During and After College: Despite What You May Have Heard, Public Service Loan Forgiveness is Still Available!

IMG_5373Hey current and future public servants! Are you hoping the Public Service Loan Forgiveness (PSLF) program will cancel part of your student debt? But do you keep hearing scary things about the program? Well, the PSLF news is both bad and good.

Bad News: Republicans want to kill PSLF. The president’s last two proposed budgets would have eliminated it. So would a Republican bill the House Education and Workforce Committee passed on a party line vote early this year.

Good News: Congress ignored all these proposals. Even if it accepts them in the future, PSLF’s end will probably apply only to those not borrowing qualifying loans (see below) before the following July 1st. If you borrow such loans before that date they’ll likely remain PSLF-eligible.

Keep tabs on PSLF with the U.S. Education Department’s easy to read and very informative PSLF web page.

Bad News: Most who’ve applied for PSLF so far have been disqualified. One problem seems to be that FedLoans, the company administering PSLF for the government, misled many borrowers about PSLF-qualifying repayment plans (again, see below).

Good News: Congress put up $700 million to fund the Temporary Expanded Public Loan Forgiveness program under which PSLF goes on a first-come/first-served basis to borrowers whose PSLF applications were rejected solely because they used the wrong repayment plans.

Bad News: PSLF’s low forgiveness rate is also due to borrower mistakes.

Good News: You can avoid such mistakes. Remember, you must meet four criteria for 120 months to get PSLF. These need not be consecutive months, but they count only if you have:

  1. Qualifying Loans: Only Federal Direct Loan Program (FDLP) loans qualify for IMG_5374PSLF. The National Student Loan Data System will show you other federal college loans you may have. Replacing them with an FDLP Consolidation Loan makes them PSLF-eligible.
  2. Qualifying Employment: Only months in which you work full-time in public service positions count and you must submit PSLF employment certification forms on which your employers confirm the months you had such jobs. It’s best to submit these forms to FedLoans by certified mail every year or when your qualifying employment with a government agency or nonprofit ends, whichever’s first, and to keep copies and your certified mail receipts.
  3. Qualifying Repayment Plan: As indicated above, a month counts only if you’re making payment under the standard repayment plan or one of the four income-driven repayment plans.
  4. Qualifying Payment: A month counts only if you pay the full required amount on-time.

IMG_5375Don’t qualify for PSLF? Don’t give up! The (Almost) Complete Guide to Student Loan Forgiveness from The Institute of Student Loan Advisors is a wonderful resource for information on over 200 other student loan forgiveness programs in the United States. Use it!

Contact College Affordability Solutions for a free consultation about your postsecondary debt if you want to take advantage of its 40 years of experience in the field of college borrowing.

College Affordability Solutions Topical Index

This index links to almost 90 articles. Each describes an wat to make college more affordable. Use them to learn how to do this before, during, or after college

And don’t forget! On August 15, 2018, new articles will be posted here every Wednesday.

Before College

College Finance Plan

Cost Reduction Strategies

College Costs

College Search and Selection

Credit Cards

Deadlines

Dependent and Independent Students

FAFSA (Free Application for Federal Student Aid)

Financial Aid Application Processes

Financial Aid Offers

Grants

Money Management

Parent Borrowing

Private Student Loans

Saving and Investing for College

Scams and Rip-Offs

Scholarships

Seeking Financial Assistance

Student Loans

Tuition and Fees

Value of Postsecondary Education

Verification

During College

College Finance Plan

Cost Reduction Strategies

Credit Cards

FAFSA (Free Application for Federal Student Aid)

Financial Aid Offers

Grants

Money Management

Off-Campus Housing

Parent Borrowing

Private Student Loans

Scams and Rip-Offs

Scholarships

Seeking Financial Assistance

Student Loans

Tax Benefits for Higher Education

Working While in College

After College

College Finance Plan

Consolidation and Refinancing

Debt Forgiveness and Cancellation

Grace Period

Missed Payment

Repayment of College Loans

Repayment Assistance

Repayment Problems

Tax Benefits for College Loan Repayment

After College: Help! I Can’t Make My Student Loan Payments!

You’re repaying loans you borrowed to pay for college. But you often find yourself IMG_1086choosing between paying for essentials and making monthly loan payments. What should you do?

You’re in luck if, like 90% of today’s college borrowers, you borrowed federal loans. Washington offers multiple ways to get relief from your predicament. The question — which is best for you?

IMG_1087If you’ve not already done so, consider replacing your federal loans with a Federal Direct Consolidation Loan. These offer longer repayment periods and lower monthly payments if you owe more than $7,500. But look into consolidation’s advantages and disadvantages before going this route.

You can also tell your loan servicer will change your repayment plan. To check out how this’ll affect your payments use the Federal Student Loan Repayment Estimator. IMG_1090It already knows your loan balances and can tell you the repayment plans for which you’re eligible plus monthly payment amounts in each available plan. It can also determine how consolidation would impact your loan repayment.

If the reason you can’t afford monthly payments is temporary, look into getting a deferment to postpone your payments for up to a year. You’re entitled to deferment if you’re:

No deferment? Another temporary solution is asking your servicer for a forbearance. You’re not entitled to forbearance. It depends on your situation. But you can totally postpone or partially reduce your payments while in forbearance.

But be careful about deferment and forbearance. During the former, interest continues to build on your unsubsidized and PLUS loans. During the latter, interest keeps building on all your loans. Unpaid interest from these periods then gets capitalized (added to principle) when your deferment or forbearance ends.

If your trouble making payments is because of your monthly due date, ask your servicer if you may change your payment due date to another day that works better for you.

Act fast, because missed and late payments have really bad consequences.

College Affordability Solutions offers 40-years of experience working with various educational loan repayment strategies. Call (512) 366-5354 or email College Affordability Solutions for a no-cost consultation.

After College: Strategies for Your College Finance Plan

We’ve discussed why students and their families need College Finance Plans (CFPs) and IMG_9739summarized strategies to use in your CFP’s “Before College” and “During College” phases. Let’s review some “After College” strategies.

Almost 70% of college graduates borrow. They leave averaging more than $34,000 in student loan debt. Hence, most strive to keep their initial monthly payments as low as possible. Toward this end:

Ex-students also strive to reduce the overall amount they repay to free up money for other uses. To IMG_9744do this:

  • Prepay: Cut the total interest you repay by prepaying – i.e. paying early or paying extra — whenever possible.
  • Reassess Your Repayment Plan: Annually compare monthly payment amounts under your current plan to such amounts under other repayment plans. Switch plans if you can afford to pay more each month. This’ll create big savings.
  • No Negative Amortization: Some federal repayment plans allow you to pay less than the monthly interest charged on your debt. It’s better than defaulting, but you’ll pay more in the long run.
  • Use Loan Forgiveness: Washington offers some generous forgiveness plans on its loans. Pursue them if you qualify.

Being late or delinquent on your student loan payments generates extra fees and penalties. To avoidIMG_9747 this:

  • Call Your Servicer: Ask to change your repayment plan or due date or to explore repayment deferments and forbearances if you have problems making your whole payment on time.
  • Dispute Servicer Errors: There are steps you can take if your loan servicer causes you repayment or other problems.

It’s your debt. Manage it aggressively to avoid problems and save money.

Look here next Wednesday morning for a more extended review of a strategy for your CFP. Need some personalized guidance on one or more of these strategies. Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-charge consultation.

After College: Should You Refinance Your Federal Student Loan Debt?

If you owe on federal student loans borrowed to pay for college, and especially if you watch late night TV commercials, you may be wondering what “refinancing” is and whether it’s the right thing for you?

When you “refinance” you borrow a private loan to pay off your federal loans, IMG_6807pledging to repay the new loan according to terms and conditions stated in its promissory note.

This sounds a lot like a Federal Direct Consolidation Loan but it’s not. Your new loan isn’t coming from the U.S. government so your rights and responsibilities on it are no longer based on laws governing federal student loans. Instead, the promissory note you’ll sign with your new lender defines your rights and responsibilities, and certain benefits and protections you now enjoy most likely won’t be available on your new, private, refinancing loan. Here are some key examples:

Interest Rates: Your federal student loan interest rates are generally fixed for the life of those loans. Refinancing lenders stress that their loans offer lower interest rates than you’re currently being charged — thereby lowering your monthly payments and saving you money in the long run. However, their promissory notes IMG_6803may allow their lenders to raise their interest rates later, perhaps many times.

Deferment and Forbearance: You may defer or forbear payment on your federal loans under certain conditions — returning to college, part-time employment, financial distress, etc. But such postponements may not be available once you refinance, or at least not available for the same circumstances.

Repayment Flexibility: When you owe the government, you get a 6-9 month grace period and the right to make payment under any of 7 different federal repayment plans that best meet your needs. Some of these plans will lower your monthly payments. Your grace period may not be the same on a refinancing loan, and refinancing lenders don’t usually offer you all the same repayment options.

Debt Cancellation, Discharge, and Forgiveness: Federal law creates opportunities through which your debt to the government may be cancelled, discharged, or forgiven. Understand none of these opportunities exist on refinancing loans.

How can you tell if a refinancing loan is good for you? Closely scrutinize its promissory note. If that note doesn’t explicitly guarantee benefits and protections you may need or want, don’t borrow it!

Looking for ways to make your college debts more manageable? Feel free to contact College Affordability Solutions for help.