Student Loan Sickness

I know that many of you are probably over my talking about student loans, but please bear with me because there might be something here that would effect you, a family member, or a friend. The more we collectively know, then the better equipped we are to avoid being in a financial mess.

Earlier this week I read this nightmare of a story about a teacher who has been making his payments for ten years while working for a qualifying employer to have his student loan balance forgiven under the Public Service Loan Forgiveness (PSLF) program. He was on track for forgiveness in 2017, then found out in a 2015 letter that he was not in a qualifying payment plan. I almost passed out when I read that.

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I had NO IDEA that there weren’t qualifying payment plans. I’ve been managing and paying student loans through the same servicer for seven years and I had never heard anything like that. There is only one servicer that will forgive your federal loans and that is FedLoan Servicing. So, you have to make sure your loans are consolidated through their program. He did that. You have to make your payments on time every month for 120 months. He was doing that. And you had to work for a qualifying employer. He was doing that too. What he didn’t know (and what I didn’t know) was that he was on a non-qualifying payment plan. He is on a Graduated Income Plan, but he has to be on an Income-Driven Plan to qualify for forgiveness.

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Having navigated all of this myself, I can attest to the fact that understanding the differences and benefits of the eight different payment plans isn’t always super clear (to me at least). I relied on the tool they have to help you figure out what plan is most beneficial for you based on your income and then made lots of phone calls to the servicer. At no point during any of that process did I see or hear anything that indicated that certain plans weren’t eligible for PSLF. If you read the Graduated Income Repayment Plan, then you will see that there is no information on that page that it is an ineligible plan for PSLF.

If you also read the chart about the eight different plans, then you will see that some say they are a “Good option for those seeking Public Service Loan Forgiveness (PSLF),” but none state that they aren’t a good option. Everyone I know that has consolidated through FedLoan has done so for the PSLF program. I know other people use them too, but in my experience the majority of people are those seeking forgiveness (also, their interest rates aren’t the best you can get, so there are better options if you aren’t looking  specifically for public service forgiveness). Having read that chart myself probably 50 times over the past few years, I have never noticed that some plans had that language on PSLF while others didn’t. Additionally, in the article, Mr. Shafer references being told he was making “on-time payments.” I would also have taken this to mean that I was on-track for forgiveness. There is nothing about his story that would have been a red flag for me personally before the letter he received in 2015.

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I know that it is my responsibility as a borrower to understand my plan, read the fine print (which he missed a single statement on the back of a bill that “he had not made any qualifying payments”), and to be informed, but it is a lot to keep up with. I keep all of my correspondence from my loan company, but I receive stuff in the mail and in the FedLoan electronic inbox frequently. It is not always clear what is simply duplicate information and what is new information. And the letters have a lot of pages and information. I got one recently that was 12 pages of fine print. TWELVE. I have been re-reading all of that fine print again over the past few days in a panic that I too have missed something.

I have confirmed with FedLoan that I am and have been on a qualifying plan for forgiveness and my account shows how many qualifying payments I have made, but I feel sick for Jed Shafer. After all of my reading, research, and effort with my student loans I always understood that I just had to have my qualifying federal loans consolidated through FedLoan, make my payments on time every time, and work for a qualifying public entity. That was it. I didn’t know that there was a “right kind” of payment plan.

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Please share this story with those you know who have loans – particularly if you suspect they may be working toward forgiveness through public service. It is our responsibility to manage our debt and be responsible for repayment, but it makes me ill to think how many other people might not be aware of this crucial piece of information. You can read the specifics of which plans count here. I hope that FedLoan will decide to add information to make it more obvious that a plan does not count towards the PSLF program so that the information is evident and obvious from the beginning.

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Just kidding. You can declare bankruptcy because you bought a McMansion or you too much crap with credit cards, but not because you took on debt to finish your education.

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