Hi Heather,

I just graduated law school a few weeks ago and am now looking forward to beginning work as a public defender this September.  Consequently, I’m in the process of consolidating my federal loans with loanconsolidation.ed.gov so that I may participate in Income Based Repayment and Public Interest Loan Forgiveness. 

Everything was going smoothly until it was time to select my repayment plan.  I sent the following email to the website helpline hoping they could help me out:

I am currently in the process of completing the application to consolidate my federal education loans.  I have not had any trouble filling out my borrower information, reference information, and loan information.  However, I am having trouble choosing my repayment plan.

I would like to choose the Income Based Repayment (IBR) Plan.  While on the “Repayment Plan Introduction” page, I made sure to fill out the necessary information about my adjusted gross income (0.0), marital status (single), and family size (1).  However, when I click on “continue” and am directed to the “Repayment Plan Selection” page, the only options available for my selection in the drop down menu are “Standard,” “Graduated,” “Extended Fixed,” and “Extended Graduated.”

Please let me know what steps I now need to take in order to be able to select IBR as my repayment plan.

Thank you very much for you help.

For an answer, I received a non-responsive overview of the Income Contingent Repayment plan.  I suspect that no one actually read my question.  I can’t find any other way of contacting the website besides this email option.

I’m hoping that perhaps you have encountered this problem before and can help me where they can’t.  I went to your seminar when you came to my law school last year and you were great!

Let me know what you think!

Best,
Melissa

I have just recently gotten a few complaints from borrowers like you on this issue.  I have a call in to the Dept of Ed and will follow up as soon as I get an answer.  Yikes! 

Congrats on the public defender job, that’s great!

Thanks for the quick response and for your help!  I can’t tell you how comforting it is to know that someone out there actually understands my question and is trying to help me out.  You’ve done a great thing with this website!  I’ve shared it with all my fellow classmates.

Thanks, Melissa.  I just wish I could get a quick answer and fix from the loan servicers!  Still bugging them about this one…

Do you think it makes sense at this point for me to try submitting my consolidation application as a hard-copy, or do you recommend I wait until you have heard back from the Dept of Ed about the problem selecting IBR with the online application?

Progress!  I have gotten word that the problem is related to the drop down menu of loan types.  The problem apparently is that they have lumped GradPLUS and ParentPLUS together, and since Parent PLUS aren’t eligible for IBR, when you tell it you have GradPLUS, the system thinks you’re not eligible to choose IBR.

I’ve been told that you can proceed electronically by selecting “unsubsidized stafford” as the loan type for your GradPLUS loans, rather than the PLUS option.  I can’t promise this won’t end up in some confusion and weirdness later, but if I were you I’d give it a shot.  You could go the hard copy route, but that would take a lot longer to process.

Please let us know what happens.

So sorry to bombard you with questions!  I’ve managed to confuse myself again and I just wanted to run my consolidation strategy by you before I submit my application to make sure I’m making all the right moves. 

Here’s my background thinking on my decision to consolidate now:

My stafford loans are currently in a grace period until November 2011.  However, my GradPLUS loans do not have a grace period.  To avoid having to make payments on my GradPLUS loans for the next five months, I decided it would be a good idea to consolidate my federal loans now, instead of waiting until closer to the end of my stafford loan grace period. 

I realize that as soon as my federal loans are consolidated, the grace period on the stafford loans will no longer apply and repayment on the consolidated loan will begin.  However, I plan on choosing the Income Based Repayment (IBR) plan.  Although I have a job lined up to begin in September, I am currently unemployed and studying for the bar exam.  Consequently, I plan to report my income at $0.00 in my initial consolidation application.  According to the IBR calculator at studentaid.ed.gov, during the time that I have no income, my monthly loan payment will be set at $0.00.  Therefore, by choosing to consolidate now, I will avoid having to make payments on my GradPLUS loans during these summer months when I am unemployed.

In September, I plan to update my income to reflect the amount I will be making as a Public Defender and make my first actual consolidated loan payment.  I understand that this means I will be making loan payments on my stafford loans (as part of the consolidated loan) in September and October, when if I hadn’t consolidated, I would not have been required to start until November.  I don’t mind this, though, because the benefit is that I get to start racking up qualifying Public Interest Loan Forgiveness payments earlier than I would have been able to otherwise.

With this background thinking in mind, I’m considering taking your advice and submitting my application online with “GradPLUS” changed to “unsubsidized stafford” on the rationale that any confusion this mislabeling might cause would theoretically be worth the trouble because my application will at least be processed much faster than if I submitted a paper copy.

Before I make it official, I’d be very grateful if you’d let me know:

      1. Does my background thinking make sense?

      2. Considering my strategy, do you think it’s worth the potential confusion to go the online route?

Again, thank you so much for all your help in this process!

Although your GradPLUS loans don’t have a grace period, the Higher Education Opportunity Act added a new deferment period for Grad PLUS loan borrowers for the six-month period immediately following graduation for loans first disbursed on or after July 1, 2008.  If you borrowed Grad PLUS loans before July 1, 2008, lenders have the option to align repayment start dates through a discretionary forbearance.  So you’ll want to consider that as well.

As for applying for IBR, you are going to have to provide documentation of your income.  You’ll be asked for a waiver to allow the Dept of Ed to access your 2010 tax records.  You will also be asked for Alternative Documentation which can take a few different forms.  You have a few options for demonstrating your current AGI, but the easiest way is if your 2010 tax records reflect the low AGI you have now.  Hope this helps.

I’m not sure it makes much difference if you go online or paper, Melissa.  There is always potential for processing errors, and you’ll want to keep a close eye on things.  If it were me, I’d probably go with the online process, I think more errors come up with the paper.

Anticlimactic update…

I changed my Grad PLUS loans to be labeled as unsubsidized stafford loans in the online application, as you suggested.  However, even though all of my loans were then subsidized stafford or unsubsidized stafford, I was still not offered IBR in the payment plan drop-down menu and I was still stuck with the “Standard,” “Graduated,” “Extended Fixed,” or “Extended Graduated” options.  I tried logging out of the website completely and logging back in, and I even tried using a different browser, but no dice.  So I ended up folding and going with the paper application. 

Thanks for clarifying the six-month deferment on the Grad PLUS loans disbursed after July 1, 2008.  That was something I hadn’t caught before!  I really appreciate all your help this past month and hope you have a great summer!

Best,
Melissa

Lame.  Thanks for the update.  I’ll bug them incessantly till this gets fixed.

Yours,
Heather

PS You are most welcome.  Please spread the word about PSLF and http://askheatherjarvis.com