Being a regular reader of this blog obligates you to put up with my ranting and raving about student loans every once in a while. And, for clarity’s sake, my rants are different than the reports where I celebrate my student loan repayments (usually twice each month). Anyway, this entry is not one of those celebratory post (look for one of them next month). Instead, it appears that I’m not in as good of a long-term situation as I had originally planned…
Unfortunately, it appears that the second half of my student loan repayment plan may not occur as I had originally anticipated. Even though I was told by the United States Department of Education (USDOE) that I qualified for the Public Service Loan Forgiveness Program and that I was already enrolled in it due to the excessive amount of student loan debt that I was carrying, it turns out that information wasn’t entirely correct. Yes, I still qualify for the forgiveness program, but no – I won’t be taking it up as a repayment option.
Why, you ask?
Simple. I called the USDOE about a month ago to get an update on all of the details on this program and how I could possibly use it to my repayment advantage. As it turns out, the first person that I e-mailed back and forth with (linked above) was incorrect when she implied that I was already in the forgiveness program, which forgives the balance of your debt after 10 years of consecutive repayments assuming that you meet certain parameters. Right now I’m 4 years into my repayment, so if the first person that I talked to was correct with her information, then I would be nearly halfway done with my $55 thousand USDOE debt. Well, she was wrong.
Apparently the forgiveness program requires you to complete a simple application to enroll and part of the approval process includes wrapping up all of your debt into one big loan with the USDOE. There is no way I would do this. I currently have a private loan with about $30 thousand outstanding at 7.33% interest. If I can stick my repayment plan (and I’ve done so well so far), then I can have the private loan repaid within 12 months. If I consolidated with the USDOE now, then I would wind up with a blended interest rate of above 5.5% and I would have to carry that for the life of my student loan repayments. Currently, my interest rate with the USDOE is 4.25%.
In other words, if I consolidated with the USDOE and stuck to my current repayment plan, I’d wind up increasing my interest rate by over a point. What’s the sense in that?
So… I’m not enrolling in the Public Service Loan Forgiveness Program. And now I’ll have to reformulate the second half of my repayment plan for my student loans. At this point, my reformulated plan is to keep all things the same and just continue the automatic monthly payments out of my checking account straight to the USDOE. But, as I continue to demolish the private loan debt we’ll see if I come up with another repayment plan.