I graduated in May and started a state job about two months ago. My income from my job puts me over 150% of the poverty line, but well below what I would need to make my full standard 10 year student loan payments affordable. Since I work for a state agency and plan on working for that agency or a federal counterpart for the next 10 years, it makes sense for me to do PSLF.

My issues right now primarily deal with PAYE.

Since I just graduated and got a job, I notified my servicer (Nelnet) that I got a job and sent in my first full pay stub so they could calculate my payments. First, they denied me even though I qualify. I called and got that straightened out. Now, they are calculating my payments based on gross income, not AGI. I have some money taken out for my health insurance and retirement plan on a pre-tax basis that will not be included in AGI. On my pay stub, these items are marked as “tax sheltered.”

I called yesterday to dispute my payments being based on gross income instead of AGI. What I was told, and want to make sure is correct, is that they will only take AGI off of Form 1040. If that is the case, what I told the representative on the phone that I would do is file my 2013 tax return ASAP and reapply for PAYE based on my AGI on Form 1040. What this means is that my payment for January and February would be based on my gross income, and afterwards they would be based on my AGI for 2013.

If it is based on my AGI on my Form 1040, my payments will not reflect my true income, since my three months of income would put me below 150% of the poverty line, meaning that my calculated payments would be $0. Is there anything I can do to count my non-payments towards the 120 consecutive payments for PSLF? Perhaps pay $1 per month or something like that…

Was I correctly told that they will only take AGI off of Form 1040? Would I then be correct in reapplying after I file to lower my payments to 0?

I’m wanting to make sure that I follow everything correctly so that they can’t deny me for anything in the future.

Thanks!