Hi Heather,

I have a scenario that perhaps you could clarify for me….

Let’s say that a person goes through school, consolidates all of their federal loans into a direct loan, and begins working in a qualifying public sector job and making “qualifying payments”  on any of the plans (Standard 10 year, IBR, ICR, PAYE, FBI, HBO….) that would count towards eventual PSLF.

Now, Suppose that a condition of continued employment or certification is that within 5 years, a person must either earn a number of post-bachelor credits, graduate credits, or even a graduate degree (these are often requirements for education professionals). So, after a year of qualifying payments and public service employment, the person decides to begin taking the required classes. In order to finance these courses, the person must take out an an additional loan or loans.

How would this impact PSLF eligibility? How would these additional loans be factored into what will be forgiven after the required 120 payments? This seems like a situation for which a contingency would/should be in place, but I cannot find clear information about this scenario.

Thanks, Heather (Or anyone else who may know the answer!)

Hi, Michael.  For a loan be forgiven under PSLF, 120 qualifying payments must be made ON THAT LOAN.  So in your hypothetical, the borrower has made 12 qualifying payments of the consolidation loan, but NO qualifying payments on the new loans.  After the grace period is exhausted on the new loans, the borrower may enter one of those qualifying repayment plans (acronym, acronym, acronym) and start making payments that count towards forgiveness.  He or she must BEWARE NOT TO CONSOLIDATE the old consolidation loan in with the new loans.  That would serve to repay that old loan and the borrower would no longer have credit for the 12 qualifying payments. 

Then this person would apply twice for forgiveness: once for the older consolidation loan, and later for the second batch of debt once he made 120 payments.

Thanks, Heather.

I suppose I can see why that might be the case. It would prevent people from taking large loans out near the end of the 120 qualifying payments, making few payments on the new loans, and having them forgiven as part of the old loans. But, that kind of leaves people stuck who are required to obtain post-graduate credits, or even another degree, for continued employment/certification (like teachers in many states are). Thank you, though.

You know, I really wonder what is going to happen with the outstanding student loan debt in this country over the next few years, as well as with the price of college. It’s like we are caught in the vicious cycle of an economy that is getting worse and and colleges that are rising their prices. Gotta love our corrupted crony-capitalist short-term profit centered economy.

I really do think that MAJOR changes are coming in terms of our student debt student (much bigger than expanding programs like PAYE) and how we finance higher education. I believe that eventually, much of this debt is going to have to be written off. It’s not possible for it to be payed back.