While student loans can be a boring topic, this is an article you must read if you have student loans, if you want information on public service loan forgiveness (PSLF), or if you have put your loans into forbearance. There are a lot of changes happening for a lot of people who are going into fellowship, residency, or becoming an attending, and it is time to dig into your student loans. The Covid Waiver is only available until October 31, 2022, so don’t put this off! 

What is Loan Forbearance?

If you are like me, you thought that if you signed the forbearance paper every year your loans would just go away for a year. Instead of diving into my student loans, I just let the interest accrue and used forbearance for five years to do that. I am the poster child of what not to do when it comes to student loans! Because of forbearance, my loans increased by 150%. This isn’t necessarily your fault if it happened to you too. There was a lot of forbearance steering going on by the people who were supposed to help guide you with your student loans. 

Until recently, federal student loans were contracted out to loan services who you would pay back. You would take out your loans, graduate, then get an email saying something like, “Don’t forget you have to pay us back,” then you were placed in a grace period. The next email you would receive would say you owe thousands and to call the servicer to make a payment. When you called them, they would tell you just to put it into forbearance, which was bad advice. In forbearance your interest accrues, and you don’t rack up any payments under PSLF, and you end up with larger loan amounts to deal with. 

Public Service Loan Forgiveness and Income Driven Repayment Plan

When you go to college, you are going to have to have a way to pay for it. If you can’t get scholarships or grants, student loans are the default way to pay for your education. The PSLF program was created by the government to help public servants pay off their student loans. This would include teachers, police, firefighters, doctors, etc., who are full time employees who work at least 30 hours. To qualify you need to work for a non-profit or government agency and sign up for the program. To have the remainder of your loan forgiven, you need to make 120 payments or 10 years of payments.

Part of the original qualification was that you had to be on an income driven repayment plan. An income driven repayment plan is a payment plan based on your actual income, not on the loan amount. You may have a payment of zero dollars to a few hundred that you have to pay every month. A lot of people got denied for this plan because their loans type didn’t qualify, or they weren’t on this payment plan. The headlines announcing the denials caused a lot of mistrust in this program, but Covid hit and there have been a lot of changes to who can qualify. 

Changes to PSLF Since Covid

Change #1- FFEL

There have been a lot of changes to the PSLF program since Covid. The Federal Family Education Loans (FFEL) did not qualify previously because they were loans backed by the federal government, not issued by them. A lot of people were denied by no fault of their own which caused a lot of distrust in the program. Now these loans qualify if you consolidate them into a direct consolidation loan. If you graduated eight to ten years ago, there was a four-to-five-year period where these loans were predominant. 

If you previously consolidated your loans, your payments would reset to zero and you would have to start from scratch on your required payment count. Now they are keeping your payment count and using your highest payment count available. They are also counting time in forbearance. If you spent twelve consecutive months in forbearance that time will count towards your required time. If you were in forbearance for 36 months total, that time will also count toward your total time. 

I have a friend who went back and submitted their information for the new program, and they are going to have $100,000 forgiven! If you consolidated your loans with the federal government or still have FFEL, these loans might qualify. Go back and look to see if this helps you. Don’t wait because the Covid Waiver expires on October 31, 2022.

Change #2- Interest Rates

Interest rates are always different on different loans and based on the federal interest rate and what is going on in the world. Every semester that you were in medical school you took out a new loan. The interest rate for that loan is based on the interest rate at that time. You might have eight different loans with different interest rates. The government paused the interest rates and initiated zero percent through August. While this may get extended, this is not the same thing as the Covid Waiver.

Change #3- Payment Plan Requirements

As I mentioned before, the original program required you to be under an income driven repayment plan to qualify. Under the Covid Waiver, any plan counts. They are also allowing any previous payments under any plan to count. They are working hard to bring in a large number of people to be forgiven. They are even allowing partial payments to count towards the number of required payments. 

Covid Waiver vs Temporary Pause

The Covid Waiver is not the same thing as the temporary pause. The waiver was put in place because the Covid 19 pandemic qualifies as an emergency event. This allows it to be put into effect temporarily and expire on a set date. The temporary pause has been used to give people a little bit of relief from their monthly payments. This has been getting extended every few months throughout this pandemic. 

Where do I start with PSLF?

With all the new program changes, it makes sense to check into it. The government is going above and beyond to make this program work. When you personally see people getting six-figures forgiven, it opens your eyes and helps you trust and verify this program. 

The federal government is already working on automatically updating payment counts if you are already enrolled in the program. You have until October 31st to get qualified if you aren’t already. You can find more information about the Public Service Loan Forgiveness program and the PDF form that you need to fill out and submit. You have to submit this form prior to the deadline, but keep in mind that they are behind! Once you fill it out, you can upload it into your federal loan portal. 

Share this with a friend because you never know, you might save your friend $100,000 in student debt! The thought for the day is: most doctors know very little about student loans, but you too can master money if you can master medicine.

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