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School Loans- PSLF or re-fi

By Terry Savage on February 13, 2020 | College Savings / Student Loans

Upon graduation from grad school, I was put on a standard repayment plan just to find out after a few years that that plan did not qualify for the Public Service Loan Forgiveness. I was told that I would have to be on the income driven repayment plan. Unfortunately, the first years then did not count and I had to start again. At this point, I am about 1/2 way through the 10 years towards the PSLF. Each year I must recertify with proof of income which then leads to my monthly payments to increase. As I worked towards my Masters +45 to max out on the pay scale, my monthly payment continued to increase. I just recertified for the upcoming year and the monthly payment has jumped another $100 per month. My question: Is it worth staying with the PSLF program at this high interest rate and the ever increasing monthly payment or would it make more sense to refinance to pay a lesser amount per month at a lower interest rate? Once I re-fi, I will no longer qualify for the PSLF program, but if I continue to pay like this I don’t know that there will be much left to forgive. Thank you for your help!

Terry Says

Ha — great question! The idea of the PSLF program is that if you don’t pay it off in 10 years — and certify qualified employment — the balance will be forgiven. But few people ever qualify (your experience is not unique with having to ‘start over”) and you’re right that they have you on track to pay it off entirely without ANY forgiveness. This program is a FRAUD on the students! I state that clearly. But at least you’ll be done in 10 years!

Why don’t you go to www.SOFI.com or www.Credible.com and check out what you could do in a refi. The way to compare is not by asking the interest rates, but by asking WHAT IS THE TOTAL YOU WILL PAY IF YOU PAY THE LOAN OFF IN 10 YEARS.
That way you can compare that amount with the total remaining balance on your current loan and make a sensible decision.
PS Are you remembering to deduct some of the interest you pay on the loan? This article should be helpful in that regard.

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