By Joseph Reinke, CFA, Founder of FitBUX
There has been a lot of chatter about individuals not qualifying for student loan forgiveness despite having, in their mind, done “everything right”. The truth is that the vast majority of applicants haven’t followed instructions correctly and consequently were denied forgiveness. Therefore, I’ve decided to write this quick guide on how to get student loans forgiven.
In this guide, I will specifically be discussing the income driven repayment plans (REPAYE, PAYE, and IBR) as well as public service loan forgiveness (PSLF).
Before reading further, I highly recommend reading our income driven repayment guide first. If you are pursuing PSLF, I also highly recommend reading our public service loan forgiveness guide and visit our comprehensive PSLF Resource page before continuing.
How To Get Student Loans Forgiven Table Of Contents
- Step 1: Which Program Do You Qualify For?
- Step 2: Should You Pursue Student Loan Forgiveness In The First Place?
- Step 3: Call Your Loan Servicer Again
- Step 4: Verifying Your Income
- Step 5: Recertify Your Income Each Year
- What If I’m Still In My Grace Period?
- Additional Steps If You Are Pursuing PSLF
- Avoid Student Loan Forgiveness Scams
Step 1: Which Program Do You Qualify For?
There are actually 5 different income driven repayment plans. Many people make the mistake of trying to understand all of them before checking which plan(s) they may be eligible for in the first place. The other thing people do is try to figure out which program they qualify for on their own. The good news is that you don’t need to do any of this.
You can get these answers simply by calling your loan servicer. Beyond saving you time and headaches, it will get your servicer on recording.
Getting your loan servicer on recording is extremely important. If they provide you with erroneous information, you have evidence of it and they are responsible.
Conversely, if you try to find the answer by yourself and make a mistake, then it falls 100% on your shoulders.
For clarification, when deciding which program you qualify for, I am referring to the income driven repayment plan itself, not PSLF. PSLF is a feature of income driven repayment plans. If you need to get into even more details about PSLF, I highly recommend reading our Public Service Loan Forgiveness guide.
Step 2: Should You Pursue Student Loan Forgiveness In The First Place?
Before you focus on how to get student loans forgiven, you have to decide if loan forgiveness is right for you or if you should pursue a pay off strategy, i.e. pay off your loans in a traditional fashion. If you haven’t already, check out our income driven repayment calculator. It allows you to make a side-by-side comparison to understand which approach would put you in the optimal financial situation.
You can also sign-up and become a Member of FitBUX. After you build your profile, you can schedule a call with a FitBUX Coach. Both the membership and call are free.
Once you are 100% sure that you want to use a student loan forgiveness strategy, then you can begin taking the next steps to get them forgiven.
Step 3: Call Your Loan Servicer Again
Again, you want them to clarify on the phone with them what plan(s) you are eligible for. If you do qualify, they will direct you to a government website to sign-up.
Most of the time, it takes 1 – 2 months for the paperwork to be processed before you are officially on the income driven repayment plan. During that time, you should request your servicer put you on forbearance. Doing so means that you won’t have to make a monthly payment.
Step 4: Verifying Your Income
When you submit your information to the government, you’ll be asked how you’d like to verify your income. We recommend using a tax return. It makes life easy.
There are other options on the official form such as “I can’t accurately predict your income.” We only recommend using this if you actually can’t predict your income at all. We know a lot of people state that they can’t predict their income or state a really low number when in fact they can easily predict it. This is fraud and doing this exposes you to the possibility of major fines.
If you recently graduated and can’t show a full tax year of income, you have the option to provide pay stubs.
Also, if you have a part-time job in addition to a full time job, only state the income from the job you work at the most. If the former is not guaranteed and can fluctuate heavily, then it is valid to state that you can’t accurately predict it. Therefore, exclude it if you are submitting paystubs to verify your income.
Step 5: Recertify Your Income Each Year
Once you are approved for an income driven repayment plan, the required monthly payment is good for 12 months. Every 10 to 11 months you’ll get a notice to recertify your income.
Recertification simply means that you have to verify your income again so the government can set you monthly payment for the next 12 months based on this new recertified income.
If you do not do this you are kicked off the income driven repayment plan and put onto the standard 10 year plan. That is not a huge deal because you can always reapply, but you might as well do it right the first time because it’s going to cost you otherwise, here is why:
The interest that you deferred for the past year (i.e. the difference between what your IDR payment was vs. what your required monthly payment would have been on a regular repayment plan) would then be capitalized. In short, this means that it would be added on your loan balance and you would be charged interest on top of interest. This would result in a higher tax bill when your loans are forgiven.
To keep it simple, you do not want to forget to recertify your income.
This is such a costly mistake that we include an email reminder and a notification on your FitBUX profile for those that have signed-up for our IDR Tax Savings Solution. Our Solution is designed to make sure you are implementing your IDR student loan repayment plan correctly!
What If I’m Still In My Grace Period?
As a reminder, for the first six months after graduation, you do not have to make a payment on your student loans. This is what is called your student loan grace period.
You can not enter an income driven repayment plan until your grace period ends. Therefore, during those six months, you should be working hard to establish yourself financially. If you are a student or new grad and want to develop a game plan, be sure to check out our student loan grace period guide.
There are two exceptions to entering an income driven repayment plan before your grace period ends.
- You can consolidate your loans and enter repayment. In our experience, there is very little reason to do this.
- You work at a non-profit and are pursuing public service loan forgiveness. In this case you will want to start making your PSLF eligible payments as quickly as possible to reach the required 120 monthly payments as quickly as possible.
Additional Steps If You’re Pursuing PSLF
First and foremost, you need to download the PSLF certification form. The PSLF certification form is the only way you can confirm that:
- Your employer qualifies public service loan forgiveness, and
- You qualify for it.
You’ll want to bring it to your HR department and complete the first day of work.
The address to send the completed form is on the PSLF certification form. Submit it and your loans will be transferred to Fed Loan Servicing if they already aren’t there. Despite its name, Fed Loan Servicing is a private student loan servicer administrating the PSLF program. They are not associated with the Federal government.
Therefore, it is essential that you file this form immediately. You don’t want to be one of the thousands of people that didn’t qualify for PSLF loan forgiveness because you did something wrong.
In addition to filing it immediately, we recommend you do it at least annually. If you do so, the easiest thing to do is to do so when you recertify your income.
You’ll also want to file it immediately if you quit your job and begin working at a new non-profit.
Avoid Student Loan Forgiveness Scams
Many people get emails, phone calls, and mail from companies claiming they can get you loan forgiveness. That is incorrect and these are student loan scams. Only the government can forgive your Federal loans. There is no magic trick.
These companies simply fill out paperwork that you can do in about 15 minutes. Then they charge you hundreds if not thousands of dollars to do so.
I mentioned earlier that FitBUX has its very own student loan planners, i.e. our FitBUX Coaches. They will walk you through this process and help you make sure that everything is done right….and we do it for free! Our FREE student loan planners have helped thousands of Young Professionals manage and eliminate over $950 million in student loans. We help you develop your plan for free because planning your financial future should not cost you your financial future.
Also If you’d like to read more about money, check out our blog.