Camille Schenkkan is a theatre management professional and educator, passionate about career development for artists & arts managers.

Masters graduation, or, the day repayment began.

The Public Service Loan Forgiveness (PSLF) program is a giant carrot for those of us stressing about the discrepancy between low nonprofit salaries and high student debt from Masters programs.

Unfortunately, a small mistake cost me a year’s worth of payments toward this program.  Hopefully my post will prevent others from making the same mistake.

The PSLF, in brief: if you prepare your loans a certain way and make 120 on-time, in-full payments after graduation while employed full-time at a qualifying nonprofit organization, the remainder of your student loan debt is forgiven.

120 on-time payments translates to 10 years.  If you take a break from nonprofits and then come back to the field, your eligible payments pick back up at the time you go back to full-time employment at a 501(c)(3).  There are quite a few other areas of employment that are eligible, such as public education, government and military service.

I’ve told many interns and young professionals about PSLF when they express doubts about whether a Masters degree is ‘worth it’ in a field where any job with health insurance is considered a sweet gig.

Now that I’m in my late 20s, I’m starting to see friends leaving the field because they don’t feel like they will ever have the quality of life they want while still working in the nonprofit sector.  And these are friends with Masters degrees!  It’s a field you go into because you love it, but if your monthly loan payment tops $500 and you know you can do the same job and double your salary just by switching from 501(c)(3) to for-profit, well… it’s tempting.  I’m grateful for the program, which is allowing me to stay in a field where my salary isn’t anywhere near my student loan debt (and I have a GREAT job).

So THANK YOU for the PSLF.  Now let me try to explain how I messed it up so other people won’t do it too.

I graduated in May 2011, and immediately did what I thought I had to do to make myself eligible for the program.

I followed the steps outlined in sites such as FinAid and IBRinfo.  First, I consolidated my loans.  When you come out of an undergraduate or graduate program, you usually have separate loans for each semester.  If you have both subsidized and unsubsidized loans, you could have multiple loans even within a single semester.

To make things more complicated, loans can be sold to various entities, so if you were to pay them separately without consolidation you could be sending money to a laundry list of banks, private lenders, and other institutions.

So I read the directions multiple times and consolidated my loans into a Federal Direct Consolidation Loan.  This part was correct.

In January of 2012, the Federal government released an employment certification form, instructions and a Dear Borrower Letter.  This was the first time you could officially sign up for PSLF, although qualifying payments made as early as October 2007 would count toward a borrower’s 120-payment term.  It’s recommended that you file them annually and/or when you switch jobs, just to be sure everything’s in order.  However, you don’t technically need to file until you’re ready to get the rest of your money back.

However, I saw the forms as insurance against any mistakes, and filed them in March.  In June, I got a letter that confirmed I was eligible for PSLF.  My employer counted, my consolidated loans counted, and I had 0 payments toward my 120.

Hold up.

I’d been paying into this for a year.  Why zero?  How did I lose a year’s worth of payments (which totaled over $5,400)?

My mistake: I put myself on the wrong repayment plan.  Since I discovered this, three friends have found out they did exactly the same thing.  Because it’s freaking confusing.

Here’s the explanation I discovered after multiple phone calls to FedLoan Servicing, who seem to be still wrapping their heads around this as well.

The repayment plans that count toward PSLF are income-based repayment (IBR), income contingent repayment, (ICR), and Standard repayment– only if the Standard repayment plan you’re on is the ten-year plan.

Catch that?  The ONLY Standard plan that counts is the one where you pay off your loans in ten years.

Well… yeah, no shit.  That means you’d be done paying them off at exactly the time when the PSLF kicks in.  Actually, FinAid clarifies why they even mention Standard loans:

If a borrower were to use only standard repayment for repaying their loans there would be no balance remaining after 10 years and so no debt to cancel. Standard repayment is only provided as an option to address situations when a borrower is unable to continue under income-based repayment because they no longer have a partial financial hardship and the payments under income-contingent repayment exceed standard repayment. In such a situation the borrower would use standard repayment for the remaining payments and obtain some loan forgiveness at the end of the ten years of payments.  (Click here to read more)

Okay, fair enough.  So Standard repayment plans only apply to people who have been paying into the IBR or ICR, get a great gig (still in an eligible organization), and no longer qualify for IBR or ICR.  They finish out their ten years on the Standard plan and still, hopefully, get a little back.

But I– and at least three of my friends– signed up for a different Standard repayment plan, one that’s on a 25-year time frame, and therefore have not made any eligible payments since graduation.

I feel lucky that I caught this after only a year.  One friend had been making his on-time, in-full payments for four and a half years, and thus thought he was almost halfway to forgiveness.  Unfortunately, you can’t do anything to make up for time lost.

My next step is to apply for Income-Based Repayment, which you also have to apply for every year to remain eligible (the more you know!).  It looks like this may actually lower my payments, as my husband is now a full-time student so our household income is pretty low.

I highly recommend that anyone interested in this program submit that employment certification form and make sure you’re doing everything right.

If you have more tips or advice, please leave it in the comments!

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Comments on: "Why I Lost a Year of Payments: A Post on PSLF" (14)

  1. Yikes! Government bureaucracy at it’s finest. I’m torn between being disgusted at the hurdles and appreciate of the program…but am definitely thankful for your useful and cogent explanation. Thank you!!

  2. Thank you so much for this post. I wasn’t even aware that I could potentially qualify for partial forgiveness! I am most certainly submitting the Employment Certification form.

  3. oh wow! I didn’t know anything about this program. I’ve only worked at non-profits and bet I could have gotten some back on my undergrad. Oh well, will try in 2 years with my grad loans. (which I am suddenly less terrified by..hmm) Thanks for sharing!

  4. I, too, was on the wrong repayment plan according to The Department of Education. However, I was not the erroneous party and after I explain what transpired you and your other friends may find that you were not at fault either:

    After consolidating my outstanding loans with Direct Loans in 10/09, I was mailed correspondence at the end of 12/09 with four bulleted choices of repayment plans. 12/28/2009, I called Direct Loans and was advised by one of their representative as to the repayment plan that was the best choice for my loan and financial situation. She suggested the ten year standard repayment plan.

    Luckily on a whim I called to check on the status of my loan 06/2011. To my horror I was told I selected the wrong repayment plan. After much debate and ‘escalation’ of the phone call it was finally determined that yes I called and yes a representative was the one who mislead me, and don’t worry she was fired, and yes too bad your 17 payments so far do not qualify. The Direct Loans supervisor then said I should change my repayment plan to IBR, but should hold-off until I hear from The Department of Education regarding if the payments already made will qualify.

    I immediately wrote to the Department of Education explaining what had occurred. 08/2012 I mailed correspondence that my Direct Loan was transferred to FedLoan Servicing. August 16, 2012, upon contacting FedLoan, I was told by a representative they were to service the loans mishandled by Direct Loans. I sent all of the documents required, including the IBR application.

    A few weeks later I was advised by Stephanie (1-855-265-4038 x3983) that she was personally handling the 300 borrowers who caught Direct Loans mistake. She happily informed me that out of the 300 borrowers, I was lucky because I have the highest number of qualifying payments: 17. The problem here is that I’ve made 34 payments since my inception with the PSLF! Her advice was to write to The Department of Education because they are the one who came up with the mathematical formula for figuring out the amount of payments made that FedLoan Servicing may qualify.

    I am not a mathematician, but I can easily tell you that the Dept. of Ed.’s formula is, at best flawed, but certainly favorably one-sided. Here’s how: Each year I’ve grossed (slightly) more money than the previous and thusly have paid down any debts. Currently my IBR payment is $216 per month. Since 12/2009 Direct Loans has directly debited my account each month in the amount of $239.

    When I remarked to Stephanie that this has class action lawsuit written all over it she replied, “You’re no the first of the 300 borrowers to say that, just the one who put it as pleasantly as you.” I quietly explained it was 24 hours since an emergency appendectomy and she was reaping the benefit of pain medication and weakness.

    Oh, and why are just 300 borrowers being given consideration? Great question, I asked that too to Stephanie. Her reply:”You’re the only ones who caught the mistake. The window of opportunity closed in July 2012, and the others won’t be able to ask us to accept any qualifying payments.” I told her that wasn’t fair, The Department of Education’s hiring of FedLoan Servicing is a clear indication of their acknowledgement that Direct Loans screwed up and screwed others, thereby admitting they are at fault. All she said was, “Yeah, you’re not the first person to point that out to me either.”

    But as we’ve all been told, the pen is mightier than the sword, so let’s see! You may contact me at hayes13@hotmail.com

  5. Hey, just wanted to update one small detail since this was written: PAY-AS-YOU-EARN is also a qualifying Repayment Plan for PSLF, see here: http://www.myfedloan.org/manage-account/loan-forgiveness-discharge-programs/public-service-loan-forgiveness.shtml

  6. I see your post on Google and it’s a couple years old, so this may go nowhere. I too have made a minor error in the strict direction following for PSLF. I, however, seem to have lost 4 years worth of payments! I’ve contacted and documented the situation to numerous authorities (we all have time for this, right?). But, here’s what I want to share:
    I consolidated all my federally subsidized and unsubsidized student loans back in 2004, about 7 months after I finished my doctorate (yes, I’m that old and I have that much debt), because as you mention–you have bunches of little loans and little payments going hither and yon and you’re writing about 7-9 checks a month for a grand total vs. a consolidated total that is, in my case, 1/4 of what I was paying.

    I paid to this consolidated servicer for 9 years–some good years employed, some rougher years also employed by state schools–so I was super poor, super in debt, and on Income-based repayment for at least 4 years starting in 2008 (which is when the years started to be eligible). Having had a 9 year relationship with this servicer (that provided increasingly crappy customer service over the years) I asked them about PSLF when my parents discovered it in a newspaper article. This long-time benefactor of my payments said, we don’t offer PSLF, you’ll need to contact Direct Loans to switch servicers.

    DO NOT SWITCH SERVICERS ON YOUR OWN.

    The only way Direct Loans switches your servicer is if you fill out their consolidating a loan paperwork and simultaneously apply for PSLF. I’m golden, I thought, I have all the requirements and I was on the right repayment plan and I’m following directions (no matter how much I want to just give them all the finger and say good luck squeezing $360 a month out of this). “I’m cooperatin’ here.” to quote Jerry Lundegaard from Fargo.

    Anyway, the bathtub scum new servicers of my consolidated loan receive all the forms and paperwork and tell me, I have made 4 qualifying payments. Four!?? I call them, and get some 12 year old who condescends to me–the government lent you that money, she said, they have a right to expect it back. I hung up. I write a detailed and supported letter disputing their payment count. I cc’d it to Sec. Duncan, and my state Senators just for fun. They continue to say, because I consolidated that loan, it is treated like a new loan and no prior payments count.

    I’ve contacted a consumer lawyer and the financial aid ombudsman. Now, it’s a game of waiting.

    The so-called correct way to do this would have been: Do not ask your current servicer for advice. Simply fill out this PSLF paperwork (if only for the sheer fun of it) and fire it off. If you’re not with the right servicer, let them correct it. Do not believe anything your current servicer says about the PSLF program.

    • I’m in the same situation. Salliemae told me that all my payments on a loan of about 80K made to them would count towards my 120. I could “swich at any time” before the 120 and still qualify. I was also told (on multiple occasions- 8-10 times) by them that I it didn’t matter when I filled out the PSLF paperwork, it could all be set retroactively. Well, FIVE YEARS in and I have zero qualifying payments… Thank you salliemae. I have turned down multiple higher paying jobs, partly in oder to keep qualifying for this deal. Thanks for nothing… I’m very interested in a class action suit.

  7. I’m a resident physician with $400,000 in loans, but I’m not worried. During my 5 years of residency in a non profit hospital (qualify for PSLF), I can make minimal payments on IBR which is 10% on my $50,000/year resident salary. Then after residency, I’ll find a job at another non profit hospital (which is easy to find as most hospitals are non profit) for another 5 years to finish up my 10 years in repayment. I’ll have close to half a million in loans discharged (principle and interest) and get to enjoy my high six figure attending salary. Life is good when you game the system!

    Only thing I regret is not borrowing more as my monthly payments is dependent on my current salary and not my loan balance.

  8. I have lost 5 years of public service credit for being on a graduated plan. I started working in education in 2012 and none of the specifics of what would qualify and what wouldnt were made clear to anyone, even the Dept. of Education. I got so much conflicting info I gave up. I dont qualify for a lower payment than my graduated payments on the IBR plans according to the Dept of Ed. According to my loan servicer, I do and my payments would be half of what I am paying now. I give up on trying to get my PSLF. I was told by one rep “hopefully come 2017 more people will realize they got screwed being on the wrong plan, and the rules will change”. Yeah. Hopefully.

  9. I’ve been on this plan for a year now. My prior 5 years working for a non-profit don’t count because (a) the PLSF plan didn’t exist at that time and (b) the type of loans that qualify for this plan did not exist when I went to school.

    When I got a new 501c3 job last year, I consolidated and followed all the steps to sign up for PSLF. I am so nervous that this plan is going to get scrapped sometime in the next 9 years. If it does, and if I’m understanding how the plan works, that’ll mean all the sudden those of us on the PSLF plan will be in a TON of debt because we’ve been paying so little all these years, so the interest has catapulted our debit into a sky-high number.

    Today I am particularly unhappy because I am on the IBR plan, and all of the sudden, without any warning or notification, MyFedLoan debited $40 more than usual from my account. They are really terrible with customer service. I live paycheck-to-paycheck and they could’ve easily overdrafted my account. I looked through my paperless inbox, and there is no notification that they were about to take an additional $40.

  10. lombardi, jason said:

    I wanted to say thank you for making this post, and creating a Florum about PSLF. After many conversations with friends, family and co-workers, no one seems to have heard of this program besides teachers and the government officials, so it is a relief to read something by an actual person.

  11. I actually applied for the IDR. So from 2009 to 2014 I thought I was making qualified payments. Come to find out Direct Loan Servicing never counted them even though I was signed up, those bastards still had me on graduated payments. So I should be done in two years but due to their mistake, I only have three years of qualified payments.

  12. I’m wondering if working for a non-profit with 501 C3 status counts towards the non-profit loan forgiveness program. I can’t find anything online that talks about that.

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