Celebrating 10 years! 2007-2017

PSLF Questions

Heyloo Do $0 payments count as one of the 120 on time pay favorandgrace07/20/18
$0 payments count if you are making them while you work for govlaw07/20/18
The payment will change next September based on your 2018 ta fettywap07/20/18
Yes, a zero payment is a payment. You recertify on your IBR onehell07/20/18
This is hugely helpful, as I have been dealing with the same filthadelphia08/13/18
I can't give you a source, because it's not so much about wh onehell08/14/18
They should count, but since you are allowed to pay more tha qdllc08/13/18
I never came back to thank you guys for the answers to my qu favorandgrace08/13/18
Thanks, this makes sense and is helpful! This program is gre filthadelphia08/14/18
favorandgrace (Jul 20, 2018 - 4:59 pm)

Heyloo

Do $0 payments count as one of the 120 on time payments?

Also, I'm in the process of consolidating my loans into one Direct loan and then applying for PAYE. I'm about to start a federal government job. However, the adjusted gross income on my last income tax statement is only about $15,000, and this is the figure they are using to calculate my loan payment. Thus, my payments will be $0.

Does anyone know when you need to recertify? (Essentially, how long will I have a $0 payment and they start to look at the salary I will make as a fed gov attorney)

Thanks!

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govlaw (Jul 20, 2018 - 5:04 pm)

$0 payments count if you are making them while you work for a qualified employer.

The amount may change based on your next tax return. You usually recertify over the summer and the first payment at the new rate is September.

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fettywap (Jul 20, 2018 - 5:00 pm)

The payment will change next September based on your 2018 tax return.

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onehell (Jul 20, 2018 - 5:22 pm)

Yes, a zero payment is a payment. You recertify on your IBR anniversary date, but if you lose your job midyear you can always submit an "alternative documentation of income" form for an immediate payment adjustment.

And yes, the lag issue can create payments that are significantly less than what you're actually making. That's A-OK as far as the servicers are concerned, and so far no one who has actually hit the ten year mark that I know of has seen the issue investigated prior to forgiveness, but DOE could always change course. Wouldn't be the first time DOE has decided servicers screwed up and that DOE is not bound by a servicer mistake, such as in the ABA case where servicers messed up the rule regarding nonprofits that are NOT c3s, resulting in DOE refusing to honor PSLF eligibility previously granted by the servicer.

So for example, let's say your IBR anniversary date is March and you file your taxes in April. You file a couple of months in advance of the anniversary date to avoid them needing to put you on a deferral while they figure out your payment.

So, you recertify in January of 2018. Your most recent tax return is from April of 2017 and it was of course reporting your income from calendar year 2016. They are basing your payment on some very old information there, whereas if your anniversary date had happened to be in late April instead of March, the information would of course be much more recent.

There is an "alternative documentation of income" form you can use that will cause them to base your payment on paystubs instead of 1040, but the servicers have all taken the position that you should only use this form if your current income is LESS than the income shown on your most recent tax return. Seems shady I know, and DOE might one day come to a contrary interpretation, but that's where it stands now. As such, when you sign up for IBR (and when you file your taxes) can take on an interesting strategic significance if your income is rising over time.

The big question hanging out there unanswered is whether borrowers have a duty to use the alt. doc. form when annualized current income is significantly higher than what was reported on last tax return. So far, servicers say there is no such duty and DOE has not weighed in at all.

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filthadelphia (Aug 13, 2018 - 2:12 am)

This is hugely helpful, as I have been dealing with the same question.

At the risk of sounding like a dick, is there a source you can point me to re: yearly recert is so far deemed ok, even if there is an income jump? It seems too good to be true, but at the same time, I’ve been getting similar informal advice and have seen no clear directions on how/when to report income changes (and I’ve been half-assed looking in to this for a few weeks, called lender, etc).

Same deal- about to start a job, getting ready to direct consolidate, etc.

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onehell (Aug 14, 2018 - 2:25 pm)

I can't give you a source, because it's not so much about what they say as what they DON'T say. If you look at the official alternative documentation of income form, you'll see it says you're supposed to use it any time your last tax return "does not reasonably reflect your current income."

However, "reasonably reflect" has no definition in the regulations. There's simply no guidance about where the line is, like how much of a percentage difference there has to be before your 1040 in year one is deemed not to "reasonably reflect" year 2. And there's no rule about an administrative process to determine whether your tax return from a previous year "reasonably reflected" your future income in a subsequent one. Also, depending on recert date you would be asking borrowers to predict the future. They might get an unexpected raise midyear, and there's no calculator they can use to determine whether that will obligate them to use alt doc. There's also no rules requiring borrowers to recertify more frequently than annually, though they certainly CAN do so, e.g. if they lose their job.

In short, trying to use the alternative documentation process in a manner adverse to the borrower would be a procedural mess. With no definition of "reasonably reflect" there would be a significant due process issue and probably lawsuits if DOE suddenly made up a threshold for it and instructed their servicers to apply it retroactively.

As a result, if you call the servicers they just tell you to only use it if actual income is less than last 1040 or if for some reason you don't file tax returns. They never put this in writing, but I suspect it is because there's just nothing in the regulations setting forth a procedure by which this could be used against a borrower, so the current practice is that they advise only to use the form to request relief that is favorable to you.

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qdllc (Aug 13, 2018 - 7:09 am)

They should count, but since you are allowed to pay more than your set monthly payment, I’d send in a token payment of $5 or $10 each month just to have a paper trail.

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favorandgrace (Aug 13, 2018 - 11:15 pm)

I never came back to thank you guys for the answers to my questions. Thanks so much! I applied for the direct consolidation loan and I hope to hear back from them this week.

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filthadelphia (Aug 14, 2018 - 3:34 pm)

Thanks, this makes sense and is helpful! This program is great, but the gov clearly had no idea what a monster they were creating...still, I’ll take it! The work I do I hard and I passed up more $ to do it, so they can break even on me.

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