Refinancing, PSLF, Common Misconceptions, & More w/ David Carlson – Journey To Launch (2024)

FAQs

Do refinanced loans qualify for PSLF? ›

Beware: Once you refinance federal loans, you can no longer apply for PSLF or IDR plans. On the other hand, if you have high-interest private loans, then refinancing can be an excellent option for saving money and might help you pay off student loans faster.

What happens when you refinance a student loan? A lender pays off your existing loan and offers a new loan with a different interest rate, payment schedule and terms. Having a high debt-to-income ratio or defaulting on your loan can bring down your credit score.

Previously, you could consolidate your loans into the Direct Loan Program, but you could only get PSLF credit for payments made after you consolidated. However, the time-limited PSLF rule changes allow you to get credit for periods of repayment before you consolidated those loans.

Because PSLF is a time-based program, if you can make smaller qualifying payments, then you will pay less money in total before your loan is forgiven. But also remember that outside of PSLF, making smaller payments means paying more for your loan over the long term because more interest accrues.

If you refinance your federal loan with a new private student loan, you will no longer be eligible to participate in these federal loan forgiveness programs. You may also lose the protection of loan discharge or forgiveness in the case of death or permanent disability, which you get with federal student loans.

You must be a direct employee of a qualifying employer for your employment to qualify. This means that employees of contracted organizations, that are not themselves a qualifying employer, won't qualify for PSLF including government contractors and for-profit organizations.

You generally can't or shouldn't refinance if: You have federal loans and could see a drop in income. If there's a chance your income could decrease, don't refinance federal student loans. You'll miss out on federal student loan relief options, as well as government programs like income-driven repayment.

When you refinance federal debt, you lose access to government programs, such as income-driven repayment plans, student loan forgiveness, and deferment and forbearance. That said, if you're nearing the end of your repayment term and see a lower rate, refinancing your federal loans could save you money.

If you have Direct Loans and have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, you may be eligible for PSLF or TEPSLF. Before you apply, however, it can help to confirm that your employer is qualified for the program.

Do loans have to be consolidated for PSLF? ›

While a Direct PLUS loan made to a parent borrower is eligible for PSLF, it cannot be paid via a qualifying repayment plan (other than the 10-year Standard Repayment Plan or a plan in which the payment is equal or greater than the 10-year Standard plan) unless it's first consolidated into a Direct Consolidation Loan.

Typically, months in forbearance and deferment do not count towards PSLF. However, months during the COVID-19 payment pause (March 2020-September 2023), months that qualify under the IDR Adjustment, and months where loans are being placed on administrative forbearance after the repayment restart will count toward PSLF.

Loan consolidation can qualify you for Public Service Loan Forgiveness (PSLF), give you access to different repayment options, help you get out of default, combine your loans into a single payment, or change the interest rate on your loan. However, consolidating federal loans may cause you to give up other benefits.