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Hugh Mistake People Make IN PSLF Program
Hello,
As we navigate the world of loans and mortgages, I want to share some common mistakes people make regarding student loan payoff approaches. This is especially important if you're considering purchasing a home soon.
First, it's crucial to understand your loan payoff strategy. Consider whether you want to pay faster or pay off your loans and prefer smaller monthly payments. Once you've made that decision, avoid these common pitfalls:
⚡️Mistake #1: Overpaying When Aiming for Public Service Loan Forgiveness (PSLF)
Let's say you work for an employer that qualifies for the PSLF program. You want your loans forgiven but keep paying more than your monthly minimum payment. If you're on track for loan forgiveness, paying more doesn't get you there faster. Instead, you're essentially wasting money that could be forgiven. Rather than overpaying, use your money to build up your savings, invest in retirement, or save for a down payment on a house. Plus, overpaying can put you in a "pay ahead" status, which might invalidate additional charges you make. So, keep an eye on your "qualifying payments" and stick to the minimum.
⚡️Mistake #2: Neglecting Paperwork
Another common mistake is when people plan for PSLF but only fill out the income-driven repayment form, forgetting about the PSLF Employment Verification form. They hope that after ten years, they can file the state, and all their payments will be counted for forgiveness. But the US Department of Education needs proof that your 120 payments were made while working for a qualifying employer. If you keep careful records and track your employers, FedLoans will automatically count your costs for forgiveness. So, remember to fill out all the necessary paperwork.
⚡️ Mistake #3: Refinancing Too Soon
This mistake often involves people who work for qualifying nonprofits. They refinance their student loans even though they don't plan to leave their government or nonprofit job. Imagine having a $100K student loan from your master's degree in public health and landing an appointment with the local government. Your payment is over $1000 a month. You refinance and reduce the cost by $50 a month. But what if you had chosen an income-driven plan instead? You could have reduced your monthly income to $600 and gotten almost $30K of loan forgiveness with no remaining balance after 120 charges. That extra $400 a month could have gone towards your savings for a house or other financial goals. Remember to consider the potential of the federal program to help you out.
These mistakes can be easily avoided with careful planning and proper guidance. As your mortgage lender, I help you navigate these decisions. If you have any questions, feel free to let me know.
As we navigate the world of loans and mortgages, I want to share some common mistakes people make regarding student loan payoff approaches. This is especially important if you're considering purchasing a home soon.
First, it's crucial to understand your loan payoff strategy. Consider whether you want to pay faster or pay off your loans and prefer smaller monthly payments. Once you've made that decision, avoid these common pitfalls:
⚡️Mistake #1: Overpaying When Aiming for Public Service Loan Forgiveness (PSLF)
Let's say you work for an employer that qualifies for the PSLF program. You want your loans forgiven but keep paying more than your monthly minimum payment. If you're on track for loan forgiveness, paying more doesn't get you there faster. Instead, you're essentially wasting money that could be forgiven. Rather than overpaying, use your money to build up your savings, invest in retirement, or save for a down payment on a house. Plus, overpaying can put you in a "pay ahead" status, which might invalidate additional charges you make. So, keep an eye on your "qualifying payments" and stick to the minimum.
⚡️Mistake #2: Neglecting Paperwork
Another common mistake is when people plan for PSLF but only fill out the income-driven repayment form, forgetting about the PSLF Employment Verification form. They hope that after ten years, they can file the state, and all their payments will be counted for forgiveness. But the US Department of Education needs proof that your 120 payments were made while working for a qualifying employer. If you keep careful records and track your employers, FedLoans will automatically count your costs for forgiveness. So, remember to fill out all the necessary paperwork.
⚡️ Mistake #3: Refinancing Too Soon
This mistake often involves people who work for qualifying nonprofits. They refinance their student loans even though they don't plan to leave their government or nonprofit job. Imagine having a $100K student loan from your master's degree in public health and landing an appointment with the local government. Your payment is over $1000 a month. You refinance and reduce the cost by $50 a month. But what if you had chosen an income-driven plan instead? You could have reduced your monthly income to $600 and gotten almost $30K of loan forgiveness with no remaining balance after 120 charges. That extra $400 a month could have gone towards your savings for a house or other financial goals. Remember to consider the potential of the federal program to help you out.
These mistakes can be easily avoided with careful planning and proper guidance. As your mortgage lender, I help you navigate these decisions. If you have any questions, feel free to let me know.