And another question, for Student Loans

arj14 · June 2015

DH is a public school employee, and was hoping to take advantage of loan forgiveness for at least his graduate degree loans, but we're a little confused about how this works. When I go to the government site, it just looks like you make payments for 10 years and the rest is forgiven, but... it can't be that simple, right? Do you have to be with a specific servicer? All of his graduate loans are currently with Great Lakes for $65k. We're on a reduced payment plan with them and pay about $365 / month (more than minimum so we keep up with the interest in case something horrible happens). He also has a $1500 Perkins loan we pay the minimum of $55 / month on, and $22k that we pay $250 / month (the minimum) through ACS (but are getting moved to Navient sometime this summer). In addition to all that, I have my own loans.

Is anyone here also a public employee? Are you taking advantage of the loan forgiveness offer? Do you have any advice?

Xstatic3333 · June 2015

I'm not in the program, but I'm a nonprofit employee so I researched it heavily. You do actually have to apply and be accepted into the program. Once accepted, your loans are transferred to Fedloan servicing, who handles all PSLF accounts. I think he'll need to move all of his loans over. They should, however, count qualifying payments that he has already made towards the 10 years of qualifying payments. There is no penalty for overpayment. Hope that helps!

hoffse · June 2015

Xstatic gave you great info.

Something else to remember: most of the time, loan forgiveness is income to you and will be taxable in the year in which it is forgiven, all at once. There are a couple exceptions to this with certain kinds of student loan forgiveness programs, but you need to be 100% positive you are in the right program to get tax-free treatment. I honestly don't know enough about it, but I know that sometimes it's counted as income and sometimes it's not. Here's the IRS publication on it (not that it is super helpful):

http://www.irs.gov/publications/p970/ch05.html

If for some reason the loan forgiveness is not tax-free in your H's case, then obviously you guys need to save up for the tax bill. Student loan forgiveness is still relatively new, so you don't hear much about the tax consequences of it. I'm pretty sure it's going to be biting thousands of people in the ass within the next few years.

If you have to pay tax on it, you should aim high on the taxes, and maybe estimate that you will be in the next tax bracket (or two) higher 10 years from now. It's obviously better to overshoot than undershoot it. Save during the entire 10 years, and it won't be bad at all.

EDIT: not tax advice - I have no idea if the program you are looking at qualifies as tax-free or not.

simplyelise · June 2015

DH and I are both public employees - neither of us is eligible - but his loans are already under Fedloan servicing and here is what they say:

"Since the Public Service Loan Forgiveness Program requires 120 separate on-time monthly qualifying payments and was just established in 2007, no borrower will be eligible for forgiveness until 2017. Applications will be available closer to that time.
However, we do recommend that you submit employment certification on an annual basis for any months that you were employed with a public service organization and believe you have met the eligibility requirements."

Not sure if you'll be able to get this if you're not logged in, but here is the fedloan employment certification: http://www.myfedloan.org/forms/pdf/discharge/pslf_instructions_ECF.pdf
Alternate link: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf

As far as what counts as qualifying payments:

To maximize forgiveness under the PSLF Program, you should repay your loans on one of the income-driven repayment plans (Income-Based Repayment (IBR) Plan, Pay As You Earn Repayment Plan, or the Income-Contingent Repayment (ICR) Plan), which qualify for PSLF.

Other PSLF-qualifying repayment plans are the 10-Year Standard Repayment Plan or any other repayment plan where your monthly payment amount equals or exceeds what you would pay under a 10-Year Standard Repayment Plan.

Before selecting a repayment plan, it is important to understand the implications and costs of that decision. The longer you make PSLF-qualifying payments under a 10-Year Standard Repayment Plan, the lower the remaining balance on your loans will be when you meet all of the PSLF Program's eligibility requirements. In fact, if you make all of the required 120 qualifying payments under the 10-Year Standard Repayment Plan, there will be no remaining balance on your loans to be forgiven.

Under the IBR, Pay As You Earn, and ICR plans, your monthly payment amount will likely be lower than under any of the other PSLF-qualifying repayment plans and your repayment period will likely be longer. Because of the longer repayment period, additional interest that will accrue on your loan, and the smaller monthly payment amount, you will be left with a higher loan balance that could be forgiven. However, if you ultimately do not meet the eligibility requirements for PSLF, you will be responsible for repaying the entire balance of your loan, including all accrued interest, unless you qualify for forgiveness under the terms of the IBR, Pay As You Earn, or ICR plan.

He may also be eligible for teacher loan forgiveness: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher.

If you are not eligible for income based repayment or pay as you earn (we're not eligible at 77k gross pay for 2 people), then you will likely already be paying the amount that will have you fully paid in 10 years, which would make the forgiveness unnecessary. But if you are eligible for one of the above repayment plans, it would relieve the remaining debt at 10 years.

simplyelise · June 2015

hoffse said:

Xstatic gave you great info.

Something else to remember: most of the time, loan forgiveness is income to you and will be taxable in the year in which it is forgiven, all at once. There are a couple exceptions to this with certain kinds of student loan forgiveness programs, but you need to be 100% positive you are in the right program to get tax-free treatment. I honestly don't know enough about it, but I know that sometimes it's counted as income and sometimes it's not. Here's the IRS publication on it (not that it is super helpful):

http://www.irs.gov/publications/p970/ch05.html

If for some reason the loan forgiveness is not tax-free in your H's case, then obviously you guys need to save up for the tax bill. Student loan forgiveness is still relatively new, so you don't hear much about the tax consequences of it. I'm pretty sure it's going to be biting thousands of people in the ass within the next few years.

If you have to pay tax on it, you should aim high on the taxes, and maybe estimate that you will be in the next tax bracket (or two) higher 10 years from now. It's obviously better to overshoot than undershoot it. Save during the entire 10 years, and it won't be bad at all.

EDIT: not tax advice - I have no idea if the program you are looking at qualifies as tax-free or not.

Yeah, they definitely didn't think about this when they first passed the forgiveness legislation, but they have since gone back and re-titled it from loan forgiveness to loan cancellation.

As it stands today, those people who participate in this PSLF program will not have to pay taxes on the "cancelled" (forgiven) debt.

hoffse · June 2015

simplyelise said:

hoffse said:

Xstatic gave you great info.

Something else to remember: most of the time, loan forgiveness is income to you and will be taxable in the year in which it is forgiven, all at once. There are a couple exceptions to this with certain kinds of student loan forgiveness programs, but you need to be 100% positive you are in the right program to get tax-free treatment. I honestly don't know enough about it, but I know that sometimes it's counted as income and sometimes it's not. Here's the IRS publication on it (not that it is super helpful):

http://www.irs.gov/publications/p970/ch05.html

If for some reason the loan forgiveness is not tax-free in your H's case, then obviously you guys need to save up for the tax bill. Student loan forgiveness is still relatively new, so you don't hear much about the tax consequences of it. I'm pretty sure it's going to be biting thousands of people in the ass within the next few years.

If you have to pay tax on it, you should aim high on the taxes, and maybe estimate that you will be in the next tax bracket (or two) higher 10 years from now. It's obviously better to overshoot than undershoot it. Save during the entire 10 years, and it won't be bad at all.

EDIT: not tax advice - I have no idea if the program you are looking at qualifies as tax-free or not.

Yeah, they definitely didn't think about this when they first passed the forgiveness legislation, but they have since gone back and re-titled it from loan forgiveness to loan cancellation.

As it stands today, those people who participate in this PSLF program will not have to pay taxes on the "cancelled" (forgiven) debt.

Yeah that's what I thought, but I wasn't sure. I know a bunch of people who are doing loan "forgiveness" through their law schools, and that's definitely going to be taxable.

The whole thing is overly complicated, IMO.

simplyelise · June 2015

hoffse said:

simplyelise said:

hoffse said:

Xstatic gave you great info.

Something else to remember: most of the time, loan forgiveness is income to you and will be taxable in the year in which it is forgiven, all at once. There are a couple exceptions to this with certain kinds of student loan forgiveness programs, but you need to be 100% positive you are in the right program to get tax-free treatment. I honestly don't know enough about it, but I know that sometimes it's counted as income and sometimes it's not. Here's the IRS publication on it (not that it is super helpful):

http://www.irs.gov/publications/p970/ch05.html

If for some reason the loan forgiveness is not tax-free in your H's case, then obviously you guys need to save up for the tax bill. Student loan forgiveness is still relatively new, so you don't hear much about the tax consequences of it. I'm pretty sure it's going to be biting thousands of people in the ass within the next few years.

If you have to pay tax on it, you should aim high on the taxes, and maybe estimate that you will be in the next tax bracket (or two) higher 10 years from now. It's obviously better to overshoot than undershoot it. Save during the entire 10 years, and it won't be bad at all.

EDIT: not tax advice - I have no idea if the program you are looking at qualifies as tax-free or not.

Yeah, they definitely didn't think about this when they first passed the forgiveness legislation, but they have since gone back and re-titled it from loan forgiveness to loan cancellation.

As it stands today, those people who participate in this PSLF program will not have to pay taxes on the "cancelled" (forgiven) debt.

Yeah that's what I thought, but I wasn't sure. I know a bunch of people who are doing loan "forgiveness" through their law schools, and that's definitely going to be taxable.

The whole thing is overly complicated, IMO.

Agreed completely. It's been a crash course for me since getting married. I still find it utterly ridiculous that with our credit scores, we could go get a <1% car loan for a depreciating asset yet we can't refinance our student loan debt to get it lower than 6.8%. It's not going to affect us that much with our payoff plan, but it would save over 10k to get the rate under 4 if we were doing 10 year repayment.

OP, public student loan forgiveness sounds like a good plan for you guys considering all your other SL obligations. You can count past debt payments (after 2007) and they don't have to be consecutive. Just get up to speed on documentation and figure out how soon you can reach that 10 years employment and 120 qualifying payment sweet spot. Good luck!

jjbmstinco · June 2015

I am on the program right now. They have given you all good advice and correct information. If you have any questions, feel free to PM me or ask here.

CuriousKiddosMama · June 2015

One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).

brij2006 · June 2015

CuriousKiddosMama said:

One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).

All of this. I know that I'm anti-debt, but personally I would just chuck away at the loans and get them paid off. I wouldn't want to worry about staying in debt for 10 years just to wait for the forgiveness, or stay at an underpaid position because of it as well.

simplyelise · June 2015

brij2006 said:

CuriousKiddosMama said:

One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).

All of this. I know that I'm anti-debt, but personally I would just chuck away at the loans and get them paid off. I wouldn't want to worry about staying in debt for 10 years just to wait for the forgiveness, or stay at an underpaid position because of it as well.

I'm curious, OP, you said you also have SLs. How much are your loan totals? OP's husband has $88k and she also has some amount. I'm all in on Dave Ramsey as well, so my #1 recommendation is to pay off as quickly as possible. But I'm thinking they could at least attack OP's loans hard while making regular payments on the husband's. Then when they get through hers, they can make a decision about the 10 year forgiveness or just paying off quickly.

Xstatic3333 · June 2015

CuriousKiddosMama said:
One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).

This is definitely a good consideration. The main reason I didn't get into the program is that if I ever get laid off from this job, I'd like the opportunity to pursue private sector work. Another consideration for me was that I didn't stand to have her much forgiven. Finally, a smaller consideration is that I've heard horrible things about FedLoan Servicing-"lost" payments, mysterious late fees, etc., though in a lot of those circumstances I think the borrower is probably at fault.

hoffse · June 2015

Xstatic3333 said:

One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).
This is definitely a good consideration. The main reason I didn't get into the program is that if I ever get laid off from this job, I'd like the opportunity to pursue private sector work. Another consideration for me was that I didn't stand to have her much forgiven. Finally, a smaller consideration is that I've heard horrible things about FedLoan Servicing-"lost" payments, mysterious late fees, etc., though in a lot of those circumstances I think the borrower is probably at fault.

I think these are good points.

Regarding FedLoan, we use them for H's law loans. They've been fine and easy to work with for us. I actually prefer them over Sallie Mae/Navient because you can pay extra on each individual loan, one at a time, rather than having them all bundled together. Then again, we pay FedLoan directly... we don't have the loan forgiveness program.

I've read the horror stories about them too, but I don't get it. I figure the borrowers must be the folks screwing up, and they're blaming the lender.

formerlyGDaisy09 · June 2015

Xstatic3333 said:

One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).
This is definitely a good consideration. The main reason I didn't get into the program is that if I ever get laid off from this job, I'd like the opportunity to pursue private sector work. Another consideration for me was that I didn't stand to have her much forgiven. Finally, a smaller consideration is that I've heard horrible things about FedLoan Servicing-"lost" payments, mysterious late fees, etc., though in a lot of those circumstances I think the borrower is probably at fault.

These are good points! I've been out of school 6 years and I'm currently at my third job, I would not want feel locked in somewhere for 10 years, but I guess my willingness to do that might change depending on how much I owed.

arj14 · June 2015

simplyelise said:

brij2006 said:

CuriousKiddosMama said:

One thing to consider is that 10 years is a really long time. How long has he already been there and is it a job he wants to stay in. When I graduated there was a 5 year forgiveness program for teachers, but it only forgave $5000. In order to get that I had to stay at a title one school for 5 years. If I had it to do over again, I would have just paid the loans and moved to a better school earlier. As it was I paid about half that in interest while my loan was frozen but still accruing interest (I paid it down to 5k and then paid quarterly interest payments).

All of this. I know that I'm anti-debt, but personally I would just chuck away at the loans and get them paid off. I wouldn't want to worry about staying in debt for 10 years just to wait for the forgiveness, or stay at an underpaid position because of it as well.

I'm curious, OP, you said you also have SLs. How much are your loan totals? OP's husband has $88k and she also has some amount. I'm all in on Dave Ramsey as well, so my #1 recommendation is to pay off as quickly as possible. But I'm thinking they could at least attack OP's loans hard while making regular payments on the husband's. Then when they get through hers, they can make a decision about the 10 year forgiveness or just paying off quickly.

My loan totals are at 12.5k through one servicer (private loan through the MN Self loan program, low but variable rates) and about 26k in federal loans. Fed loans are on IBR for the time being, but I pay more than that to keep up with the interest while I throw what I can at the private loans.

Unless funding is cut, DH has no intentions of leaving his position or his district, even - it's large enough that he has some mobility there (and is actually changing schools next year).

And here's the part you will all cringe for... DH and I have separate finances, and there is no convincing him otherwise. He is very slow to accept change in general but in particular with money. We do share some expenses, but not with student loans. He makes about 45k a year and I make around $20k a year (both before taxes), so I have a lot less to throw at my loans - my budget for that right now is $380 a month.

simplyelise · June 2015

Do you think he'd be willing to attend Financial Peace University with you? It might help if he sees how your budgets would work combined vs separate. Unfortunately you just don't have much wiggle room in your side of the budget. Any chances of making more at your current employer? I've been there with the low income and it's just hard to feel any progress is being made.

Is his issue with combining finances just overall and he only accepts it on small, joint stuff (rent, cell phones)? Or is it specifically with debt that he doesn't want to pay your debt?

One comment referring back to PP's concerns on the 10 year employment. He would not even need to be at his current district for 10 consecutive years to get the forgiveness, it's just a combination of 10 total years of qualified public service employment and 120 qualifying payments.

arj14 · June 2015

@simplyelise - I don't know that he would. I would really have to push him to do it, and even then I don't know that he would. He's stubborn and takes a long time to come around to money things. I'm not in control of all our bills, but I am in control of both our student loan payments (scheduling them online, anyway). So, while possible, I would say it's unlikely.

My employers at this time are both public entities (school library and public library) so significant increase in pay is pretty much out of the question unless it's a different position (unlikely at this time, although the public library has had a lot of movement in the last couple years it seems to be slowing down).

Thank you all so much for the advice!! You've set me on a good path to start with.

And another question, for Student Loans

Re: And another question, for Student Loans

Choose Another Board

Search Boards