This blog post is the second in a two-part series about the Public Service Loan Forgiveness (PSLF) Program. This follow-up offers an infographic to help audiologists and speech-language pathologists filter out if you should or should not pursue this particular forgiveness program.
Start at the top of the graphic. This portion of the decision-making process covers work setting and loan type pre-requisites—think of these as your table stakes. Many ASHA members who entered the workforce in the past five years will meet these requirements. For tips regarding these qualifiers, visit part one of this series.
The first interesting question comes for those of you with Perkins loans. Does it make sense for you to consolidate? This is important. Perkins loans come with their own cancellation program far exceeding the PSLF opportunity. We’re talking portions of the loan erased each year with 100-percent cancellation in the fifth year. Salacious!
This benefit gets lost if you consolidate your Perkins into a Direct Consolidation loan. If you work in a Title 1 school, please research your Perkins cancellation program options as part of your repayment strategy.
Moving forward, the final quandary for every would be PSLFer to consider revolves around the payment plan and your student loan balance-to-income ratio. All the income-driven repayment plans are calculated as a percentage of your income.
In the past, that meant if you had a low loan balance and a high income, PSLF may not have worked, because the calculation resulted in a payment higher than the standard 10-year payment. In this scenario, there’s nothing left for forgiveness under PSLF.
A potential solution arrived with the introduction of REPAYE. This income-driven plan requires very few qualifiers, REPAYE isn’t right for everybody.
That said, scenarios exist where people meet all PSLF qualifications, but pursuing this route may not be the optimal strategy. Your average interest rate, income, loan balance and future life events all play a role in deciding this outcome. My general rule of thumb is, if your federal loan balance equals half of your annual income or less, you should try and estimate your future payments to judge whether any balance would be left for forgiveness and compare that to alternative plans such as refinancing, or paying them off in full.
If you can move through the graphic and answer all questions cleanly and correctly, then move forward. Public Service Loan Forgiveness is a long journey, but for the right hearing and speech professional it’s a very worthy pursuit.
Moving forward? These six advanced tips for PSLF will help you on your way.
Jacob W. Parish, a certified financial planner™ professional, focuses on helping audiologists, SLPs and other young healthcare professionals navigate financial planning issues. Visit his website, Schooner NextGen or or follow him @SLP_Finance. Securities and Advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC