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FAQ

What is the PSLF Program? Back to Top

The PSLF Program was established to encourage individuals to enter and remain in public service jobs. The program allows eligible borrowers to cancel the remaining balance of their Direct Loans after serving full time at a public service organization for at least 10 years while making 120 qualifying monthly payments.

Which types of federal student loans qualify for PSLF? Back to Top

A qualifying loan for PSLF is any loan you received under the William D. Ford Federal Direct Loan (Direct Loan) Program. You may have received loans under other federal student loan programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program. Loans from these programs do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan. However, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated them don’t count. If you don’t know which types of federal student loans you have, we can assist you in finding that information. Generally, if you see a loan type with “Direct” in the name then it is a Direct Loan; otherwise, it is a loan made under another federal student loan program.

What are the borrower eligibility requirements for loan forgiveness under the PSLF Program? Back to Top

You must be employed full-time by a public service organization when you make each of the required 120 qualifying payments on your Direct Loans, at the time you apply for loan forgiveness after makingthe last of those 120 payments, and at the time you receive loan forgiveness.

Are loan amounts forgiven taxable? Back to Top

No. The 10-year public service loan forgiveness (PSLF) is not taxable under section 108(f) of the Internal Revenue Code because the forgiveness is restricted to borrowers who work in specific occupations. However, the 25-year forgiveness for borrowers who don't work in public service careers will represent taxable income to the borrower under current law.

What are the benefits of consolidating my loans? Back to Top

Consolidating your student loans will allow you to put all your existing loans under the Federal Loan Forgiveness Program with the Department of Education. You will only have to worry about one payment instead of multiple payments. This makes it easier to manage your debt. If you want to lower your monthly payment amount but are concerned about the impact of loan consolidation, find out first what Loan Forgiveness or Repayment Program you qualify for and then determine if the new payment structure of the newly consolidated loan still offers you a financial benefit. Once your loans are combined into a Direct Consolidation Loan, they cannot be removed.

What is a qualifying repayment plan? Back to Top

Qualifying repayment plans include all of the income-driven repayment plans (plans that base your monthly payment on your income) and the 10-year Standard Repayment Plan. Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments. Therefore, if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.

Will my payment be reduced? Back to Top

In many cases yes. Your payment in the new consolidated loan can be lower than your current payment. There are multiple plans to repay your student loans. One of those plans is the Income Based Repayment Plan. This plan allows your payment to be based on your annual income, which often times will allow you to qualify for a very small payment and in some cases even a zero dollar payment.

Is there a minimum or maximum loan amount that qualify? Back to Top

No.However, we have found that people will start seeing meaningful repayment benefits when their loan balances are $7,000 and up. There are certain circumstances however under which a person can obtain upfront forgiveness and get their loans completely forgiven, up to $17,500, based on the type of work they have had such as teachers that meet certain criteria.

Can I defer my payments? Back to Top

Yes, once you are consolidated you may qualify to renew your deferment options.

What are the consequences of defaulting? Back to Top

Borrowers who fail to make a payment on time are considered delinquent on their Direct Consolidation Loans. Borrowers who do not make payments for 270 days are in default. Defaulting has severe and long-lasting consequences, as follows:

  • The Department of Education can immediately demand repayment of the total loan amount due.
  • The Department of Education will attempt to collect the debt and may charge collection costs.
  • The Department of Education reports defaulted loans to national credit bureaus, damaging borrowers’ credit ratings and, making it difficult for borrowers to make purchases such as cars or homes.
  • Borrowers with loans in default are ineligible for Title IV student aid.
  • Borrowers with loans in default are ineligible for deferments
  • The Internal Revenue Service can withhold borrowers’ Federal income tax refunds.
  • Borrowers' wages may be garnished.

Am I eligible for a Direct Consolidation Loan? Back to Top

Borrowers must have at least one Direct Loan of Federal Family Education Loan (FFEL) that is in grace, repayment, deferment, or default status to qualify. Loans that are in-school status cannot be included in the Federal Loan Forgiveness Program.

If you are in default, you can consolidate under the Income Contingent Repayment Play or Income Based Repayment Plan.

If you are already consolidated but have one loan which is not, you can add that one loan into the consolidation.

How does consolidating affect my interest rate? Back to Top

If you currently have variable interest rates on your federal student loans, consolidating will allow you to have a fixed interest rate for the life of the loan. If you currently have multiple interest rates across all of your federal student loans, consolidating will establish one interest rate that will remain the same for the duration of your repayment period. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated.

Can my PLUS Loan be consolidated? Back to Top

Yes, PLUS Loans can be consolidated into a Direct Consolidation Loan. However, if you consolidate a parent PLUS loan, your new Direct Consolidation Loan cannot be repaid under the IBR Plan.

Can I consolidate my Perkins Loan? Back to Top

Yes, it is possible to consolidate Perkins Loans into a Direct Consolidation Loan if borrowers include at least one Direct Loan or Federal Family Education Loan (FFEL) in their request. Perkins Loans cannot be included in a Direct Consolidation Loan by themselves. Furthermore, all Perkins Loans consolidated into the Direct Loan Program will be included in the unsubsidized portion of the Direct Consolidation Loan. Borrowers should carefully weigh the advantages and disadvantages of including a Perkins Loan in a consolidation loan. While the borrowers gain the benefits of the Direct Consolidation Loan Program, they also lose the benefits associated with the Perkins Loan Program.

We recommend that you consider the following points prior to making a decision:

  • Borrowers may qualify for cancellation of some or all of their Perkins Loans in exchange performing certain kinds of public service. These cancellation benefits are lost when a Perkins Loan is included in a Direct Consolidation Loan..
  • Perkins Loans have a grace period of 6-9 months. When a Perkins loan is consolidated, any remaining grace period is lost.
  • Interest does not accrue when a Perkins Loan is placed in deferment. However, a Perkins Loan is included in the unsubsidized portion of a Direct Consolidation Loan, and borrowers are responsible for interest that accrues on the unsubsidized portion of a Direct Consolidation Loan during deferment periods.
  • Perkins Loans generally have a lower interest rate but have a less flexible repayment period

Can I consolidate health professions loans? Back to Top

Yes, you can consolidate certain health professions loans sponsored through the U.S Department of Health and Human Services with other Federal Education Loans. You must still include at least one Direct Loan or Federal Family Education Loan to qualify.

Eligible Health Professions:

  • Health Professions Student Loans (HPSL)
  • Health Education Assistance Loans (HEAL)
  • Lloans for Disadvantaged Students (LDS)
  • Nursing Student Loans (NSL)

Benefits of consolidating these loans would include lowering your monthly payment, having a longer repayment period, and having one single monthly payment.

Can I consolidate if I am currently enrolled in school? Back to Top

Yes but with certain conditions. Borrowers cannot consolidate loans that are an in-school status, but borrowers can still consolidate loans that are in grace, repayment or deferment.

I am already consolidated, can I consolidate again? Back to Top

Yes, as long as you are including at least one other FFEL or Direct Loan into the new consolidation.

Can I consolidate my loans that are in grace? Back to Top

Yes, you can consolidate loans that are in grace however you will lose any of your remaining grace period.

Can I delay my application so I don’t lose my grace period? Back to Top

Yes, you can delay your application to take full advantage of your grace period but you must indicate you wish to do this on your application.

Can I consolidate my defaulted loan? Back to Top

Yes, as long as you agree to pay under either the Income Contingent or Income Based Repayment Plan, OR make satisfactory repayment arrangements with your current loan holder.

You cannot consolidate a defaulted loan if a judgment has been issued against it defaulted and it has not been dismissed.

Click here for more information on defaulted loans

Will consolidating clear the default notation from my credit? Back to Top

No, if you want to clear the default notation, you will need to contact your loan holder to discuss rehabilitation with them. However, If you decide to consolidate while in default, your default notation in your credit will also show that the loan was paid off in full. This notation will remain on your credit history for seven years.

What are the repayment plans? Back to Top

There are several repayment plans in the Federal Loan Forgiveness Program:

  • Standard Repayment Plan

You will pay a fixed amount each month until your loans are paid in full. Your monthly payment will be at least $50 for up to 10-30 years, based upon your total education indebtedness (loan amounts).

  • Graduated Repayment Plan

Your minimum payment amount will be at least equal to the amount of interest accrued monthly. Your payments start out low, and then increase every two years for up to 10-30 years and is based on your total education indebtedness (loan amounts).

  • Extended Repayment Plan

To be eligible, your Direct Loan balance must be greater than $30,000 and you will have up to 25 years to repay your loans. You have two payment options:

– Fixed Monthly Payment Option: You will pay a fixed amount each month until your loans are paid in full.

– Graduated Monthly Payment Options: Your minimum payment amount will be at least $50 or the amount of interest accrued monthly, whichever is greater. Your payment start off low and then increase every two years.

  • Income Contingent Repayment Plan (ICR)

Your monthly payments will be based on annual income, Direct Loan balance, and family size. They are spread over a term of 25 years.

  • Income Based Repayment Plan (IBR)

Your monthly payments will be based on your annual income and family size, and spread over 25 years. You must be experiencing a partial financial hardship to initially select this plan and once you select this plan you cannot change to any other plan except standard.

For more in depth information on the repayment plans, please see our Repayment Plans page

Can I later on change my repayment plan? Back to Top

Yes, most borrowers can change their repayment plan at any time once consolidated. Borrowers who are in the ICR plan must make at least 3 consecutive payments into the Direct Consolidation Loan account before changing to another plan. There is no limit to how many times you can change. Borrowers in the IBR plan can only change into the Standard Repayment Plan.

How long does It take to consolidate? Back to Top

It generally will take 60-90 days to consolidate from the time the lender has received your application for consolidation. It is important for you to stay on top of the process with your loan servicer and be checking frequently to ensure that your process is completed on time and most importantly, that it is completed correctly

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