PSLF Prepayment Quandary

[hippocratic oaf]

Hello, longtime lurker, first time poster.

I'm a 40yo pediatrician going for PSLF, on track for 120 qualifying payments in February 2023.

I work with underserved kiddos and applied for a state loan repayment award because I have 150k in consolidated loans (eligible for PSLF) and 30k non-consolidated (Stafford loans, not-eligible for PSLF...it's a long story but basically by the time I realized they would not be eligible for PSLF it did not make sense to restart the payment clock).

In July 2021 I was notified I would be receiving a one time $50k award from my state for loan repayment in exchange for the promise to continue working with underserved kids for the next 2 years. Awesome, I love the job and can pay off my 30k non-consolidated loans and apply the rest to PSLF-eligible loans. They told me the check would be sent directly to my services (FedLoans) in September.

At that point I read through all of my FedLoans paperwork and saw they recently added an option to lump-sum (pre-pay) PSLF-eligible loans for 12 months. Here's their wording:

"Prepayments: You may prepay your loans (make lump sum payments) and have those payments count towards forgiveness. Each prepayment will only count for up to 12 qualifying payments. In order for the prepayment to qualify for subsequent months you must:
- Have paid an amount to fully satisfy future billed amounts for each month you wish to prepay
- Have qualifying employment that covers the due date for each month you prepay
- Multiple prepayments made within the same year will not afford you more than 12 months of qualifying payments
Note: If on an Income-Driven Repayment (IDR) plan, you may not prepay past your next annual recertification date. Your annual recertification period is the 12 month time period when your payments are based on your income."

So since my IDR recertification date is Feb 2022 (when COVID forbearance ends), I immediately asked to recertify my income and provided all relevant data. Well that took a long time and the state loan repayment check hit before they were done recalculating, meaning that none of the remaining $20k towards PSLF will count as a pre-payment. Had the timing worked out I would have been pre-paid up until Sept 2022, saving another $1500/mo x 7 mo = $10.5k total.

I'm still a very lucky lucky guy (to get COVID forbearance + PSLF + state grant) and but if you were in my shoes would ask FedLoans to return the check, then immediately re-deposit the $50k so the $20k counts towards pre-payment? I'm worried that's too risky/complicated (last thing I'd want to is endanger my PSLF), but my friends say I'm leaving $10.5k on the table. What does WCI forum think?

[jfoxcpacfp]

StudentAid.gov states:
“As part of the payment suspension, your recertification date has been pushed out from your original recertification date.
You will be notified of your new recertification date before it is time to recertify.”

Have you already been notified that your recertification date coincides with the end of forbearance?

This is really not in my wheelhouse, so hopefully Andrew will respond. I can also shoot this by Sim, our SL person at FWM, and see if she has any info.

[hippocratic oaf]

Have you already been notified that your recertification date coincides with the end of forbearance?

I think Feb 2022 just happens to be when I was originally due to recertify. I believe not everyone is recertifying at the same time as a friend going for PSLF and in COVID forbearance has a recertification date later in the year.

[jfoxcpacfp]

I think Feb 2022 just happens to be when I was originally due to recertify. I believe not everyone is recertifying at the same time as a friend going for PSLF and in COVID forbearance has a recertification date later in the year.

Ah! Then, according to the link, you’ll be notified of a new recertification date. Am I reading that right? May want to check, at least. Again, though, I am stepping out of my comfort zone.

[hippocratic oaf]

Yes, I have a new recertification date but the recertification took place after the lump sum..

Actual Scenario: Recertification 2/15/22. Request IDR recalculation in July. Lump sum $50k deposited in FedLoans on 9/1/21. IDR recertification finalizes 9/15/21. Because lump sum deposited before the recertification, cannot prepay and monthly payments.

Desired Scenario: Recertification 2/15/22. Request IDR recalculation in July. Approved in August 2021. Lump sum $50k deposited after annual recertification thus it can count as prepayment for February - August 2022 IDR payments.

Current Options:
a) do nothing, make my payments when they start back in Feb 2022 and count my blessings, OR
b) ask FedLoans to reimburse the $20k (portion of $50k that went to PSLF-eligible loans), then immediately repay it so it comes after my 9/15/21 recertification. No payments til Sept 2022, increasing my eventual PSLF forgiveness total.

[pierre]

I would do A. Odds are they will screw it up if you try to mess with it.

[jfoxcpacfp]

Sim just responded the following to me:

I’ve never come across a scenario like this. It stinks that the only reason it worked out this way was because someone took too long to process paperwork. I don’t know that I would ask FedLoan to return the $$ (imagine they screw that up too), but I think it’s at least worth a phone call to a manager. I would do it soon since he’s going to get a new servicer.."

Looks like she agrees with pierre 🤦♀️!

[East coast]

Why would FedLoan refund the money anyways? Especially if you weren't even the one making the payment? Isn't that the whole point of them paying it direct - you can't just take the cash.

If anything I would NOT want the money going back to the paying entity - that is actually where the mess up is most likely to happen, not a mistake by FedLoan.

[hippocratic oaf]

jfoxcpacfp - thanks for checking!
@Eastcoast - The FedLoans rep said they would refund me the money, then I could repay...but you're right there are several potential hiccups.

[Andrew StudentLoanAdvice]

Jeez this is a tough one. I think you'll probably be okay, but I hope they don't put your loan into paid ahead status.

Here's a related question from the federal website.

If I pay more than my scheduled monthly student loan payment amount, can I get Public Service Loan Forgiveness (PSLF) sooner than 10 years?

No. You must make 120 separate monthly payments. Paying extra won’t make you eligible to receive PSLF sooner.

If you make a payment for more than the scheduled payment amount, the excess amount may be applied to cover all or part of one or more future payments, unless you request otherwise. Depending on how much extra you pay, it’s possible that your next due date could be a month or more in the future from the date you made the extra payment amount. This is called being “paid ahead.” If you make subsequent payments during a period when you are paid ahead, those payments won’t count toward PSLF.

If you request that your extra payment amount not be applied to future scheduled payments, the excess amount won’t advance the due date of your next scheduled payment, and any subsequent monthly payments you make can count toward the required 120 payments.


Make sure they apply that large payment for one month, this way you won't lose future payment count.