Got Federal Student Debt? You’re Now Closer to Forgiveness Than You Think

Tony Bartels, DVM, MBA
07/18/2022
Veterinary School, Veterinary Student Debt, Veterinary Student Debt Relief, Veterinary Student Loans, Veterinary Students
No Comments
Last Updated: 03/27/2023

Don’t miss out on this special one-time forgiveness count adjustment opportunity.

There is a natural temptation to tune out all of the complex rules and regulations around federal student loans and repayment. With confusing repayment plan qualifications and ever-changing, time-limited expansions for existing borrowers, no one would blame you for ignoring the latest and greatest announcement. Heck, if you’re a not-so-new graduate from veterinary school, you may have heard from VIN and VIN Foundation in the past that older borrowers are not eligible for many of the more beneficial federal repayment programs.

“Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan.”

All that changed with the April 19th announcement from the Dept of Education (ED). To paraphrase the current President, this is the big f-ing [student loan] deal that you’ve been waiting for to alleviate your student debt stress, particularly those of you who have been in repayment for a decade or more.

If you haven’t looked closely at your student loans for 10 years or more, or you graduated veterinary school around 2014 or before, you really should pay very close attention to the recently announced changes.

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Check out the special Climbing Mt. Debt Case Study video showing how one veterinarian may save more than $65,000 in loan repayment costs using the one-time forgiveness count adjustment:

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Thankfully, most borrowers won’t have to do anything to benefit from the new changes. However, some will. The problem is that it is not obvious who needs to act and who does not to make sure you are considered for the special one-time forgiveness count adjusment.

Anyone with federal student loans is now eligible for forgiveness, regardless of the repayment plan(s) you’ve been using.

This is the big F-ing deal. ED has just provided a virtual time machine for those with older federal student loans. This virtual time machine will go back in time and consider any accumulated time in repayment as eligible for forgiveness.

Student loan forgiveness is normally reserved for borrowers who qualify for and successfully navigate newer income-driven repayment plans as well as Public Service Loan Forgiveness (PSLF).

But let’s say you graduated veterinary school in 2000 and for whatever reason have a balance remaining on your federal student loans. Under the one-time forgiveness count adjusment, you could be eligible for forgiveness consideration for the last 20+ years of repayment. This would mean that you have less than 3 years before any remaining balance would be forgiven. Essentially, your previous repayment time (and some deferment/forbearance time) will be adjusted to count towards the forgiveness progress normally reserved for income-driven repayment plans.

How do I know if I need to do anything with my loans to be considered for automatic forgiveness?

Start by identifying the specific types of federal student loans you have. All “federally held/managed” student loans will automatically be considered for forgiveness qualifying time. This includes all Direct and Federal Family Education Loans (FFELs) that are held/managed by ED.

The tricky piece is the FFELs. Some FFELs were managed by the private lenders (“privately/commercially held”) and others by ED. While the FFEL program was discontinued in July 2010, there are still a number of FFEL program loans in circulation. And if you attended higher education at any point before July 2010, then you might have FFELs in your portfolio.

If you find privately/commercially held FFELs in your student loan portfolio, then you need to consolidate those FFELs into a federal Direct Consolidation Loan before the end of 2023 to be eligible for forgiveness consideration.

How do I identify a federally held vs. privately held FFEL?

Start by logging in to studentaid.gov. If it’s been a while since you’ve interacted with the Federal Student Aid system, then you may need to create/reactivate your account.

Next, look for your federal student aid data file on the Aid Summary page of your Dashboard. You are looking for a link to “Download My Aid Data.” That will generate an ugly-looking text file (TXT) that contains all of your federal student loan borrowing history. There is a video tutorial available on the VIN Foundation My Student Loans page to help you locate your student aid data file.

Once you have your student aid text file, return to the VIN Foundation My Student Loans page and upload your file for your situation. The My Student Loans page will provide a summary of the information contained in your file. In the tabbed summary sections, review the “Loan Groups” and “Loan Types” tabs to remind yourself of your student loan details. Next, visit the “Loan Servicers” tab. If you see a “DEPT OF ED” listed ahead of the loan servicer name for your FFEL and Direct Loan types, then congratulations – you have federally held/managed student loans and do not need to do anything to receive forgiveness consideration for those loan types.

However, if you do not see a “DEPT OF ED” ahead of your loan servicer name for your FFELs, then you have privately managed or “commercially held” FFELs. These are the loans that must be consolidated into a Direct Consolidation Loan before the end of 2023 to be eligible for forgiveness consideration.

What if I find privately held FFELs in my federal student loan portfolio?

Start a federal Direct Consolidation Loan for those privately held FFELs. There is no downside to doing so. Your interest rates will be a weighted average of your remaining FFELs. During the consolidation, you will be able to choose your loan servicer and the repayment plan that your new consolidation loan will use once the consolidation is complete.

To keep your loan portfolio as simple as possible, choose a loan servicer that keeps as much of your portfolio with the same servicer as possible. For example, in the image above showing both federally held and privately held student loans, consolidate the privately held loans only, and choose the loan servicer who manages your federally held loans (Aidvantage in the image). Be aware that consolidation will add any unpaid interest you have to your principal for the loans being consolidated. Using the image above again as an example, consolidating the privately held loans with Navient into a Direct Consolidation Loan to be managed by Aidvantage will also capitalize the $5,619 of unpaid interest to the principal. The resulting Direct Consolidation loan for the example will have a principal balance of $184,877. Capitalization is not a reason to avoid consolidation. The special forgiveness consideration will generally outweigh the impact of any unpaid interest capitalization. However, you may want to do a good “physical exam” of your student loans with the help of VIN or VIN Foundation on the freely available Student Debt Message Board areas before you consolidate to be sure it makes the most sense for you.

When choosing a repayment plan, you may want to consider an income-driven repayment plan, like ICR, IBR 2009, PAYE, or REPAYE for your repayment going forward. If you are already using an income-driven plan on your federally held student loans, then choose the same plan as your privately held student loans during the consolidation. Ideally, you want to preserve the repayment plan type and anniversary dates for your federally held loans while you get your privately held federal loans consolidated. That may be tricky; another great reason to reach out for personalized assistance with your student loans in the VIN and VIN Foundation Student Debt Message Board areas.

As you think about what student loan repayment will look like for you after you consolidate your privately held FFELs or after the pandemic forberance benefits end, consider that while the recent changes will count any past repayment time as forgiveness eligible, that may not apply to repayment time going forward. That means you’ll want to get familiar with the specifics of income-driven repayment plans if you only have a little time before reaching forgiveness remaining. For example, if you receive 22 years of eligible forgiveness time as part of the one-time forgiveness recount and have three years of qualifying payments to make to receive forgiveness, then make sure you’re choosing a forgiveness eligible plan (ICR, IBR, PAYE, REPAYE) that will help you receive forgiveness paying the least amount required for your income, tax filing status, and family size.

Some additional good news: Any privately/commercially held FFEL balance you consolidate will also be eligible for the pandemic forbearance benefits, recently extended into 2023, possibly through August 2023. ~~that are in place through at least December 31, 2022~~. Whichever repayment plan you choose, no interest and no payment will be due through the remainder of that period. However, to assure that your post-consolidation and post-special-forgiveness-recount repayment time is forgiveness eligible, choose an income-driven repayment plan.

A few minutes of your time to save significant time, money, and stress on your student loans

This all probably sounds like a lot of work. Actually, it takes longer to write it out than it does to do these steps. But for many of you who have been in student loan repayment for a long time, this is well worth the small effort to maximize your new benefits.

Ideally, once the one-time forgiveness count is complete, you will have a better idea of the exact number of months and years of qualifying student loan forgiveness time. Some will even receive retroactive forgiveness if they surpass 20-25 years of eligible repayment time (likely 25 years for most veterinarians). Any payments made beyond that forgiveness period will be refunded to you. Bonus!

Borrowers who have reached the required number of years in repayment to receive forgiveness should receive word in 2023. All others will see their count adjustments applied in 2024.

If you only have a few months or a few years of payments remaining until you receive forgiveness, then you will want to make sure you’re minimizing those payments to the extent possible with a qualifying repayment plan for the duration of repayment.

Again, this is a big f-ing deal. Student loan forgiveness could be closer than you realize, particularly if you have been paying on your student loans for a long time. Don’t miss out on this unique opportunity to rid yourself of your remaining student loan debt sooner and cheaper.

If you need student debt help, reach out to VIN and VIN Foundation. We have free online tools like the VIN Foundation Student Debt Center and special message board areas to help you make sense of your options. If you have questions on any of the available tools and options, reach out to studentdebt@vinfoundation.org – we’re here to help!