Student Debt Refinancing and Consolidation Blog and Resources

Guest Post by Ryan Inman    Public Service Loan Forgiveness is a federal program that forgives the student loan debt of borrowers that meet its requirements. The program started in 2007, and because this is a 10-year program the first round of applications started in late 2017. After the first wave of applications was processed, the staggering low approval rates made national news. As of February 2020, 1,730 of the 140,102 borrowers who applied had their loans forgiven. The current approval rate of 1.2 percent is not much higher than it was three years ago. In order to receive Public Service Loan Forgiveness, student loan borrowers must meet three rules for 120 payments: Right type of student loan Right repayment plan Right employment Many doctors with student loans from medical school see Public Service Loan Forgiveness as a way to help them pay off their high six figure debt, while pursuing a career they love. Most accept lower paying jobs in hospitals and academia, and have an income-driven payment that doesn’t cover the interest that accrues on their student loans every month. For doctors, having a Public Service Loan Forgiveness application denied puts them in a worse situation than when they graduated because their loans have grown, sometimes by more than $100,000, due to having a payment that didn't keep up with their interest charges.  Low approval rates were attributed to borrowers who submitted inaccurate applications, borrowers who were on the wrong repayment plan, and borrowers who had the wrong types of loans. Key Takeaway: Understand the loan requirements 14% of applications were denied due to having the wrong type of student loan. 23% of applicants didn’t file their paperwork properly or submitted multiple applications. 59% of applications for Public Service Loan Forgiveness were denied because the borrower hadn’t earned the full 120 qualifying payments needed. What types of student loan qualify for Public Service Loan Forgiveness? As of February 2020, 14 percent of applications were denied due to having the wrong type of student loan. When the PSLF program was enacted in 2007, only 21 percent of outstanding loans were direct loans. Because a large portion of borrowers had Federal Family Education Loans when this program was rolled out, many did not know that they were not making qualifying payments towards the program. Borrowers could consolidate their FFEL loans into a Direct Consolidation Loan to qualify for PSLF, but consolidating resets the 120 qualifying payment count required for the student loan forgiveness program. Many people were not aware of this workaround until they tried to apply. Had they consolidated years ago, they could be well on their way to qualifying for Public Service Loan Forgiveness. How do errors affect the application process? By June 2019 over 90,000 unique borrowers submitted applications for the PSLF program, but over 111,000 applications were submitted. As of February 2020, 23 percent of applicants didn’t file their paperwork properly or submitted multiple applications. Over 140,000 unique borrowers submitted applications, but over 178,000 applications were submitted. For every borrower that applied for forgiveness, there was an average of 1.3 applications submitted by February 2020, up from 1.2 in June 2019. This increasing rate of applications to borrowers tells us that more borrowers are needing to submit multiple applications due to errors or missing information in their previous applications. In February 2020, 59 percent of applications for Public Service Loan Forgiveness were denied because the borrower hadn’t earned the full 120 qualifying payments needed. What types of repayment plan qualify for Public Service Loan Forgiveness? To meet the final requirement to be approved for Public Service Loan Forgiveness, borrowers needed to be on an income-based repayment plan for all 120 payments. Many borrowers were not aware of this requirement due to a lack of guidance or misinformation from their loan servicer. Borrowers on the Graduated Repayment Plan, Extended Repayment Plan, a Consolidation Standard Repayment Plan, or a Consolidation Graduated Repayment Plan were not eligible for Public Service Loan Forgiveness under the original rules. Congress passed a temporary policy to set aside a separate fund and application process, to help borrowers who discovered they were on the wrong repayment plan. Temporary Expanded Public Service Loan Forgiveness, TEPSLF, set aside $350 million in 2018 for borrowers denied Public Service Loan Forgiveness due to being on the wrong repayment plan. As of February 2020, $55 million of the $350 million Congress set aside was used. The funds are finite, are on a first-come, first-served basis, and will eventually run out. However, for borrowers who were not on one of the four income-based repayment plans, this expansion could help them qualify for forgiveness if they were denied under the Public Service Loan Forgiveness application. Current statistics of applications Public Service Loan Forgiveness applications as of February 2020: Total applications — 178,642 Unique borrowers applying — 140,102  Pending applications — 12,338 Approved applications — 2,828 Approved applications by employment type Government — 75% Non-Profit — 25% Reasons for denied applications Qualifying payments were not met — 59% Missing information — 23% No eligible loans — 14% Applications with loans discharged — 1,730 Total balance discharged — $108,126,451 Temporary Expanded Public Service Loan Forgiveness applications as of February 2020:  Total applications — 27,791  Approved applications — 1,500  Reasons for denied applications Did not meet 120 payment requirement — 46% Borrower had not made a payment in the last 12 months — 19% Repayment plans of approved applications Income-Driven Repayment Plans — 64% Graduated Repayment Plan — 17% Fixed Payment, Extended Term — 14% Standard Repayment — 4% Other — 1% Applications with loans discharged — 1,297 Total balance discharged — $55,425,848 of $350,000,000 Limit What should you expect going forward? By submitting the employment certification form annually, borrowers can ensure their qualifying payment is tracked in real time. If this is submitted every year, borrowers can catch errors within a year, instead of 10 years later. As of February 2020, over 2.8 million employment certification forms had been submitted. Roughly 44 percent of the submissions were denied; however, only 10 percent of applications were denied because of something other than missing information on the application. There’s $118 billion of student loans with approved employment certification forms, for just over 1.2 million borrowers. Many factors led to an extremely low approval rate for PSLF program applicants in the first years of applications. However, the approval rate is trending upwards giving hope to borrowers still working towards the loan forgiveness program. For now, borrowers pursuing Public Service Loan Forgiveness should confirm their loan type qualifies for forgiveness, continue to monitor their progress through annual employment certification, as well as an annual review of their repayment plan to ensure they are still on track. For borrowers denied forgiveness on both the Public Service Loan Forgiveness and the Temporary Expanded Public Service Loan Forgiveness, another 10 years of payments on an income-driven repayment plan might actually cost them more than refinancing their loans into private student loans or just paying them off. Unfortunately, this is the reality of many borrowers who thought they were on track for the forgiveness program. Ryan Inman is the host of the Financial Residency podcast and President of Physician Wealth Services, a fee-only financial planning firm that works exclusively with physicians across the country. He helps physicians create a life they love by helping them gain control of their money, the same way you make a patient feel better about their health.

The numbers of Americans with master’s degrees and doctoral degrees have doubled since 2000, according to the U.S. Census Bureau. With more and more American adults attaining higher education, you might be wondering: should I go back to school for another degree?  Maybe you feel like your career progress has stalled. Maybe you're looking to change fields. Maybe you want to increase your salary. Key Takeaway: Think carefully about these questions Would an advanced degree further my career goals? How would an advanced degree affect my pay? How would I pay for an advanced degree? What kind of degree program would I attend? Would an advanced degree further my career goals? A degree won’t have the same effect on every person or every career.  You’ll need a professional degree to become a doctor or a lawyer, and becoming a college professor will probably require a PhD. But for other careers, getting a graduate or postgraduate degree may not be necessary or even helpful. For example, if you're a newspaper reporter looking to advance your career, a master’s degree in journalism may not be helpful to you. But a master's in political science could help you specialize as a political reporter. Part of your decision-making process should also include how much work experience you have. If you graduated with a bachelor's degree less than a year ago, a master's in business administration probably isn't for you — yet. Those degrees are typically meant for students with at least three years of work experience. If you're not sure where returning to school fits into your long-term goals, try talking to someone with a career similar to the one you want. “Request informational interviews at companies you think you’d like to work for," suggests Frankie of Frank Money Talk. "Ask them about your plans to see if they can provide a reality check. They could save you years and tens of thousands of dollars.” How would an advanced degree affect my pay? Earning a bachelor’s degree increases a person’s lifetime earnings by about $1 million, compared to high school graduates, according to a report from the Georgetown University Center on Education and the Workforce. The report also found that earning a master's degree adds another $400,000 to a person's lifetime earnings, compared to someone who earned only a bachelor's degree. And earning a doctoral or professional degree increases lifetime earnings even more. But just like career goals, getting an advanced degree won't affect everyone's pay the same way.  For example, a study by Poets & Quants found that students who earned MBAs concentrated in finance economics and business and marketing doubled their salaries. On the other hand, graphic designers who earn graduate degrees only increase their salaries from about $42,000 to $52,000, according to data from CareerBliss. Before you pursue further higher education, think about how much an additional degree would increase your pay versus the cost of the degree.  “Use government sites such as the Bureau of Labor Statistics to evaluate whether you are entering a growing career field,” Frankie says. “Use employment sites to estimate what income can be expected based on experience." How would I pay for an advanced degree? The cost of a graduate degree varies depending on the college you attend and your course of study, but the average is $30,000 to $40,000 per year, according to Peterson's, a leading educational services company. Make sure when you’re calculating your potential costs, you’re not thinking only about tuition. “There are supplemental costs such as books, parking and commuting,” Frankie says. “There are time commitments away from family. There are late nights and potentially unbalanced work/school/life balance.” Also don’t forget about any current student loan debt from your undergraduate degree you may be paying off. If that’s an issue for you, consider refinancing or consolidating your existing loans with one of the top student debt companies before getting another degree. Once you have a good idea of what your costs are going to be, think about where you’re going to get the funds to pay for those expenses. Keep in mind that if you’re going to quit work or reduce your work hours, that will eat into your available income.  “Don’t forget about grants and other financial aid specific to re-entry students,” Frankie adds. “Also speak with your employer about tuition assistance or reimbursement.” What kind of degree program would I attend? You don't just have to decide on your field of study. Depending on what school you want to attend, there are usually lots of options for types of programs. One option is the traditional full-time student experience. If you're currently working full-time, this will require you to leave work or cut back your hours for at least the duration of the graduate program. If a full-time program isn't an option, some schools offer executive programs meant to accommodate students who are working simultaneously. Another option is earning your degree through online courses, which offer the most flexibility.