Written by Ben Kirchner, AAMS© / Financial Advisor

The US Department of Education has once again made an announcement that should grab the attention of any student loan borrower pursuing Public Service Loan Forgiveness (PSLF). Many remember the first major announcement regarding the PSLF Waiver in 2021 through 2022. More recently, the US Department of Education has announced that they will be doing a Payment Count Adjustment for student loan borrowers utilizing Income-Driven Repayment (IDR) programs which includes PSLF.

Since so many of our doctors are utilizing PSLF for their student loans, here’s a quick summary of the impactful items that are changing.

What’s happening?

The US Department of Education is adjusting IDR & PSLF counts to more accurately reflect the true time spent paying back loans and/or working for a not-for-profit. This includes time spent outside a traditional income-driven plan, even if the borrower was working at a qualifying job. Depending on the situation, this could result in an increase in qualifying payments and earlier forgiveness for borrowers. The payments are going to be continually updated throughout the year until July 1, 2024.

Who’s doing the payment recount?

The Department of Education is spearheading this process, providing a more unified approach than relying on each individual loan servicer.

Which doctors are impacted by this change?

Any doctor pursuing PSLF (10-year forgiveness)
Any doctor on an income-driven plan currently or in the past (20 or 25-year forgiveness)

How does this differ from normal PSLF rules?

Normal PSLF Rules:

Work full-time (greater of 30 hours or whatever your employer considers “full-time”)
Employer must be a 501c3 (not-for-profit)
Have Federal Direct loans only (no Perkins or Federal Family Education Loans (FFEL) loans)
Make on time payments using an Income-Driven Repayment plan:
- Saving on A Valuable Education (SAVE) Plan formerly REPAYE
- Income-Based Repayment (IBR) Plan
- Pay As You Earn (PAYE) Plan
- Income-Contingent Repayment (ICR) Plan
Make 120 individual monthly on-time payments

New PSLF Payment Adjustment Rules:

The following payments will count towards the magic 120 payment count:

Any months in a repayment status, regardless of the payments made, loan type, or repayment plan.
12 or more months of consecutive forbearance, or 36 or more months of cumulative forbearance.
Any months spent in economic hardship or military deferments in 2013 or later.
Any months spent in any deferment (with the exception of in-school deferment) prior to 2013.
Any time in repayment (or deferment or forbearance, if applicable) on earlier loans before consolidation of those loans into a consolidation loan.
Borrowers will continue to see the COVID-19 related forbearances counted toward IDR & PSLF forgiveness.

We encourage borrowers who have commercially managed FFEL, Perkins, or Health Education Assistance Loan (HEAL) Program loans to apply for a Direct Consolidation Loan by April 30, 2024, to get the full benefits of the payment count adjustment.

What does this all mean for our doctors?

In most cases, you’re going to see payments counted that were not under an Income Driven Repayment plan. For example, if you were in a standard or graded repayment schedule, those will be updated to the total PSLF count. Additionally, if you spent time in extended forbearance, it’s possible those periods will count toward your required total, based on the period of time you were in forbearance. Rest assured that the COVID-19 forbearance periods are counting towards the PSLF total, providing many years of $0 “payments” to many borrowers.

What are the requirements to qualify for the updated PSLF count?

These are going to depend on the type of loans you have:

If you have private or Federally held FFEL loans, Perkins Loans:

You should apply to consolidate as soon as possible – but no later than April 30, 2024 – to get the full benefits of the adjustment.
Consolidation typically takes at least 60 days to process.
Consolidating these loans to Direct Loans will make them eligible for PSLF. Here’s an example of how the payment counts will be adjusted:
- If you have two loans with different repayment histories, the payment account will be adjusted to reflect the higher monthly count. For example, if you had 50 qualified months on one Subsidized Stafford Loan and 100 qualified months on another Subsidized Stafford Loan, you’ll receive credit for 100 months on both loans.
- If you have two loans with no overlapping repayment history, the consolidation loan may be credited with more time in repayment than the loan with the longest amount of time in repayment. Using the same example above, if the loan with 50 qualified months included January 2017 in repayment status but the loan with 100 months did not make a payment in January 2017, the resulting consolidation loan might be credited with 101 months of payments.

If you have Federal Direct Loans:

The payment count will be automatically reviewed if you’ve submitted at least one approved PSLF form in the past.
The U.S. Department of Education will continue to identify borrowers every month (started in July 2023) through July 1, 2024 that could qualify for forgiveness, starting with IDR forgiveness and moving onto PSLF.
They will update payment counts on loans individually. If you have drastically different payment counts on loans, it could be beneficial to consolidate the loans into the one with the highest payment count (as mentioned above).
Borrowers who haven’t reached forgiveness yet will see the payments update when they finish the adjustment in July 2024. However, it could take some time for payments to update on MOHELA’s website.

Bottom line, what should you do next?

We encourage borrowers who have commercially managed FFEL, Perkins, or HEAL Program loans, to apply for a Direct Consolidation Loan by April 30, 2024, to get the full benefits of the payment count adjustment.

Unsure what kind of loans you have?

It’s recommended you login to www.studentaid.gov and click on “Loan Breakdown” on the dashboard. Direct Loans begin with the word “Direct.” Federal Family Education Loan Program loans begin with “FFEL.” Perkins Loans include the word “Perkins” in the name. If the name of your servicer starts with “Dept. of Ed” or “Default Management Collection System,” your FFEL or Perkins loan is federally managed (held by the Department of Education).

What if you’ve encountered issues in the process?

You can contact your servicer or submit a complaint directly to: https://studentaid.gov/feedback-center/

For the full breakdown of the announcement, please visit: https://studentaid.gov/announcements-events/idr-account-adjustment

For a personalized look at your specific student loan situation, please reach out to us. We’d be happy to review that for you.

Ben Kirchner, AAMS© / Financial Advisor
After starting his career at two Fortune 100 companies, Ben joined MD Financial in May of 2018. Ben advises over a hundred doctor households, helping them achieve their financial goals. He is passionate about serving. Ben enjoys making sure all of our doctors thrive financially and have a great experience every step of the way. He can be reached at Ben@mdfinancialadvisors.com.