Today, let’s walk through the analysis that goes into making this decision and explore the reasons why a borrower might choose to stay on SAVE or switch to another plan.

The SAVE Forbearance Problem

With Donald Trump winning the election, the SAVE repayment plan as we know it is likely coming to an end. The plan is struggling in the court system, and it is unlikely that the new administration will work to keep it in place.

With the SAVE litigation forbearance likely ending in the coming months, many borrowers want to know the next steps. The problem is that we don’t know what options will be available moving forward. IBR has a high likelihood of being available indefinitely, while ICR and PAYE could be returning before Biden leaves office. REPAYE might also reappear.

The biggest downside with the SAVE forbearance is that the time spent in this payment pause does not count toward student loan forgiveness. Initially, I hoped this rule might change retroactively, but the new administration is unlikely to take that approach. For many borrowers, switching to a plan that counts toward forgiveness could make the most sense.

What protections do borrowers have in place? Learn how Trump’s election could impact various federal repayment plans and forgiveness programs.

The Case for Staying on the SAVE Forbearance

For some borrowers, staying on SAVE might still make sense despite the uncertainty. Here’s why:

• 0% Interest: While the forbearance is active, borrowers enjoy a 0% interest rate on their loans. This is a considerable savings and it means the forbearance is truly a student loan pause.
• Unknown Resolution and Timing: We don’t know when the SAVE forbearance will end or what repayment plans will be available at that time. Waiting provides time to make a decision when more information is available.
• Payment Break: The payment break allows borrowers to save up for whatever comes next or build up an emergency fund.
• PSLF Buyback Potential: The buyback program could still benefit borrowers working toward Public Service Loan Forgiveness (PSLF).

The election is a big change and there is certainly temptation to “take action” in order to protect yourself moving forward. Being proactive might feel good, but in many cases, being patient might be the prudent approach.

Switching to IBR Now

One of the most stable options available is the Income-Based Repayment (IBR) plan. Here are some key considerations:

• Stability: IBR is statutory law and is expected to remain a reliable repayment option moving forward. This makes it a good choice for borrowers looking for long-term stability.
• Forgiveness Progress: By switching to IBR, borrowers can begin making qualifying payments toward loan forgiveness immediately.
• Tax-Free Forgiveness Window: Enrolling in IBR now may allow borrowers to receive forgiveness before taxes on forgiven balances return in 2026, potentially saving thousands of dollars in tax liabilities.

Drawbacks of Switching to IBR

Switching to IBR has some drawbacks that borrowers should be aware of:

• Higher Costs: For many borrowers, IBR can be more expensive than SAVE, particularly for those who don’t qualify for the more favorable terms of IBR for New Borrowers (2014 version). The older version of IBR requires borrowers to pay 15% of their discretionary income, compared to SAVE’s 10%. This difference alone can lead to significantly larger monthly payments. 
• Discretionary Income Definition Change: IBR defines discretionary income as the amount above 150% of the federal poverty level, whereas SAVE uses a more generous 225% of the federal poverty level.
• Eligibility Limitations: IBR comes with an income cap, meaning not everyone will qualify for this plan. Borrowers whose income exceeds the cap may be ineligible. These borrowers could be better off waiting to see what happens with SAVE/REPAYE.
• Income Recertification: Many borrowers have not recertified their income since before the pandemic. A new recertification could result in a significant payment increase if income has risen during that time.

Waiting for ICR or PAYE to Return

For borrowers not eligible for IBR but eligible for PAYE, waiting might be a smart move, as PAYE could soon become available for new enrollments again.

Income-Contingent Repayment (ICR) is also worth considering. It’s a good option for borrowers with higher incomes and smaller balances who are close to reaching forgiveness. ICR doesn’t get much attention, but it can work well in specific scenarios.

What we know for now is that the Biden administration plans to bring both of these plans back. Additionally, with SAVE unlikely to survive, bringing back both of these plans seems logical, and potentially legally required.

Holding Out Hope for REPAYE

I’m not ruling out the possibility that REPAYE could return.

There is also the potential for a REPAYE/SAVE hybrid plan, which might incorporate some changes from SAVE—such as the 10% discretionary income payments—but eliminate the earlier forgiveness and 5% discretionary income payments that are currently being litigated. This could end up being a compromise solution in the near future.

A REPAYE/SAVE hybrid is probably the optmistic outcome for borrowers, but I think it is a somewhat realistic outcome as well.

Final Thoughts: Two Things to Keep in Mind

If you decide to switch out of the SAVE forbearance, remember that processing times for IDR enrollments are still quite slow. Moving to IBR now and then switching to another plan in a few months might not save much time overall.

Above all, it’s important not to assume the worst. Borrowers’ fears about what could happen to their repayment options are justified, but assuming that all forgiveness and IDR plans will be eliminated is premature. The ideal strategy is to stay flexible and be ready to adjust as more information becomes available.

Stay Up to Date: Student loan rules are constantly changing, and temporary programs create deadlines that can’t be missed. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post Should I Switch Out of the SAVE Forbearance? appeared first on The Student Loan Sherpa.

The purpose of this article is to help borrowers identify and avoid student loan scams. Much of the advice contained below comes directly from the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau (CFPB). I’ve also included details on some of the types of scams I’ve seen over the years.

Calling Out Scammers by Name: I’d love to make a list of known scammers as a resource for borrowers. Sadly, a scary experience dealing with a scam company makes going that route especially difficult.

What Does a Student Loan Scam Look Like?

The most effective scams that I have seen create a sense of urgency with borrowers. Act now before the opportunity disappears.

For many responsible borrowers, a limited offer is worth investigating. If there is even a chance that the offer is legitimate, the potential savings would be enormous.

While the rules for student loans do change, it never happens quickly, and it never costs any money to benefit. All federal student loan programs are free to enroll. Additionally, paying for expert help just to fill out paperwork is almost always a mistake.

This graphic from the FTC best summarizes some of the telltale signs of a scam:

Lower Student Loan Interest Rates: Real or Scam?

The good guys and the bad guys both promise lower interest rates.

What is Legitimate – There are many student loan refinance companies that can actually lower your interest rates. Most of them work with both federal and private student loans.

The legitimate companies make money by offering lower interest rates to borrowers who are highly likely to pay back their student loans. These lenders pay off your existing debt with your old lenders. Then, you pay back the new company at, what is hopefully, a lower interest rate. The aggressive advertising, lower interest rates, and sign-up bonuses often trigger the “too good to be true” alarm for many consumers.

The best way to know you are dealing with a legitimate company is that good credit will be required. They will need your credit report to determine if you are a borrower who pays back your debt and can afford the loan.

This service is normally advertised as student loan refinancing, and there are many lenders in the refinance business. I’ve ranked and reviewed the nationwide companies offering student loan refinancing. Note that although some lenders received negative reviews, they are still legitimate companies. They just provide rates and terms I think could be better.

When a Lower Rate is a Scam – One of the biggest red flags to be aware of is when a company promises you lower interest rates and student loan forgiveness. You can get lower rates by refinancing your federal loans. However, those loans become private loans and lose eligibility for federal forgiveness programs. Alternatively, you can pursue federal forgiveness, but the government won’t be cutting your interest rate.

If everybody gets a lower interest rate, it is also probably a scam. Refinance companies only make money if they are smart in choosing their customers. If they pay off the loans for people who won’t pay back their debt, they will lose money.

Obama, Trump, or Biden Student Loan Forgiveness

Scammers love to advertise forgiveness programs associated with the current president. They try to benefit from the harsh political climate by appealing to a particular point of view.

However, it isn’t fair to say that all federal forgiveness programs are a scam. It has just been my experience that if somebody attaches the President’s name to the program, it is more likely to be fraudulent in some way.

What is Legitimate – Many student loan forgiveness programs exist for federal student loans. The most common are the forgiveness programs offered through income-driven repayment plans and Public Service Loan Forgiveness. There are also programs for borrowers in certain occupations, such as teachers and military personnel.

You can enroll in the legitimate programs directly through your federal student loan servicer. No special expertise is required. Although, researching and understanding the programs is very helpful for preventing errors. Furthermore, there is no cost to signing up for any of the student loan forgiveness programs. Federal law created these programs and are often a term in your student loan contract with the government.

Legitimate student loan forgiveness does not immediately wipe away all of your debt. It takes years to reach. It is a good idea for some borrowers, while others are better off aggressively paying off their debt.

Student Loan Forgiveness Scams – One of the biggest giveaways to a student loan forgiveness scam is a high-pressure sales environment. If somebody is aggressively trying to push you into a program that will erase your debt, it should be a red flag. Another huge red flag is any fees associated with the program. Again, student loan forgiveness is federal law, and signing up costs nothing. There should be no enrollment fees or monthly costs.

Another common red flag is when a company advertises a special relationship with the Department of Education. Such a relationship doesn’t exist. Student loan programs are open to all federal borrowers. No outside company can change your eligibility.

Finally, if you are working with a company that requires your FSA PIN, now known as the FSA ID, you are likely getting scammed. The Department of Education makes it clear that the borrower is the only person who should have access to this number.

You can achieve enrollment in any student loan forgiveness program through your federal student loan servicer. Any third party that tries to enroll on your behalf likely has bad intentions. At best, they are charging you money to fill out forms that you could submit on your own. At worst, they are flat-out stealing your money or your identity.

Student Loan Consolidation Scams

Student loans are consolidated when multiple existing loans are combined into one new larger loan. There are two types of consolidation. One is federal student loan consolidation, and the other is private loan consolidation. For many borrowers, student loan consolidation is a helpful or even necessary step. Unfortunately, there are also scammers advertising student loan consolidation services.

Legitimate Student Loan Consolidation – Many borrowers elect to consolidate their federal loans to gain eligibility for certain programs. For example, FFEL loans are not eligible for public service loan forgiveness, but they can be included in a federal direct consolidation loan and gain public service forgiveness eligibility. You can consolidate your federal student loans only directly through the federal government. This process can only take place using the Department of Education’s consolidation site.

Student Loan Consolidation Scams – If you are paying for this service, it is almost definitely a scam. Whether you are consolidating your federal loans for program eligibility or consolidating on the private market for a lower interest rate, the cost to you should be $0. Another red flag is if the company you are working for asks for your FSA ID or FSA PIN.

$0 Per Month Student Loan Payments

Like many other scams, the $0 per month payment scams start with a legitimate federal program and use it to take advantage of borrowers.

What is Legitimate – Federal student loans do have income-driven repayment plans. If you don’t have any income or your income is below a certain level, your monthly payment could actually be $0. It is also possible that the government could eventually forgive your loan. This is something you can do directly with your student loan servicer and requires no expertise or special knowledge.

When $0 Payments are a Scam – If you see advertising for income-driven payments, the odds are pretty good that it isn’t legitimate. Loan servicers and the federal government don’t spend money advertising these options. They have no incentive to promote these programs. They simply make it available for the borrowers who need help. If you are seeing aggressive advertising from a company offering $0 payments, it is a huge red flag.

Private lenders don’t have income-driven repayment plans. If you see an advertisement for this, somebody is probably trying to sell you something, and you probably don’t want to buy it.

Personalized Student Loan Consultations 

There are numerous self-described student loan specialists offering personalized advice for individual student loan circumstances. This is a gray area in the world of student debt.

For the sake of transparancy, I should disclose that I am someone who falls into this category of self-described specialists offering individual guidance.

As such it probably isn’t fair for me to say who or what is legitimate and what might be a scam. What I will say is that when shopping for a service like this be wary of ongoing fees and lofty promises.

Paying someone for an hour of their time and insight is reasonable. There isn’t any reason for monthly charges, or charges based upon the amount of debt forgiven. Likewise, nobody can promise loan forgiveness or a specific outcome. Anyone engaging in either practice should be viewed with some skepticism.

Red Flags to Avoid

If the specific details covered so far don’t apply directly to your situation, the Consumer Financial Protection Bureau has some excellent general guidelines for identifying and avoiding student loan scams.

According to the CFPB, the following are all signs of a scam:

Pressure to pay high up-front fees. It can be a sign of a scam when a debt relief company requires you to pay a fee up-front or tries to make you sign a contract on the spot. These companies may even make you give your credit card number online or over the phone before explaining how they’ll help you. Avoid companies that require payment before they actually do anything, especially if they try to get your credit card number or bank account information.

Promises of immediate loan forgiveness or debt cancellation. Debt relief companies cannot negotiate with your creditors for a “special deal.” Federal law sets payment levels under income-driven payment plans. For most borrowers, loan forgiveness is only available through programs that require many years of qualifying payments.

Demands that you sign a “third party authorization.” You should be wary if a company asks you to sign a “third party authorization” or a “power of attorney.” These are written agreements giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due.

Requests for your Federal Student Aid ID. Be cautious about companies that ask for your Federal Student Aid ID. Your FSA ID — the unique ID issued by the U.S. Department of Education to allow access to information about your federal student loans — is the equivalent of your signature on any documents related to your student loan. If you give that number away, you are giving a company the power to perform actions on your student loan on your behalf. Honest companies will work with you to develop a plan. Further, they will never use your FSA ID to access your student loan information.

A Couple Final Tips from the Sherpa

I once received a call from a student loan company that was going to fix my student loans. The glaring red flag was the fact that they didn’t even know my name. If you call me to offer a service and don’t even know my name, I know you are a spammer. Enough Americans have student loan debt that some scammers just call every phone number they can.

However, I’ve received mail from companies that had detailed information about my student debt situation. After some investigation, I determined that they were scams attempting to charge me for free federal student loan programs. The lesson: companies that have your loan information on file may not be legit. To this day, I have no idea how the scammers knew about my debt balance.

Finally, calls, texts, emails, letters, and ads about brand new laws and special programs from Congress are almost always scams. Any new student loan program from the government gets a ton of attention. These programs are easy to verify via a quick Google search. Don’t ever assume that some company has special access or information.

The post Student Loan Forgiveness Scams vs. Legit Programs – How to Tell the Difference appeared first on The Student Loan Sherpa.

Like the page that tracks the SAVE litigation, this page will remain updated with the latest news, updates, and developments on Forgiveness 2.0.

Forgiveness 2.0 Basics

Unlike previous efforts that aimed to forgive some debt for nearly all federal borrowers, the Department of Education is now focusing on those most in need and arguably most deserving of federal assistance. This targeted approach includes four key groups:

• Borrowers with balances larger than their original loans.
• Borrowers who have been in repayment for decades.
• Borrowers who are eligible for forgiveness but haven’t applied.
• Borrowers enrolled in low-financial-value programs.

By concentrating on borrowers who are struggling and unlikely to repay their debt in full, the Department of Education strengthens its position should the forgiveness plan face legal challenges.

Timeline and Current Status

• August 1, 2024: The Department of Education emails borrowers, giving them until August 30th to opt out of any potential forgiveness.
• September 3, 2024: Seven states sue to block Forgiveness 2.0.
• September 5, 2024: The Southern District of Georgia grants the plaintiffs’ request to temporarily block Forgiveness 2.0 from being implemented while the case is pending.
• October 2, 2024: The case gets moved from Georgia to Missouri potentially opening a small window for the Department of Education to move forward with forgiveness.
• October 3, 2024: A Missouri judge blocks the Department of Education from moving forward with forgiveness.

The case has no entered into another likely long holding pattern for borrowers.

The dismissal of Gorgia as a plaintiff and the move to Missouri was a small win for the Biden adminstration, but there are much bigger battles to still be fought.

The full litigation process could take years, as a trial is expected, followed by appeals that could eventually reach the Supreme Court.

The Legal Theory Behind Forgiveness 2.0

Previously, the Department of Education attempted to forgive up to $20,000 per federal student loan borrower by relying on the HEROES Act. This act, passed shortly after 9/11, was designed to help the federal government respond to disasters. The Department argued that the COVID-19 crisis justified student loan relief, but the Supreme Court disagreed.

One significant advantage of using the HEROES Act was the ability to act swiftly, bypassing the lengthy rulemaking process that other approaches would have required.

This time, the Department took a more conventional approach under the Higher Education Act (HEA). The rulemaking process began in 2023 and was still not completed at the time the lawsuit was filed.

Last fall, the Department released an issue paper exploring the legislative authority for forgiveness under the HEA. This approach, while slower, was intended to provide a more robust legal foundation for the forgiveness effort.

The Influence of the Upcoming Election

Complicating the legal outlook is the upcoming presidential election, which could dramatically shift the trajectory of this case.

If former President Trump is re-elected, there is little doubt that the plan for Forgiveness 2.0 would be abandoned, effectively ending the litigation.

Conversely, if Kamala Harris takes office, her administration is expected to continue defending the plan in court, potentially extending the litigation process.

Borrower Planning and Strategy

If your loans are potentially eligible for forgiveness under Forgiveness 2.0, no additional steps are necessary at this time to qualify or get your loans discharged. However, it is crucial to monitor the situation closely in case any changes require quick action.

Odds of Forgiveness 2.0 Happening

Estimating the chances of Forgiveness 2.0 becoming a reality is difficult. The legal footing for this plan is likely stronger than the initial attempt to forgive up to $20,000 per borrower, but the recent setbacks in the SAVE litigation and the initial ruling in this case indicate that winning in court will be challenging.

When combined with the uncertainty surrounding the upcoming election, the most likely outcome at this point is that Forgiveness 2.0 may not come to fruition.

Stay Up to Date: Student loan rules are constantly changing, and lawsuits often complicate matters. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post Will Student Loan Forgiveness 2.0 Hold Up in Court? A Legal Perspective and Analysis appeared first on The Student Loan Sherpa.

However, former President Donald Trump made a surprising reference to student loans during the debate. In a sharp critique of the Biden-Harris administration, he accused them of “taunting” borrowers with the prospect of student loan forgiveness.

The Student Loan “Question” at the Debate

The topic of student loans emerged indirectly when Trump was asked whether he would veto a national abortion ban. In his response, which meandered away from the original question, Trump shifted to the issue of “terminating student loans.” 

Trump claimed that borrowers were “taunted” with promises of loan forgiveness that were ultimately blocked by the courts. He also argued that the forgiveness attempt was unfair, asserting that student loan forgiveness was struck down because it would have been unjust to “the millions and millions of people who had to pay off their student loans.”

Were Borrowers Taunted?

Whether or not borrowers were actually “taunted” depends largely on perspective. On one hand, the Biden administration’s efforts to forgive student debt can be seen as sincere attempts to alleviate a significant financial burden for millions of Americans. From this viewpoint, it’s likely unfair to say borrowers were taunted.

On the other hand, the hope and excitement that many borrowers felt when the possibility of forgiveness was on the table may have turned into disappointment when those efforts were halted by the courts. This could lead some to feel as though they were misled or given false hope.

Politically, the issue divides along party lines. Republicans may accuse Biden of making promises he couldn’t deliver, while Democrats might blame the Republican attorneys general who initiated the lawsuits and the Trump-appointed Supreme Court justices who ruled against the forgiveness plan.

Another Perspective: The SAVE Plan and Biden’s Second Attempt at Forgiveness

It’s easy to let the final outcome of the forgiveness efforts cloud our judgment when analyzing the decisions that led to this point. But instead of focusing solely on Biden’s failed attempt at student loan forgiveness, it’s worth considering his other initiatives, such as the SAVE plan and his second attempt at loan forgiveness, both of which are currently blocked in the courts and face an uncertain future.

Would borrowers be better off if the Biden administration had not attempted to create a better repayment plan or a new method of loan forgiveness? If borrowers want the administration to drop these fights, it might be fair to say they are taunting borrowers. If borrowers want the administration to attempt to prevail in court, it’s hard to argue that the administration is taunting them.

The Politics of Student Loans

Student loans have become a political football, with borrowers caught in the middle as they try to navigate the shifting political tides in Washington, D.C. 

The lines have been drawn, and borrowers will need to plan their student loan repayment strategies with the understanding that they must account not only for changes in their personal circumstances but also for multiple possible outcomes from ongoing lawsuits and upcoming elections.

Stay Up to Date: Student loan rules are constantly changing, and temporary programs create deadlines that can’t be missed. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post Were Student Loan Borrowers Taunted with Student Loan Forgiveness? appeared first on The Student Loan Sherpa.

Many student loan borrowers struggle to figure out if their current employer is eligible for PSLF. Assessing future employment opportunities for eligibility can be even more daunting.

Luckily, there are several resources designed to assist borrowers in finding employers that are recognized for PSLF purposes.

Finding Government Jobs – The Classic PSLF Option

Landing a government job is well-known route towards qualifying for Public Service Loan Forgiveness.

Unfortunately, there’s no single database that lists all available government jobs. Borrowers seeking employment with a government will need to explore multiple different databases.

USAJobs.gov – If you are looking for a job with the federal government, USAJobs.gov is the ideal place to start a search. Most, but not all, federal agencies post job listings on this site.

State and Local Government Websites – Some government agencies are excellent at promoting vacancies broadly, while others may only list them on specific government sites. The more effort you have to put in to finding a job listing, the less competition you’re likely to find. It’s a good idea to find and bookmark the career pages of state and local governments you’re interested in.

Agency Specific Websites – If there is a specific government agency that you wish to work for, be sure to check out their website. Some government entities advertise their vacancies only on their own websites. For example, your local library may post its jobs exclusively on its site, rather than on the local government website. Job hunters that bookmark and frequently check these pages will have a competitive edge.

Despite the typically lower salaries compared to the private sector, government positions are highly competitive. The advantages go beyond Public Service Loan Forgiveness. Government jobs are usually considered to be stable and often offer excellent benefits programs.

Fortunately, government jobs are not the only path to PSLF.

Nonprofit Employers – 501(c)(3)s

Another significant option for employment that qualifies under PSLF is through a nonprofit organization.

Some nonprofit organizations recognize the appeal of PSLF eligibility and prominently mention it in their job postings. Others may not mention it at all.

To find potential nonprofit employers, searching job boards such as LinkedIn or Indeed with the keyword “nonprofit” can be a very effective. Additionally, seeking out specific nonprofits and watching their job opportunities pages is another good strategy.

Just like with government jobs, there is no single database that provides a comprehensive list of all nonprofit job openings. The more digging you do and the more creative you get with your search, the higher your chances of finding suitable opportunities.

It’s important to note that not all nonprofits are eligible for PSLF. Nonprofits classified as a 501(c)(3) tax-exempt organizations are eligible. Other nonprofits may also qualify. However, nonprofits such as those that are partisan political organizations or labor unions are not be eligible for PSLF.

Jobs to Avoid – The Confusing Potential Employers

The PSLF eligibility status of contractors affiliated with a government or nonprofit is a confusing issue for borrowers. Some positions may appear to alight with government or non-profit work, but do not count towards PSLF.

For example, if you work as a custodian for a nonprofit hospital, you are probably eligible. Alternatively, if you work as a custodian at a nonprofit hospital, but are employed by a third-party cleaning services company, you are probably not eligible.

Key Takeaway: What you do or where you work does not matter for PSLF eligibility. The distinction lies in who your direct employer is.

Verifying Employer Eligibility As Soon As Possible

While employer assurances regarding PSLF are encouraging, more work is necessary to ensure eligibility.

The Department of Education will not take into account what your employer has promised about eligibility. If they employer isn’t eligible, none of the time spent working there will count towards PSLF. Thus, it is critical to verify eligibility as soon as you are able.

Borrowers can take certain measures during the interview and hiring process to help ensure eligibility:

During Job Interviews – Many job interviews are coordinated by an HR representative or recruiter. These individuals often will know if the employer qualifies under PSLF.

Looking up the Employer EIN (Employer Identification Number) – The Department of Education has a great resource called the PSLF Help Tool. Borrowers can investigate employer eligibility using the employer’s EIN. The SEC has a search engine that allows people to look up a company’s EIN, though this information is limited to publicly traded companies; so, the EIN for government agencies and non-profits often won’t be provided.

After Getting Hired – No matter how confident you are about your employer’s eligibility for PSLF, you should still submit an employer certification form (ECF) after your first couple of months on the job. The ECF is the only definitive method to verify eligibility. Additionally, it also triggers an account review to ensure you are on an eligible repayment plan and have eligible loans.

Addressing issues with employer eligibility, repayment plans, or loan types often means resetting the ten-year progress toward forgiveness. Assumptions can lead to errors, potentially delaying forgiveness for months or years.

The post How to Find Employers Eligible for PSLF appeared first on The Student Loan Sherpa.

This week I received a reader email asking about Public Service Loan Forgiveness for his father. This is a situation that is probably familiar to many borrowers:

• The parent works in a public service job (such as a government or 501(c)(3) position).
• They took out a Parent PLUS loan to help pay for school.
• Parents are making loan payments but are thinking about retirement.

In this case, the reader’s dad was coming upon his retirement age, but thinking about sticking around a little longer to qualify for Public Service Loan Forgiveness (PSLF).

The Problem with PSLF for Parent PLUS Loans

In order for a student loan to qualify for Public Service Student Loan Forgiveness, the borrower must make 120 payments (10 years worth) and be enrolled in one of the following repayment plans:

• the standard 10-year plan
• Income-Based Repayment (IBR)
• Pay As You Earn (PAYE)
• Saving on A Valuable Education (SAVE)
• Income-Contingent Repayment (ICR).

If you are on the standard 10-year plan, forgiveness doesn’t do you much good because your loan is paid off after 10 years.

The problem for Parent PLUS loan borrowers is that these loans are not eligible for IBR, REPAYE, SAVE, PAYE, or ICR. This means that even if you are in a public service job, payments on a Parent PLUS loan will not be helping you towards student loan forgiveness.

However, there is one exception.

The Exception

Borrowers can consolidate their Parent PLUS loans into a Federal Direct Loan in order to gain eligibility.

Even if you have just one Parent PLUS loan, you can consolidate the loan into a Federal Direct Consolidation loan through the Department of Education. This may seem silly because consolidating the one loan doesn’t change its interest rate. In all practicality, it really is nothing more than a name change.

That name change makes a big difference, however. Even though the consolidated loan contains a Parent PLUS loan, it is eligible for the Income Contingent Repayment Plan.

However, consolidation will not help Parent PLUS borrowers gain eligibility for the more preferable plans, such as SAVE. The only exception to this rule, the double consolidation loophole, requires completing the process by July 1, 2025.

Important Warning on Consolidation: Even though Federal Direct Consolidation is an essential step for Parent PLUS Loans to become eligible for PSLF, borrowers should be very careful with consolidation.

There is no Undo – Once loans have been consolidated, there is no way to reverse the process. This means it is critical to avoid any potential mistakes.

Only Include Parent PLUS Loans – Some borrowers have Parent PLUS loans that were borrowed for their child as well as traditional federal student loans in their own name. If these two loan types get consolidated together, the combined loan will have limited eligibility for repayment plans and other federal programs, which can mean higher payments for the borrower. In most cases you will want to keep Parent PLUS loans separate from all other federal student loans.

The Steps Towards Parent PLUS Public Service Loan Forgiveness

1. Consolidate your Parent PLUS loan(s) into a federal consolidation loan.
2. Sign up for the ICR Plan with your lender.
3. Make 120 certified payments while in a public service position.
4. Apply to have the remainder of the debt forgiven.

Step number one requires going through the consolidation process just once. However, steps two and three require action on a yearly basis.

Signing up for ICR means that borrowers must certify their income every year. The income certification process usually takes very little time and can be completed online. This needs to happen each year so that the Department of Education can increase or lower payments based upon changes in income. Borrowers have the option of authoriziting the IRS to share tax information yearly to automate the process, but borrowers will still want to watch things closely to make sure payments are properly calculated.

Step three is best accomplished by sending in an employer certification form on a yearly basis. Though yearly certification of an employer’s eligibility isn’t explicitly required, it is a best practice for borrowers. This helps the borrower keep track of payments towards the required 120 and helps ensure that the borrower is meeting other PSLF eligibility criteria.

Also, keep in mind that when you complete step four, you must still be employed by an eligible employer. If you have left your job at a PSLF employer, you won’t get loans forgiven, even if you have worked the required 10 years.

Children In Public Service

Many Parent PLUS holders have reached out asking about whether their child’s work in public service has any bearing on the Parent PLUS loan qualifying for PSLF.

In theory, it would make sense. If the loan was borrowed to pay for an education that is now being used to serve the public, PSLF would seem appropriate.

Unfortuantely, it doesn’t work this way. The Department of Education is strict about PSLF rules, and PSLF eligibility is based entirely on the employment of the loan borrower. As a parent borrower, PSLF eligibility is based on your work, not your child’s work.

The Bottom Line

If the requirement to consolidate Parent Plus loans in order to be eligible for PSLF seems ridiculous, that’s because it is. This unnecessary red tape will likely prevent a number of families from achieving student loan forgiveness.

However, red tape or not, it is possible to have Parent PLUS loans forgiven… you just have to jump through the hoops.

If you are thinking about going this route, be sure to work closely with your lender to make sure you are dotting all your i’s and crossing your t’s. A mistake in paperwork can be the difference between a huge pile of debt being forgiven or not.

If you decide that Public Service Loan Forgiveness might not be the best option to repay your Parent PLUS loans, the good news is that there are other ways to repay Parent PLUS loans.

The post Public Service Forgiveness for Parent PLUS Loans appeared first on The Student Loan Sherpa.

That said, the road to forgiveness is paved with strict conditions and strategic planning. Let’s dive into the two primary programs that offer a path to wiping out your student debt in ten years.

Public Service Loan Forgiveness (PSLF): Debt Freedom for Public Servants

The Public Service Loan Forgiveness program remains a beacon of hope for those in public service roles, offering a route to loan forgiveness after ten years of service and qualifying payments. The key to PSLF is ensuring that your employment, loan type, and repayment plan meet the eligiblity requirements.

Recent reforms have aimed to streamline the process, correcting past administrative hurdles and expanding eligibility. This summer, the one-time adjustment is expected to further ease the path to forgiveness, potentially forgiving years of payments would have otherwise been deemed ineligible.

Sherpa Tip: Don’t leave your PSLF job too early. It’s vital to remain in a qualifying job not just during the period when making the 120 required payments, but also when you apply for forgiveness. Exiting your position too early can jeopardize your eligibility.

SAVE Plan: Quick Forgiveness for Smaller Debts

The Saving on A Valuable Education (SAVE) plan introduced a new forgiveness timeline that benefits those with smaller initial loan amounts. Borrowers starting with less than $12,000 in student loans can earn forgiveness in a decade. Each additional $1,000 borrowed adds a year to the forgiveness schedule, with a cap at 20 years for undergraduates and 25 for graduate students.

Decoding the $12,000 “Original Balance” Rule

This limit applies to your total original loan balance, rather than individual loans. Crucially, increases in your balance due to interest accrual or paused payments do not affect your original forgiveness timeline under SAVE.

Tax Implications of Forgiveness

PSLF offers tax-free forgiveness, a significant benefit for public servants.

For those under the SAVE plan, any loans forgiven before 2026 will also avoid federal taxes. Post-2025, there is reason for hope that future loan forgiveness won’t be taxed either.

Sherpa Tip: If you are facing a potential tax bill in the future, it is a good idea to start planning now. The best plan will account for the possiblity that you won’t get taxed, but have money set aside if you do get taxed.

As a borrower working toward SAVE forgivneess, my tax bill plan is to use a Roth IRA to give myself some flexiblity.

The Challenge with Private Student Loans

Regrettably, private student loans are excluded from federal forgiveness programs, with no option to convert them into federal loans. For these debts, the best strategy is refinancing for better terms and focusing on aggressive repayment.

As of November, 2024, the following lenders currently offer the lowest interest rates on private student loan refinancing:

Rank	Lender	Lowest Rate	Sherpa Review
1		3.95%	Earnest Review
2		3.99%*	Splash Financial Review
3		4.88%	ELFI Review

Maximizing Forgiveness Benefits

To make the most of federal forgiveness programs, lowering your monthly payment maximizes the forgiven amount. This can be achieved by:

• Income Shielding: Contributing to retirement accounts can effectively reduce your taxable income and lower monthly payments under income-driven plans.
• Income Certification Timing: Carefully timing your income certification can help manage how much of your income is recognized for payment calculations. If you have an unusually high earning year, you can hide it from IDR calculations.
• Selective Tax Filing: If married, consider whether filing taxes separately could beneficially impact your repayment calculations by not counting your spouse’s income.

Final Thoughts

Understanding and managing student loan forgiveness can be tricky, but with some careful planning and a bit of effort, getting your loans forgiven in just ten years is a real possibility. Though it requires jumping through some hoops, pursuing loan forgiveness is a viable path and a resonable strategy.

For many, it is the most afforadable way to eliminate federal student loans.

The post How Student Loan Forgiveness in Just Ten Years is a Realistic Possiblity appeared first on The Student Loan Sherpa.

Usually, if you pause your loan payments, it also stops the countdown to forgiveness. But, there are some exceptions to this rule.

A recent reader email perfectly shows how pausing your loan payments can create problems if you’re trying to get your student loans forgiven.

The Reader Email about the Student Loan Forgiveness Clock and Forbearances

Reader Gene writes:

Over the last seven years, I have made about 80 PSLF qualifying payments. During that time, I was on three months of Administrative (processing) Forbearance and three months of Hardship Forbearance.  

Will the months of Administrative Forbearance or Hardship Forbearance count as qualifying payments?

Thank you!

Public Service Loan Forgiveness Basic Requirements

As seen in our detailed breakdown of the Basics and the Fine Print on Public Service Loan Forgiveness, time towards the required ten years, or 120 months, basically has three basic requirements:

1. Eligible Loans – Not all federal loans are eligible. This includes certain Plus loans as well as FFELP loans. However, some loans can be made eligible through federal direct consolidation.
2. Eligible Repayment Plan – Only specific repayment plans will count towards PSLF. The income-driven plans such as IBR, PAYE, and SAVE count, but the graduated and extended repayment plans are not eligible.
3. Eligible Employer – Only employers that fall within the Department of Education’s definition of public service will count. This includes most government agencies and 501(c)(3) non-profits.

Because there is room for confusion within these requirements for PSLF, we suggest sending an employment certification form to your federal servicer every year. This is the best way to track progress and ensure you meet all the requirements.

Is my employer eligible for Public Service Loan Forgiveness? The exact eligibility requirements can be a bit complicated. This article breaks down the criteria for eligibility. Additionally, the Department of Education recently created the PSLF Help Tool to assist with the verification process.

Forbearances and Deferments and Time Towards Student Loan Forgiveness

Unfortunately for Gene, deferments and forbearances usually do not count towards the required 120 payments for Public Service Loan Forgiveness. Additionally, this time will not be eligible for the 20 or 25-year forgiveness programs under an Income-Driven Repayment Plan.

This is because a forbearance or deferment means that the borrower made no payment under an eligible repayment plan. (Note: $0 payments on an income-driven repayment plan can count.)

This rule can be incredibly frustrating in Gene’s case because he spent three months on an administrative forbearance. Administrative forbearances are usually the result of slow processing or errors on the part of the student loan servicer.  Sadly, there is no mechanism in place to get these months to count towards PSLF.

Good News for Gene: The rules haven’t changed, but a new temporary exception will help Gene and millions of other borrowers.

Scroll down to the temporary exceptions to learn more.

The Massive Exception to the Rule

As part of the Covid-19 economic relief, all federal student loan payments were paused, and interest rates were set to zero.

Fortunately for borrowers, this deferment of payments will count towards Public Service Loan Forgiveness and Income-Driven Loan Forgiveness.

Borrowers don’t need to make extra payments for the time to count towards loan forgiveness.

The Temporary Exceptions

There are two notable temporary exceptions to the rule. One has expired, while the other is still available.

The Limited Waiver on Public Service Loan Forgiveness – (Expired)

In October 2021, the Department of Education announced rules for expanded Public Service Loan Forgiveness eligibility.

Under the expanded rules, called the Limited Waiver, active duty military service counted toward PSLF, even if the borrower was on a military deferment.

The Limited Waiver on Public Service Loan Forgiveness program ended on October 31, 2022.

One-Time IDR Account Adjustment – Expected Mid-2024

In April of 2022, the Department of Education announced an update to the rules for calculating progress towards forgiveness. Previous periods of deferments and forbearances may now count towards forgiveness under this one-time update.

Crucially, this time can also be used toward PSLF.

Most borrowers do not need to take any action to get this benefit, but consolidation may be required for borrowers with certain loans, such as FFEL.

Avoiding PSLF delays due to Forbearances and Deferments

Borrowers working towards PSLF should all be on Income-Driven Repayment (IDR) plans.

One of the key requirements to stay enrolled in the IDR plans is to certify your income yearly. Missing certification deadlines can cause delays in enrollment and force a forbearance or deferment. It can also cause an interest capitalization, which can be expensive.

Bottom Line

Federal student loans can be forgiven after ten years of public service or 20 years of IDR payments. Unfortunately, things don’t always go smoothly, and sometimes progress stops.

If you are working towards student loan forgiveness but your loans are on a deferment or a forbearance, the clock is likely paused.

The post Does Deferment or Forbearance Time Count for Student Loan Forgiveness? appeared first on The Student Loan Sherpa.

While $12,000 of forgiveness after 10 years sounds like an easy concept, there has been a lot of confusion. For example, many readers have written asking if the forgiveness is per loan or based on the total balance. I’ve even received some reports from readers who were given inaccurate information from their loan servicer.

This post should cover all of the fine print. Where the Department of Education hasn’t been clear, I’ve linked to the appropriate section of the Code of Federal Regulations. If you’ve got questions about early forgiveness under SAVE and this article doesn’t cover it, please leave a comment at the bottom of this article.

Determining Your Repayment Term

The path to forgiveness under the SAVE Plan is tied to your “repayment term.” This term is essentially the amount of time you need to be in repayment before qualifying for forgiveness. It varies based on the original principal balance of your loans.

Notably, the current loan balance does not influence the length of the repayment term. If your balance has grown due to interest, you won’t be penalized with a longer repayment length.

Three Rules for Repayment Term Calculations

• For Small Loan Amounts: The shortest term is 10 years for those who borrowed $12,000 or less.
• Incremental Increase: For every additional $1,000 borrowed above $12,000, the repayment term extends by a year. For example, a balance of $14,900 would have a repayment term of 13 years.
• Caps on Repayment Terms: The maximum term is capped at 20 years for purely undergraduate loans and 25 years for a mix of graduate and undergraduate loans, regardless of the borrowed amount.

Is the forgiveness timeline based on individual loan balances or the total amount borrowed?

To answer this question, let’s look at a simple example. Suppose a borrower has a total of six loans. Each loan was for $5,000. Thus, the borrower has a total original balance of $30,000.

Does forgiveness come after 10 years because each loan is less than $12,000, or does it take the full 20 to 25 years because the total balance is $30,000?

Sadly, the answer is that forgiveness will take 20 to 25 years.

The Department of Education hasn’t been very clear about this particular question. The StudentAid.gov article explaining early forgiveness leaves the answer to this question somewhat ambiguous.

For a more definitive answer, we must turn to the Code of Federal Regulations. For those unfamiliar, the Code of Federal Regulations is the source for the rules that the Department of Education and the loan servicers must follow.

34 C.F.R. § 685.209(k)(3) states that early forgiveness is based on “the borrower’s total original principal balance on all loans.”

The language is quite clear. If your total original balance exceeds $12,000, you won’t get early SAVE forgiveness after 10 years.

Loan Types and Eligibility

Even the phrase total original balance can get a little tricky in terms of determining the forgiveness timeline. For example, consolidated loans make things a bit more complicated.

Borrowers with unconsolidated loans are the easy ones. The Department of Education will look at the total original balance of each of your loans when determining the forgiveness timeline.

For those who have consolidated their loans, the Department of Education will look at the original balance of the loans that were included in the consolidated loan.

There are also a couple of other special circumstances:

• FFEL Program Loans: These are included in the timeline math because they can be consolidated into a federal direct loan to get eligibility for SAVE.
• Parent PLUS Loans: These do not impact the forgiveness timeline. However, if the Parent PLUS loan is consolidated into a federal direct loan, it will impact the timeline, according to the Department of Education.

Parent PLUS Loans and Early SAVE Forgiveness Example

As many Parent PLUS borrowers know, Parent PLUS loans are not eligible for the SAVE repayment plan. Thus, they do not qualify for early SAVE forgiveness.

This nugget of information is good news for borrowers who have a mix of both. Suppose you borrowed a total of $10,000 for your education and then borrowed Parent PLUS loans to help pay for your child’s education. In that scenario, you would be eligible for early forgiveness on the original $10,000.

However, if you consolidated the Parent PLUS loans into a federal direct loan, the debt would be included in the timeline analysis, derailing early forgiveness.

Steps to Access Early Forgiveness

1. Consolidation of Loans: If some of your loans are ineligible for the SAVE Plan, consolidating them into a Direct Consolidation Loan is necessary to qualify for early forgiveness. A common example would be an FFEL loan. Most borrowers won’t need to take this step.
2. Addressing Defaulted Loans: If your loans are in default, the Department of Education encourages you to utilize the Fresh Start program to make defaulted loans eligible.
3. Enrollment in SAVE Plan: Eligibility for early forgiveness requires enrollment in the SAVE Plan.

For most borrowers, getting early forgiveness only requires signing up for SAVE.

The Process of Loan Forgiveness

Once you are enrolled, eligible, and reach the timeline requirement, your loans will be placed in forbearance while your servicer processes the forgiveness. This period may extend beyond two to three months, but no payments are required during this time.

Final Thoughts on Early Forgiveness

Before this year, income-driven student loan forgiveness only made sense for borrowers with larger student loan balances.

Thanks to the new forgiveness timeline on SAVE, borrowers with smaller balances now have a more realistic path to debt freedom.

The post Early Forgiveness Under SAVE: Understanding Loan Size Limits and Other Fine Print appeared first on The Student Loan Sherpa.

Supreme Court battles and political rhetoric might get all the headlines, but the little-known Payment Count Adjustment is the program changing millions of lives for the better.

This one-time program was created to help borrowers who were confused about repayment rules or got bad advice from servicers.

In most cases, borrowers don’t have to take any action to benefit. However, consolidation is a critical step for some borrowers, and it has a firm deadline.

One-Time Payment Account Adjustment Basics

This site has already covered this program in great detail, but the highlights are worth repeating.

Previous periods in which borrowers were on ineligible repayment plans will now automatically count toward Public Service Loan Forgiveness and Income-Driven Repayment Forgiveness.

Additionally, many deferments and forbearances will also count.

The program may not have a sexy name or get much media attention, but it is a great tool to help borrowers get the credit they deserve for payments made toward their student loans.

The December 31, 2023, Deadline

For most borrowers, this account adjustment will happen automatically.

In most cases, it is scheduled to occur in 2024. That said, thanks to the adjustment, some borrowers have already reached PSLF or IDR forgiveness.

The problem category is borrowers with privately-held FFEL loans. These commercially-held loans are still technically federal loans, but they don’t always qualify for all federal programs. For example, borrowers with these loans had to make payments during the Covid-19 payment and interest pause.

Borrowers with these troublesome FFEL loans need to consolidate their loans into a federal direct loan to benefit from this program.

By consolidating FFEL borrowers will get full credit for their payment history from before the loan consolidation. Additionally, it will enable them to sign up for the new SAVE plan, which promises lower monthly payments.

Sherpa Note: FFEL borrowers who miss the deadline for the adjustment will still be able to sign up for SAVE if they later consolidate. However, these borrowers won’t get the benefit of the one-time adjustment. Thus, consolidating before the deadline is much better than waiting.

Moving the Deadline is Critical

Because some borrowers are required to take action to benefit, the success of the program depends upon borrower knowledge.

At this time, many borrowers are still learning about the one-time adjustment. Others haven’t heard about it yet. I know this for sure based on email exchanges with readers of this site.

The point of the adjustment is to help borrowers who didn’t get any guidance from their servicer or who got bad advice from their servicer. At present, servicers are failing the otherwise eligible FFEL borrowers by not informing them of the significance of the opportunity.

Dating back to the beginning of the repayment restart, wait times have routinely taken hours. The borrowers who did get to talk with a representative often got guidance that conflicted with what other representatives said. The Department of Education acknowledged the severity of the servicing mess when they withheld millions of dollars’ worth of payments to servicers for their failure.

By the time many borrowers finally get the help they need from their servicer, the December 31, 2023, deadline will have passed.

Avoiding Confusion

The current deadline also creates a potentially confusing scenario for borrowers.

Those who consolidate by December 31 receive a generous calculation method for determining progress toward PSLF or IDR forgiveness. Those who consolidate after July 1, 2024, will get created for the weighted average of their pre-consolidation progress. This calculation is less generous, but it won’t reset borrower progress toward forgiveness.

At this point, it isn’t clear how the Department of Education will handle credit for pre-consolidation payments for borrowers who consolidate in the first half of 2024. It would be absurd to punish borrowers who consolidate during this gray area, but for now, we don’t know what the Department of Education will do.

Moving the one-time adjustment and the generous calculation deadline to June 30, 2024, solves this issue. It also gives servicers time to get things squared away on their end and provides the Department of Education more time to reach out to potentially impacted borrowers.

Lender Incentives

Many borrowers leave comments and send emails alleging that they think their lender is somehow out to get them or intentionally making things difficult. I usually point out to these borrowers that incompetence is the most likely explanation. Servicers are overwhelmed and often confused, and this leads to mistakes.

In the case of the one-time adjustment, things are a bit more complicated.

To qualify, commercially-held FFEL borrowers must consolidate into a federal direct loan. For the borrower, their debt amount doesn’t really change. It just improves eligibility for forgiveness programs and repayment plans.

For the commercial lender, things change dramatically. Instead of receiving a monthly payment from the borrower, they receive a lump sum from the Department of Education, paying off the loan in full. In other words, they stop profiting from the debt.

I haven’t seen any evidence indicating that commercial lenders intentionally withhold this information from borrowers. However, I am saying there could be a significant incentive to keep borrowers ignorant about the one-time adjustment. The cure for this problem is for the Department of Education to make every effort to educate borrowers.

Hiding a deadline on New Year’s Eve will only raise more questions.

Previous Deadline Moves

Finally, it is worth noting that this deadline has already been moved multiple times.

When the one-time adjustment was first announced on April 19, 2022, the deadline to consolidate was by the end of 2022.

As the Covid-19 payment and interest pause kept getting extended, it also made sense to move the one-time adjustment consolidation deadline.

Servicers will be making the adjustment at some point in 2024 according to the Department of Education. Why impose an arbitrary early deadline on borrowers?

July 1, 2024, is the day the SAVE plan becomes fully implemented, and numerous other federal policies take effect. Moving the deadline to benefit from the one-time adjustment to June 30, 2023, addresses multiple issues and fits nicely with other federal changes.

The post The Department of Education Needs to Extend the One-Time Payment Count Adjustment Deadline appeared first on The Student Loan Sherpa.