For the past nearly 12 months, I have lived in the financial Twilight Zone that I can only and best call student loan purgatory. And I must say, it’s a very annoying limbo. Lots of people lately have asked me about student loan forgiveness and how to manage student loans in the current environment.

So, I thought it would be a good idea to share my experience, what I am doing about it, and what you can do about your situation.

Let’s dive into the student loan purgatory!

My student loan limbo

I finished training with just an absolutely massive amount of student loans. This happened because I paid for a private undergraduate and medical education exclusively with loans. About half of my loans were private and half were federal. During training, I stupidly deferred my loans every year. Because I had no idea about income based repayment plans or anything like that. It was one of my top 11 biggest financial mistakes…

Thus, upon finishing training, my plan was to aggressively pay off my student loan debt. But then the COVID pandemic happened. And all federal loans were placed at 0% interest rate. So I didn’t need to make any payments and every month still counted towards loan forgiveness.

I then refinanced my private loans to a lower interest rate, around 4.5%. I then threw large amounts of money from my monthly savings rate of ~40% at this debt. A couple years later and I had paid it all off.

And then…

My private loan fulfillment coincided with the lifting of the COVID federal loan forbearance on September 1, 2023.

At this time, I enrolled my federal loans into the new SAVE repayment plan. The idea of the SAVE plan was to adjust how income was calculated, resulting in a lowering of qualifying monthly loan payments for most borrowers. Sure, I’ll take that.

And for the next 10 months, I made these large payments every month. Each one tallying towards my final loan forgiveness count of 120 now that TEPSLF (Temporary Expanded Public Student Loan Forgiveness) counted my previous deferrals towards this count (due to lack of education on appropriate options).

I was all set to make my last payment and achieve forgiveness in July 2024.

And then…

In June 2024, a Missouri federal court placed an injunction blocking the SAVE repayment plan.

Why?

Seems like mainly spite. The judges rule that establishing the SAVE plan was an overreach of presidential powers. Not surprisingly, these rulings all fell along typical partisan lines. Well, no use crying over spilled milk.

At this point, federal loans enrolled under the SAVE plan were placed under administrative forbearance at 0% interest rate. But the passing months did not count towards loan forgiveness.

And this is where the student loan purgatory comes in…

I called Federal Student Aid. I wanted to immediately change my repayment plan to a different one that qualifies for PSLF payments so I can make my last payment, get forgiveness, and be on my way.

Nope, not allowed. Ok, fine. I ask to make a payment, whatever amount they want, to get that last payment in. Not allowed.

So, I wait.

Finally, in September, Federal Student Aid says that you can apply for a “buyback payment.” Basically, if there was a qualifying payment you could have made in the past, but didn’t, you could now make that payment and have it count retroactively.

Perfect! Sign me up! Not so fast…you have to apply, even though they told me on the phone I qualified. So I applied. And waited 5 months.

Then, I received an email. I did qualify! Just like they told me on the phone 5 months ago. Ok, what now? Well, they need to certify my income in 2021 because that is when I missed a payment. And if I use my current income I might end up paying a greater amount. I call and tell them I don’t care. Just please take my money!

But no such luck. I have to go through this process. So I submit my tax returns.

My current situation

And I’ve been waiting ever since. Here I stand, potentially 1 payment away from loan forgiveness.

This will end up being either the greatest tease or the greatest relief whenever it comes to some (in)glorious conclusion…

What I’m doing in student loan purgatory…

I am:

• Prepared to make a final loan payment of any amount of FSA’s choosing when and if they ever are ready
• Investing the money that I would be to pay off my loans in my taxable investing account and in real estate
• Reluctantly accepting of the fact that PSLF may disappear before I ultimately benefit from it

What should you do if you are in student loan purgatory?

If you find yourself in a similar situation, you can do any number of things. I’ll highlight the best strategies in my opinion. Of which sitting anxiously biting your nails for fear of PSLF dismantling is not on the list…

• If you don’t have any federal student loans, refinance your private loans to a lower rate if possible and pay them off aggressively starting now
• If you have federal student loans on an income based repayment plan that is not blocked, continue making those income based payments regardless of how far away you are from forgiveness
• If you have student loans on an income based repayment plan that is blocked like SAVE and you…
  • Have a small amount of loans left (<$100,000), pay off the loans aggressively
  • Are far away from loan forgiveness (>60 payments), pay off the loans aggressively
  • Have a huge amount of loans left (>$100,000), take the amount you would pay monthly for income based repayment and put it into a HYSA each month or just keep making that monthly payment
  • Are very close to loan forgiveness (<60 payments), take the amount you would pay monthly for income based repayment and put it into a HYSA each month

And here is my thought process for these situational strategies

1. I don’t think that the SAVE repayment option is ever coming back
2. It is legitimate to have some concern that PSLF could be eliminated
3. I think that even if it is eliminated, those already in it will be grandfathered in. But who knows for sure
4. The months that are passing by for those on payment plans like SAVE do not count towards loan forgiveness

Thus, if you have a relatively small amount left in federal loans or are very few away from forgiveness, I would almost treat these loans as private loans and get rid of them as quickly as possible. Mainly because there is some concern that PSLF may not come back. And waiting around has minimal utility since you are just essentially deferring your loans. Now, let’s say you are a resident and don’t have much extra to pay off the loans, then waiting can still benefit you. But otherwise, I’d try to pay off.

Now, if you have a huge amount of loans left, there could be some benefit to waiting and seeing what shakes out with PSLF. Because the upside is so much greater, you could take your projected monthly payments and just save them to use to pay off the loans if PSLF goes away. Or you could just keep making those monthly payments to reduce the loan amount for whenever payment comes back online whether the possibility of forgiveness is there or not.

And if you are like me, with very few payments left for potential forgiveness, it makes sense to wait out this student loan purgatory and see what happens. If forgiveness survives in some capacity, the upside is huge. If not, then you just start paying off the loans aggressively. Little downside.

So that’s what I think…

Now, for some controversy…do I deserve loan forgiveness?

I know there are lots of strong feelings on this. Mine are very pragmatic. Just like you can use legal tax strategy to reduce your taxes as long as you follow the rules, I followed the rules are the government set forth on loan forgiveness.

Therefore, I feel I deserve to benefit from them.

Now the question can be brought up if these rules for forgiveness should have been set up at all. I also say yes. For 10 years, I worked and treated underserved patients bringing them amazing and state of the art care that may not have otherwise been available to them. Forgiveness in exchange seems fair. Plus, as a patient, I don’t want my doctor worried about their loans. I want them focused on helping me.

But then again, I am very biased.

We can only control what we can control

Life in student loan purgatory is frustrating and unsettling. Every person in a similar situation has expressed these same feelings to me.

But, in the end, all we can do as we find ourselves here is plan as best we can for our financial future. Debt repayment is the foundation of our financial health. So, as long as we know what we will do to get rid of our debt in however the scenario plans out, then we are set and can’t be shaken off our path to financial freedom!

Here are some other posts to help you progress on the path to financial freedom while we wait for this issue to resolve:

• What’s Better? Should You Pay Off Debt or Invest?
• At What Interest Rate Should You Invest Instead of Paying Off Debt?
• The 7 Step Basic Formula for Wealth as a Physician
• An Updated Formula to Practice Intentional Spending for Doctors
• 401k vs. Real Estate: Which Is the Better Investment?

What do you think? Are you in student loan purgatory? What is your situation? Should PSLF be revoked? Is it fair? Why or why not? Let me know in the comments below!