Public Service Loan Forgiveness (PSLF) & Buybacks
What is the latest news with the PSLF buyback program?
Well, we got the latest numbers. Basically the backlog got bigger. They processed more applications. So technically if you know you are in the buyback line it's about 27 months now instead of 35 months. So still over two years and again like I'm reiterating the number of denials are rising. And I expect that to continue because I think a lot of people are going to end up hitting PSLF the normal way, well before they get their buybacks processed.
How soon before the 120th payment should I submit for forgiveness and apply for buyback?
You cannot apply for buyback until you've crossed the 120. Not before, crossed it. And so, honestly, for you, Buyback's going to be moot. I wouldn't even consider doing a buyback. Now, it doesn't hurt to put the application in if by some miracle they eliminate a 27 plus month backlog and get caught up, but honestly, just plan on doing PSLF the normal way.
Do you have to work at a PSLF-qualifying job for the whole 10 years, or just at the time of application?
They actually treat every one of the 120 payments as individual. Every single one. And you have to meet all the criteria for each of the individual payments. Direct loan, qualifying repayment plan, qualifying employment, and then you certify it all, every single one.
Do payments made while in "in-school deferment" count towards PSLF?
No, they do not. And you bring up a great reminder. Do not make payments when you're in deferment or forbearance. Do not make interest payments when you're in school. Most people end up costing themselves money that could be going to other things. If you feel like you got extra money when you're in college and you want to do something with it, invest it.
How does someone get out of student loans besides paying them off?
So about 50% of borrowers qualify for loan forgiveness programs. Assuming that you work in public service. Any remaining balance is forgiven from your student loans. The other secondary benefit is because you're on an income driven repayment plan for those 10 years, it's the lowest monthly payment you're going to have. And there's also levers you can pull to hack it, right? You can contribute more to your 403b and you can contribute to an HSA and contribute to a traditional IRA. And you can lower your taxable income by saving and investing for yourself.
Income-Driven Repayment (IDR), IBR, & The SAVE Plan
How can my SAVE plan say my next due date is 2028, but now they are making me switch plans?
Because like we've said for a year and a half now. That date is a placeholder date. It's not your actual date. Inside the antiquated Excel spreadsheet that is our student loan system, they had to put a date in there and they had to pick one that they wouldn't have to keep updating every single month. With that being said, how can they change it for you? Well, Congress passed a law and then the save rules that weren't laws. They were just executive orders that got shot down by the courts. I'm sad to say that you're going to have to choose a new repayment plan.
I was on SAVE and just filed my taxes separately. When is the best time to switch to IBR?
As soon as your tax returns are processed, it's going to pull it automatically and you just apply on studentaid.gov and it will go from there. The biggest thing is just make sure it's processed and then go from there.
Why does interest accrue so quickly while on IBR?
The big thing that you need to realize is that when you're on IBR, your monthly payment is based on your income. It's not based on your loan balance, your interest rate, anything like that. Most people are on IBR because they want the lowest payment because they're going for some type of loan forgiveness, right? Or like financially, you can't afford the standard plan payment. I guess the big thing I should say is if you are looking to repay your student loans, the standard plans are what repay your student loans. Most people are on IBR though because they can't afford that.
How do I submit alternative income documentation if I am going on disability or am unemployed?
When you go on studentaid.gov and it asks you like on the very first screen it says like, 'Do you want to link your tax return?' you scroll past that and at the bottom select 'Skip' and then select 'I want to upload alternative documentation,' and then you can upload. I always say things like: put a little letter on there and say like I'm currently on disability. My only income is this and you can have like a little copy of it. Show your disability check and you're good to go. If you're unemployed, similar process: 'I'm unemployed, here's my unemployment compensation, that's all my income right now.' Done.
Is IDR based on both incomes for married couples?
Yes. If you're both married and you both have loans, you're going to calculate your payment as married filing jointly. What it does is it kind of divides out proportionally to your debt so that your overall debt is the same payment. File separately. It uses your income. File jointly. It uses your joint income.
I'm moving to Germany. Do I need to pay my student loans?
Absolutely you do. But. I talk about how you can hack moving to Germany to make your student loans zero or very little. And it's because you can have the foreign income exclusion tax credit. So up to like I want to say it's $130,000 this year of foreign income you get to deduct from your taxes. So you could have effectively zero on your American tax return. And guess what? You could use that zero on your US tax return to certify your student loan payments and now your student loan payments are zero.
Parent PLUS Loans
I have Parent PLUS loans that are deferred or unaffordable. What should I do?
If you need access to income driven repayment and public service loan forgiveness, you have to consolidate and get on an income driven repayment plan and you need to do it today because that window to consolidate and get on an income driven repayment plan closes on June 30th. Starting July 1st, Parent PLUS loans that are not consolidated can never access income driven repayment and public service loan forgiveness.
For a Parent PLUS loan, do you recommend making one payment on ICR and then switching to IBR?
Yes, absolutely. Income-based repayment will give you a lower monthly payment than income-contingent repayment. So, do your one ICR payment, finish the billing cycle, and then apply for IBR.
Can the government come after the student if the parent doesn't pay their Parent PLUS loan?
No. Parent plus loans are 100% your parents responsibility. You have no legal obligation to them.
FAFSA & Paying for College
What is your best advice for a college student who didn't get any financial aid but still wants to attend?
Pick a college that you can afford. The maximum value of a bachelor's degree is $80,000. That's it. So spend less than that, borrow less than that, you'll be okay. Spend more than that, you're going to get yourself into financial trouble. I would look at community college. I would look for employers that pay for a college education. Go work at Chick-fil-A, Target, Walmart, Starbucks.
I got into Michigan Ross for $70k or UMass Amherst for $25k. Which should I choose?
Always the cheaper school. There is no difference. They pulled Fortune 500 employers and one of the questions they asked them was does where you went to college or does where applicants go matter to you at all? And literally if you go to a top 200 school in America, it's exactly the same. There is no difference to an employer where you went to school. And so no difference. Just do the cheapest possible school that you can do.
Do you recommend taking out federal loans even if you have money in a 529 plan?
The order of operations that I recommend is pay your known first. So, drain the 529 plan fully and then supplement. The reason is that one-third of students that start college don't finish college. You don't want to have leftover money in your 529 plan. You don't want to borrow, have the debt, and then have this extra money because not every state lets you use your 529 plan to repay student loans. So, use the 529 plan upfront.
What is the order of operations for taking out loans for medical/grad school?
Federal loans first up to your limit and then you supplement with private student loans. Honestly, that's the way you do it. There's not much to it. You just go shop around, get three to five quotes on the private loans and rock and roll.
What should I be looking at for my 12-year-old daughter to prepare for college?
Number one is make sure that she can do math. Algebra one. Do everything in your power to make sure that algebra 1 is completed by 8th grade. The reason that is so important is because the PSATs and the SATs quiz you on pre-calculus. And if you don't have algebra 1 and eighth grade, you're not going to finish the trajectory to get great SAT and ACT scores. If she gets great scores, it unlocks a lot of doors for both colleges and for merit aid. By the time you get to early high school. You need to be fully transparent with the kid. You need to tell them this is how much money mom and dad have.
General Personal Finance & Debt
Would you recommend paying off student loans as fast as you can, even if it means living uncomfortably?
If you are one of the 50% of student loan borrowers that is getting no type of student loan forgiveness, then absolutely get out of debt as quickly as you can. There's an asterisk to that though. Don't do it at the expense of 401k matching contributions. HSA matching contributions. You don't pass up free money to get your student loans paid off. So, always do enough to get any free money you're eligible for and then yeah, throw the rest at it. And living uncomfortable. Absolutely. I'd rather live uncomfortable when I'm 22, 25, 28 than living uncomfortable at 38 and 40.
I'm a 19-year-old trying to buy a $21,000 car. What percentage should I put down?
The real answer is you put down 100% and you buy the car for cash and if you can't afford a $21,000 car, you go find a $5 to $7,000 car and then you put down as much as you humanly can. And you finance as little as possible. Cars just lose value. They are just to get you from point A to point B. And you're 19 years old. You need that money to work for you. You don't want to be giving your money away to other people.
My husband and I make $375k but are still living month-to-month. What do we do?
That's really going to come down to a lot of behavioral finance questions. I always say look at your big three, right? So, you got your housing, your transportation, sometimes education, and I would also venture at your income level, vacations. It's going to be uncomfortable for you, though. So, you need to just start having those tough conversations because it's all psychology at that point in time. The math is the math, but there's going to be uncomfortable choices of downsizing housing, downsizing vehicles, not taking vacations.
Once you get $250k in a money market account, should you open a second one to ensure it's insured?
I think there's value in diversifying that, but I actually have a bigger question. What the hell do you have so much cash in a money market for? You know, there really is a risk to that and the risk is cash drag in that you are potentially costing yourself tens if not hundreds of thousands of dollars, maybe millions of dollars by keeping so much cash versus keeping it invested. I hope you're telling me that in the context of you got a $10 million portfolio because like that that's just that's so much wasted money, man.
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.