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  • Would like to help out family member

    I apologize for the lengthy comment but I really want to help a family friend who is a family medicine doc with a large amount of student debt.

    The breakdown:
    Direct subsidized loan $17,646 at 6.6%
    Direct unsubsidized loan $90,450 at 6.6%
    Direct PLUS loan for Grad/Prof students $68,880 at 7.7%
    Grad PLUS loan $57,746 at 8.3%
    unsubsidized Federal Stafford Loan $95,696 at 6.6%
    subsidized Federal Stafford Loan $17646 at 6.6%

    Total: $348,064

    his AGI $167,000. single with no dependents.

    Currently pays $500/month towards loans via NAVIENT (just read the news about the 3 federal lawsuits against NAVIENT) because he is banking that PSLF will pay off the loans, however.......

    Family member was initially under the impression that all the loans were eligible for PSLF, but I don't think so. I think $176,976 is eligible for PSLF. He has been making eligible payments via IBR for about 4 years. Now that he's committed some serious time on IBR while working at a 503(c) non profit organization (he will stay in this non profit) what should he do?

    The options I see (in no particular order or logical reasonableness)
    1. consolidation it all into a direct consolidation loan and restart the PSLF clock (this seems stupid)
    2. Just swallow it and keep on making the payments for the PSLF eligible loans. Refinance the $171,088 that isn't eligible for PSLF to get a much lower interest rate and start hacking away at it
    3. Can you consolidate the loans that weren't eligible for PSLF so then there's...two separate clocks for PSLF? (does that make sense?)

    unrelated question:
    - When you decide to make extra payments for the federal loans, can you direct the extra payments to the loans with the highest interest rates?

    Thanks for all the awesome help you provide!

  • #2
    I'd refinance those that weren't eligible for pslf and attack those. I'd also suggest living kind of like a resident but worse. Banking on PSLF in 10 years seems like a big gamble in this case that could cost tons of money. If it didn't work out in 10 years, they may be in a similar predicament, only worse.

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    • #3
      Your family member has a variety of options--and is fortunate to have your support to figure out what's best. Because he doesn't sound like someone who's a "Do It Yourself-er", different from many who post here   ... he would benefit from professional advice. See WCI Recommendations page for a couple of options.

      You are correct, only Direct loans qualify for PSLF. The other loans will become eligible when consolidated into a Direct Consolidation loan.

      One important clarification: it is possible to apply for a Direct Consolidation loan for the non-Direct loans (EXCLUDE the existing Direct loans). The clock will not reset for the existing Direct loans.

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      • #4
        I hate to say it but I think you are absolutely correct on your concern about the $171,088.

        If it doesn't have the word DIRECT in the loan name it is not eligible for forgiveness. Simple as that.

        Unless you incorrectly identified these loans, they are not eligible for PSLF.
        Grad PLUS loan $57,746 at 8.3%
        unsubsidized Federal Stafford Loan $95,696 at 6.6%
        subsidized Federal Stafford Loan $17646 at 6.6%

        Stafford loans are certainly not eligible for PSLF. I'm hoping you just skipped adding the word Direct to the description on the Grad PLUS loan. If not, you are correct, the $171,088 of the loans are not eligible for PSLF. These loans can be consolidated into a direct loan but none of the payments made so far will count toward PSLF. He should not consolidate the current Direct loans. Keep in mind in six years when he gets them forgiven, his payment will not go down. The payment is based on income not loan size. Still getting them off his balance sheet as quickly as possible is a good idea.

        He may want to look into PAYE or RePAYE for the $171,088 consolidated loan. It will have a lower payment than IBR.

        He should be submitting a certification form every year. You can download it at https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf. When he submits the form, they will transfer servicing of his loans to FedLoan Servicing. They will respond in writing with exactly which loans are eligible and how many eligible payments have been made.

        Good Luck!

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