With the restart of payments and a new repayment plan, many borrowers are looking for the quickest path to student loan forgiveness.
Many of you have emailed asking about possibly making double or triple payments to speed up the PSLF or IDR forgiveness clock.
Even though a new provision allows borrowers to make extra payments to get closer to loan forgiveness, most borrowers will find that speeding things up isn’t a realistic option.
Paying Extra for Faster Forgiveness
When the SAVE plan was created, the Department of Education issued many new regulations.
One of these new regulations allows borrowers on an IDR plan to make “catch-up” payments for previous periods when they were on a deferment or forbearance. The purpose of making these extra payments is to qualify for forgiveness sooner.
Unfortunately, there are some significant limitations with this new provision. For starters, it does not become available until July 1, 2024.
Additionally, “catch-up” payments can only be made for deferments and forbearances less than three years old.
Lastly, borrowers on an in-school deferment cannot use the catch-up provision to count that time toward IDR forgiveness.
Sherpa Tip: Even though the catch-up doesn’t address older deferments and forbearances, borrowers may still be able to get credit for these periods under the one-time IDR count adjustment.
Extra Payments Don’t Usually Move Forgiveness Clock
To see why paying double can’t count as two payments, an example might help.
Suppose a borrower just graduated college and worked during school. This new graduate qualifies for a monthly payment of $10 under the new SAVE plan.
If borrowers could make multiple payments in a month, this example borrower could pay $240 in one month and be two years closer to loan forgiveness.
Such a rule would be incredible for the borrowers who qualify for low monthly payments, but it hardly seems fair to everyone else.
Strategy Behind Extra Payments
Why pay extra if making extra payments doesn’t speed up the forgiveness clock?
In many cases, paying extra is a lousy strategy. If you are working toward IDR forgiveness or PSLF, it just means less money to forgive at the end.
Some borrowers consider paying extra to keep their balance under control. The new SAVE subsidy already addresses this issue. With this new program, many people are better off just putting that extra payment into a high-yield savings account.
Understanding the Forgiveness Clock
In the past, many borrowers thought about forgiveness purely from a time-based perspective. PSLF takes ten years, and IDR forgiveness takes 20 or 25 years.
I’ve encouraged borrowers to think of it less as a forgiveness clock and more as a payment count, especially with PSLF. This approach helps ensure that borrowers don’t skip over critical eligibility factors.
As we look at things from a payment count perspective, it is essential to remember that there is still a time-based element. If you need 20 years’ worth of payments for IDR forgiveness, it will take 20 years to get there.