That’s a bummer about having FFEL loans, but yes you’re right those are not PSLF eligible without a direct loan consolidation. Did you look at whether the school she taught at qualified for the teacher forgiveness? It looks like that program forgives FFEL Stafford Loans but not grad plus.
I’m not a SL professional, just someone whose had to do a lot of research on it as I’m 4.5 years into the PSLF program myself (250k now in loans!). The fact that I’m still in the program means I have a high degree of confidence that my loans will be forgiven. Here’s why. I do think it’s likely the program will be stopped or modified to cap amount of loans forgiven at sometime in the future. BUT I’m very confident that if Congress ends PSLF, those who already have PSLF eligible loans will be able to finish the program. Essentially that we will be grandfathered in.
This year Trump proposed to end the program and it won’t happen, already DOA. This is because right now there is a ton of support for the program and for helping people with SL in general, and Congress votes on what will keep them in office. And even though Trump proposed to end the program, his proposal included language to grandfather in all loans already issued that was eligible by proposing that new loans issued after June 2019 would not include PSLF. If the Trump administration recognizes it can only propose to end the program with grandfathering, I have high faith that future admins will also.
There’s three main reasons I believe we will be grandfathered in regardless of what happens in terms of politics or them adding up the costs of forgiveness. 1) They will incur massive class action lawsuits for not grandfathering and it will be super expensive, bad press, etc. The direct loan promissory notes all include language about being PSLF eligible, so besides just a general reliance argument there is also a contractual argument for the gov being required to honor PSLF for current direct loans. 2) The public outcry will be ridiculous. There’s always outcry when any gov attempts to make changes to current benefits. This is why changes to gov pensions, social security, and every other program also grandfathers people in. They grandfather in those currently in the program and make changes to people born after year x, people who started working after x, etc. PSLF will be no different. 3) Millennials are the generation with most SL debt and also now rival the boomers as a voting bloc, plus Gen Z as they come up will be in similar positions. Just like nobody is going to reduce the boomers social security, nobody is going to take away promised forgiveness to millennials and Gen Z. It would be political suicide.
We can already see examples of this today. When the high rate of denials for forgiveness was discovered and people learned it was because they were on the wrong payment plan, often at advice of loan servicers, there was a lot of bad press and outcry. Congress acted by creating the temporary forgiveness program so those who relied on PSLF and weren’t eligible due to a “technicality” could still get forgiveness. When the Dept of Ed wasn’t properly forgiving teacher loans and creating extra hoops, there was outcry and Congress acted to make them fix it.
td;lr I can’t 100% guarantee your wife’s loans will be forgiven, nobody can. But I’m confident enough that they will be, that I’m also doing PSLF.
For me, by the time I paid off all my private loans and built an emergency I was 3 years in. I then calculated how quickly I could pay off my gov loans if my husband and I only put the minimum 5% match in my 401k and threw all our extra money at the loans. Well, paying off loans with barely any retirement contributions would have only got me out of debt like 1.5 years earlier than PSLF, would have cost over 150k more in payments, and would have left us with very little saved in retirement. Compared to option B of doing PSLF and saving all the extra money instead, which will make us (hopefully) only a couple years from FI when loans are forgiven instead.
Compound interest and time is super important for retirement savings, even if you plan on a normal retirement age. That’s actually one of the reasons the program exists...so that people in public service can still contribute to retirement, have a family, etc at the ‘normal’ timelines. Play around with a compound interest calculator in how much you will have in 10 years if you invest the 8k a year difference in payments now vs waiting 10 years to invest in retirement.
The math I would do for PSLF is figure out how you could cut expenses and what the max you could pay each month towards loans to get it done ASAP. Use a mortgage pay down calculator like bank rate’s to figure out paying that amount how long it would take and how much you would pay in loan + interest. Then estimate PSLF payments over next 10 years depending on different anticipated retirement contributions and income levels (using the payment estimator on studentloans.gov) to see what’s the most you will likely pay over 10 years. Figure out if based on your situation if the extra time and saving of PSLF is worth jumping through the hoops of certifying your income each year, certifying employment to track qualified payments etc. Like I said earlier, usually the higher the loan amount the more likely this math and time trade off will weigh in favor of PSLF.
If you decide to go with PSLF, do try to contribute a bunch to traditional retirement accounts to lower payments and increase your savings all at once! The 38k figure was assuming you each out the max in 401k, which is 19 each. If your employer doesn’t offer a 401k you can’t do a solo 401k, only an IRA which has income limits and a 6k contribution limit. You might be incomed out of a traditional IRA tax deduction without being able to contribute to two 401ks, check that. But if your wife has access to both a 401k and a 403b she should be able to put 19k in 401k and 19k in 403b. Obviously it’d be nice to have half in her account and half in yours, but since California is a community property state I don’t think this is a big deal.
Also make sure you pick the PAYE or REPAYE payment plan rather than IBR. PAYE payments is max 10% of discretionary income while IBR is 15% (so higher).