PSLF applies independently for each loan. So if you don't consolidate direct loans A-B, but consolidate loan C, then A-B will still have 5 years of eligibility towards PSLF. And once that loan is consolidated then you will start accruing eligible payments for loan C.

The clock will restart on the 25-year IBR forgiveness for loan C however.

I don't see any reason why you can't have more than one timepoint for PSLF.

If you're not already, make sure you familiarize yourself with PSLF eligibility, as well as IBR eligibility (if you make too much as an attending, then you'll be switched to the 10-year plan. You could still benefit from PSLF for your original loans that have 5 years of eligibility, but you would not see any benefits with your new consolidation loan)

If you haven't already, make sure to get your PSLF-tracking form signed so you can log those 5 years of eligible payments you've made. (Assuming your residency is eligible--there are a number of residents actually employed by for-profit groups).

 

[carrotbanana]

Thanks RangerBob. Thinking more about it, I definitely won't be eligible for IBR with my attending pay, so I would automatically get placed into the standard 10 year plan. With the 10 year plan, my newly consolidated direct loan would be paid off right at the time I would be eligible for PSLF, not helpful. Another qualifying PSLF payment plan would be REPAYE, but from what I gather, the calculation is (your gross salary minus the 150% poverty level) * 10% / 12). This would make my REPAYE monthly payments higher than my 10 year standard repayment plan monthly payments, meaning I would pay off my loan way before 10 years with this income based method (REPAYE), again, no PSLF for me.

My best option at the time seems to be to keep my original direct loan the way it is (with the 5 years of residency IBR payments) and switch to a 10 year repayment plan and get PSLF in 5 years. The other non-direct loans I should probably refinance to a consolidated private loan with a lower interest rate (currently those loans are 6.8%). Hopefully I can find something in the 3% territory.

I also need some help from my accounting buddies to see if I'd be better off refinancing my direct loan to a lower interest rate at this time, or would I be better off financially in 5 years, doing what I'm doing and getting the PSLF.

Ahhhh!!!!!

 

[RangerBob]

Thanks RangerBob. Thinking more about it, I definitely won't be eligible for IBR with my attending pay, so I would automatically get placed into the standard 10 year plan. With the 10 year plan, my newly consolidated direct loan would be paid off right at the time I would be eligible for PSLF, not helpful. Another qualifying PSLF payment plan would be REPAYE, but from what I gather, the calculation is (your gross salary minus the 150% poverty level) * 10% / 12). This would make my REPAYE monthly payments higher than my 10 year standard repayment plan monthly payments, meaning I would pay off my loan way before 10 years with this income based method (REPAYE), again, no PSLF for me.

My best option at the time seems to be to keep my original direct loan the way it is (with the 5 years of residency IBR payments) and switch to a 10 year repayment plan and get PSLF in 5 years. The other non-direct loans I should probably refinance to a consolidated private loan with a lower interest rate (currently those loans are 6.8%). Hopefully I can find something in the 3% territory.

I also need some help from my accounting buddies to see if I'd be better off refinancing my direct loan to a lower interest rate at this time, or would I be better off financially in 5 years, doing what I'm doing and getting the PSLF.

Ahhhh!!!!!

You may very well be better off refinancing now and paying it off ASAP. If your REPAYE payment would be higher than the standard 10-year repayment, I'm guessing you're going to be a looking at a pretty nice salary. Maybe it's because I owe so much, but if I were in similar shoes I'd delay living the good life another year or two (perhaps while renting a house in the new area to figure out which neighborhoods are nice, etc., plus that way you can be a predatory home buyer) and pay off the loans ASAP.

If you're doing that well financially, the math probably supports private consolidation of your non-direct loans with a 5-year variable rate loan. The shorter the loan term, the better your rate will be. I think the loans get as low as 2.5% or so.

Keep in mind PSLF still isn't a guarantee, but we should know in late 2017 if it looks like it'll be sticking around or not. But you can hedge your bets and aggressively pay off that non-direct loans (via consolidating them and paying off that private consolidation loan as quick as possible) while making the minimum payments on your direct loans in hopes of maximizing PSLF.

 

[Igor4sugry]

I'm finishing residency this June and very angry at myself for not consolidating my non-direct loans to direct to qualify for PSLF.

I left medical school with a combination of direct and non-direct loans and have been paying under IBR for the last 5 years of residency. I don't want to lose my 5 years of qualifying payments on my direct loan by consolidating ALL of my loans.

My question:
If I consolidate only my non-direct loans to direct (i.e. have two direct loans at the end of the day, one existing and one newly consolidated), will the 5 years of payments to the original direct loan remain unscathed and applicable for PSLF?

Also, could I potentially cash out with PSLF at two different time points? In 5 years for the original direct and in 10 years for the newly consolidated direct loan?

Thanks!

--Just curious, what is your debt level and what is your salary range for your first job?
I would consider the following:

1. Keep current direct loans with plan to utilize PSLF & do private consolidation to all other loans

--see companies here: http://whitecoatinvestor.com/new-players-in-student-loan-refinancing/
--there are many companies over past two years that consolidate.
--remember as an attending you get the best interest rates. (variable rates down to 2.13% and fixed down to 3.5%)
--you may need to work a little to have some paychecks as proof of your earnings to qualify for some of these.
--you can keep re-consolidating your loans with various companies to get better rates.

2. Consolidate all your loans to private loan and pay it off in 2-3 years.