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Old Spousal Consolidation Loan Eligible for PSLF?

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Joined 2015-11-02

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In 2006 my husband and I were able to re-consolidate our FFEL spousal consolidation through Direct Loans just before they eliminated that option. We are currently on an ICR plan. The loan does not qualify for IBR or Payee because there is a small underlying Parent Plus Loan that was paid off by the re-consolidation (2K out of a 300K loan!). I have 2 questions: 1. If one or both of us were to go to work for a non-profit, would this loan be eligible? Everything I have read says that joint consolidations are not eligible but that is because it assumes that it is still an FFEL and cannot be re-consolidated through Direct Loans (which is the case now).  If it is just me that works for the non-profit, would my portion of the loan be forgiven? The second question is: Are you aware of anyway for us to get that small Parent Plus Loan separated so that we can qualify for these better programs?
I am a counselor and my husband is a Chiropractor and we are thinking of forming a non-profit Wellness Center, in part to get loan forgiveness so this is why I am asking the question about our particular type of loan and whether it might qualify. Thank you

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Total Posts: 604

Joined 2011-03-30

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Yes, a joint Direct Consolidation loan is eligible for PSLF. Only the portion of the loan attributable to the borrower in public service is eligible for forgiveness.  Nothing to be done about the Parent PLUS loan, though, so ICR is the only income-driven option available.

tbaum’s questions raise an important point to emphasize: Parent borrowers of Parent PLUS loans should NOT consolidate the Parent PLUS loans in with the loans they borrowed for their own educations unless they know for sure that it’s the right thing for them (for example, if the Parent PLUS portion is big and they need ICR). Including Parent PLUS loans contaminates the consolidation loan such that IBR, PAYE, and REPAYE are not available.

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Total Posts: 2

Joined 2015-11-02

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Thank you Heather - I so appreciate this site. And as for the Parent Plus Loans….....when we were preparing to re-consolidate these we were concerned about including the Parent Plus Loan as some of these new programs were just coming on-line. I called our servicer AND the Ombudsman’s office to make sure it was OK to include them and was told in both instances that it would not be a problem because the Direct Loan Reconsolidation did not actually pay of the Parent Plus Loan - it had been paid off in an earlier consolidation so it was several degrees removed. But of course when we then tried to apply for IBR we were told otherwise. Another angle we have been looking at is whether or not the terms of an old loan, once paid off through re-consolidation, should carry over into a new loan. If we could eliminate the joint liability for this loan (it is just in my name now although he has to still sign for everything) then we could make our ICR payment based on just my income (if we file separately) which is much lower than our combined income. Ever heard anything along these lines? Again, thank you.