Student Loan Questions Answered: Switching From SAVE, PSLF, IDR Plans, and Forbearance

If I switch to a different plan on 10/13, can I go into processing forbearance?

If you are currently in the SAVE forbearance, you're not going to get an additional forbearance by switching repayment plans. However, plan switching is going pretty quickly. About 70% are getting processed in a week or two. If you have to switch by 10/14, I would personally apply on 9/29 to take advantage of the auto-pay discount. You might as well save a little bit of money on interest if you can.

The University of Arizona still can't accept Parent PLUS or student loans. They say there is a federal delay. What's going on?

We are hearing stories about this. Financial aid offices are having trouble getting their student loans disbursed to them. However, it's not really blocking anybody. The schools and financial aid offices know about the delay, and they should be handling it with grace. I haven't heard of anybody actually being negatively impacted by it, except for some grad students who rely on the disbursements for rent.

Should I be saving for a down payment on a home or making extra payments to pay off my student loans faster? Thoughts?

It depends on your goals. If you qualify for loan forgiveness, go for that. If not, paying off student loans is great. Buying a home is a personal preference, and it's generally not a mathematically good investment, it's usually more expensive to buy than to rent, and it gives you "golden handcuffs" with huge transaction costs. If I were younger, I would pay off my student loans, max my 401k and IRA, pay off consumer debt, and then look into saving for a home.

What do you recommend doing given an incorrect payment from Mojila? They refused to correct it and won't move me from forbearance. (I am going for PSLF).

Just submit a new Income-Driven Repayment (IDR) application. You could request reconsideration, but since you said they wouldn't do it, submitting a new application is the way to go.

PSLF keeps changing, waiting for them to make a decision already.

I'm really concerned about what you're seeing because PSLF hasn't changed a lick. Nothing has changed on that front.

Should I wait until right before my 90 days finish to sign up with a payment plan?

Changing payment plans should not be dictated by what the government tells you; you need to make the best choice for your personal finances. If you are going for Public Service Loan Forgiveness (PSLF) or time-based loan forgiveness, you should already be enrolled in the new plan. Delaying is just costing you money in interest (e.g., $300 a month stacking on your loans) and it's costing you eligible PSLF time. The only reason to delay is if you literally cannot afford any option right now.

If I auto-recertify, will my loans be placed in administrative forbearance?

The only reason you go into administrative forbearance when changing plans or recertifying is if they can't process the application within one billing cycle. It's pretty rare to see that happen these days. As long as they process it within the billing cycle, you won't go into forbearance.

I have $130k in loans, can I enroll in the graduated 25-year plan?

Please don't. The graduated plan is the worst plan out there. It gets people in trouble because it's a sexy tease. It starts with a low payment, but then it goes up and up and up. Less than 4% of borrowers are on it, and basically nobody actually finishes on it. You'll do it for years, the payments will rise until you can't afford it, and then you'll switch to IBR. The problem is, those years spent on the graduated plan do not count for time-based loan forgiveness or PSLF.

Why hasn't financial aid come out yet? School starts next month.

It's very common. You get your federal loans awarded, but they can't disburse the loans until 21 to 30 days before your first day of classes. The school typically won't offer refunds until school starts or the week after. The financial aid office handles everything, so don't worry unless you're missing something on your end.

My son said his interest rate on his student loan will be 9%. Is that right?

The only federal loans that have a 9% interest rate this year are Parent PLUS loans. Undergraduate loans are 6.5%, and graduate loans are 8%. If he has a private student loan, that is based on your credit and income, so a 9% rate is very possible.

My wife has high student loan debt and low part-time income. We filed separate taxes, and I moved her from SAVE to PAYE. Any tips?

You are already doing the right steps. The only thing I'd question is filing taxes separately. Filing separately will cost you more in taxes. You have to do the math: Does filing separately lower your wife's student loan payment by more than the extra amount you are paying in taxes? If it doesn't, it's not worth it. You should file jointly and pay the loan off together.

How long does a reconsideration submission for PSLF take to review and approve?

Months to years.

What happens to someone that goes on Social Security and still has student loans?

Nothing different. You still have to pay your student loans. If you don't, they will garnish your Social Security.

What payment plan is best for high earners that want a low payment?

It's about navigating your specific situation. Income-driven plans base payments on your income and are designed for hardship and loan forgiveness (like PSLF). Standard plans (Standard, Graduated, Extended) are based on the loan balance. If you are a high earner and there's no forgiveness program for you, the Standard plan might be best, just enroll and pay them off.

My PSLF application was closed because it says they were unable to reach my employer. What should I do?

Submit a new PSLF certification form, and then yell at your employer (HR) because they received the email and didn't DocuSign it.

What's the situation with the program that forgives federal loans for borrowers in public service (PSLF)?

The program is working as designed. 10,000 people a month are getting their loans forgiven. There are no issues on that front.

Has auto recertification always been a thing for IBR? PSLF caught me off guard.

Don't mix the two. IBR is a repayment plan, and you can auto-renew your income for that (though I recommend doing it manually). PSLF is for Public Service Loan Forgiveness; it's a separate form, separate paperwork, and there is no auto-renewal for it. You have to submit PSLF paperwork manually at least once a year.

I'm worried about the Department of Education messing things up. Should I switch from SAVE still?

First, you don't have a choice. Second, I wouldn't worry about it because the Department of Education isn't actually involved in processing your switch. You submit the application online, it goes to a business processing organization (like Deloitte), and then to your loan servicer. It's all automated and electronic.

How will I know if my monthly payment amount is not accurate?

Run the student loan calculator. The big thing people get in trouble with is not using the correct income number. If you are using your taxes, you want to use Line 11A (Adjusted Gross Income) from your tax return. If you use a pay stub, take your gross income (the very top line, no deductions) and multiply it to cover the whole year.

I have 66 payments on PSLF, but I was doing the extended graduate plan...

The extended graduate plan does not count for PSLF. Get off of it immediately. There is a back-door called Temporary Extended PSLF, but it is limited by budget. If you have 5 years to go, you better cross your fingers that Congress keeps that program alive, or else none of what you paid will count. Switch to IBR or REPAYE right now.

How long can you defer college or loan payments and take more college courses?

As long as you are enrolled at least half-time, you can go on in-school deferment forever. However, it will leave you worse off. Because you have to be at half-time, it's hard to work, earn income, and start your life. Meanwhile, your loan balances and interest just keep growing. It never works out well.

Can you give the Department of Education permission to use your tax return but not grant permission to auto recertify?

Correct. They are two different things.

What's the difference between IBR and RAP (REPAYE/SAVE)?

They are two different income-driven repayment plans. RAP uses your Adjusted Gross Income (AGI), while IBR uses discretionary income. They use slightly different calculations, so you just have to run the numbers to see which is lower.

I have Parent PLUS loans that have been deferred and they are coming due. What is the best plan?

If you have not consolidated those Parent PLUS loans, you don't have any choices. The Standard plan is your only option.

StudentAid.gov said my payment would be $423, but Ed Financial gave me a bill for $525.

The real question is, which one is mathematically correct based on Line 11 of your tax return? If $423 is correct, you can hit the "Reconsider my income" button on StudentAid.gov. If that still doesn't work, submit a paper application with your tax return attached.

Besides paying more interest, is there any downside to the extended fixed standard plan if I want to pay more?

No, that's actually one of my favorite approaches if your goal is repayment but you want a little flexibility. The Standard/Extended plans are fully amortized, meaning your payment covers accrued interest and principal, making it easier to make extra payments directly toward the loan.

Do I need to apply for a new IDR plan by Friday if I was in SAVE?

There is no universal Friday deadline; you have your own individual 90-day deadline. However, you should run the calculators and move plans at any time. There is no good reason to wait unless you literally cannot afford any of the payments right now.

I'm a teacher, I owe $70k, and I'm in forbearance. What plan is best?

Because you are a teacher, you need to be going for Public Service Loan Forgiveness (120 payments). Being in forbearance is the worst place to be because those months don't count toward PSLF. Get on IBR or RAP (whichever is lowest) and certify your employment.

My husband got a Parent PLUS loan for his daughter. Am I liable for that if he defaults?

You are not legally responsible for the loan itself. However, if you file taxes jointly, the US government views you as a single unit and they will intercept your joint tax return. They can also garnish his wages, which impacts joint bank accounts. To protect yourself, you would have to file taxes separately and keep bank accounts separate.

How do I know what amount was used to determine my monthly payment?

If you consented to the IRS data retrieval tool during your IDR application, they pull Line 11A (Adjusted Gross Income) off your latest processed tax return.

I am hoping for the PSLF buyback to cover the time I was in forbearance.

Please read how the PSLF buyback actually works. It is calculated based on what you should have owed during the specific calendar year the payment was paused (based on your tax return for that year). If your income went up, that buyback payment could be significantly higher than what your payment is today. Do not rely on the buyback; get on an IDR plan now.

How do I go back to federal loans from private student loans?

You cannot. If you refinance into a private student loan, there is no mechanism to ever restore them into the federal student loan program because there is no longer a government guarantee supporting them.

I was recently laid off and was in SAVE. I'm not sure which plan to choose.

Probably IBR. If you state you have zero income due to unemployment, your payment will be $0. It's a solid way to take advantage of the IDR system while you are unemployed.

I started with my loans in 2009. What can I expect for IDR forgiveness?

Assuming you entered repayment in 2014 (after 4 years of school + a 6-month grace period) and have paid diligently the entire time, your loans would be forgiven after 20 years, in 2034. COVID forbearance counts, but time in the current SAVE forbearance does not.

Is it better to do standard repayment or income-based for new loans that aren't that high?

If your goal is to pay off the loans, the Standard plan is the easiest way to do it. If your goal is to get loan forgiveness, an Income-Driven plan is how you do it.

If my mom has the loan but the payment is set based on her husband's income...

If they file taxes jointly, the government views them as one tax-paying unit. The only way to not have his income count is for them to file taxes as "Married Filing Separately." However, they need to do the math, because filing separately often costs more in taxes than what you save on the student loan payment.

If I don't work for the next two years, but my loans start this year, what should I do?

Apply for an IDR plan and state you have zero income. Your payment will be $0, and those $0 payments will actually count as credit toward your loan timeline. When you start working again, your IDR payment will eventually adjust up.

Do forbearance months count towards RAP?

No. General forbearance might count under certain rules, but the specific SAVE forbearance counts for absolutely nothing. It does not count for IDR forgiveness timelines, and it does not count for PSLF.

With IDR rules changing, does it make sense to consolidate all my loans into one Direct loan? I also have Parent PLUS loans.

Absolutely not. Consolidating Parent PLUS loans with regular loans today only gives you access to the ICR plan, which caps your payment really high. The deadline to use the backdoor to get Parent PLUS loans into better plans closed in July. Consolidating today doesn't get you extra options and resets things.

What would be your main advice for PSLF?

Minimize your payments. Make your 120 eligible payments, and the rest is forgiven. Use legal strategies to lower your Adjusted Gross Income (contribute to a 403b, HSA, traditional IRA). Do not pay an extra dime towards your student loans; it's a waste of money if you are successfully achieving PSLF.

If I am on an IDR plan like RAP and it subsidizes interest, does making an extra payment go to principal right away?

No. You are never allowed to pay extra toward principal on a student loan before paying off fees and accrued interest first. If you make an extra payment, you lose your RAP subsidy. Furthermore, if your goal is IDR forgiveness, there is absolutely no mathematical reason to pay extra.

Can I go into a general hardship forbearance when I'm currently on the SAVE administrative forbearance? I'm doing PSLF.

You can, but to get out of the administrative forbearance, you need to apply for a new IDR plan via a paper application. Send it to your servicer, then call them and ask to be put into a general processing forbearance.

Does COVID forbearance count towards PSLF?

Yes, if you were working full-time for an eligible public service employer (501c3, government, military) between March 2020 and August 2023, those 40-ish months completely count towards PSLF.

What document do I use to prove zero income/unemployment?

You can submit an unemployment compensation document, or simply write a letter stating: "To whom it may concern, I am unemployed and have received $0 for my gross income over the last [time period]." That counts as self-certification.

Do you have to pay taxes on the amounts forgiven after 20/25 years on IDR?

Currently, yes. There is a carve-out in tax law making it tax-free, but that expires in 2025. Unless Congress extends it, the forgiven amount is considered taxable income and taxed at ordinary income rates.

Is it too late to file a borrower defense application before changing to IBR?

It's never too late. However, Borrower Defense is incredibly challenging. You must definitively prove your school defrauded you in marketing or recruitment based on state law. Unless your school is already part of a documented class action on the Dept. of Education's website, it is very hard to get approved.

What do you think about going to the American University of Rome in Italy?

Be incredibly careful with foreign schools. They often charge triple the price, forcing students to take out massive private student loans that lack federal protections. They generally don't offer the same Return on Investment (ROI) as US institutions.

If your loans are below 5% interest, shouldn't you just let IDR forgiveness handle the balance instead of stressing over extra payments?

Mathematically, yes. If you invest the money you would have used for extra payments, you will come out ahead. However, personal finance is personal, and many people cannot handle the mental burden of carrying significant debt for 25 years.