The Student Loan Ranger's Mailbag Express: Consolidation and Repayment

We answer reader questions regarding income-based repayment and other student loan topics.

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Another month, another payment closer to loan forgiveness for the Student Loan Ranger. That's right: We don't just talk the talk; we walk the walk and we pay the debt.

Onto the Mailbag Express: As always, our responses are not meant to provide specific legal or financial advice. Your situation is unique, and we encourage you to reflect carefully on your options and to consult a financial adviser.

Dear Student Loan Ranger: I just observed your student loan webinar, but I wasn't able to access it until 15 minutes after the start time. Did you say that in order to use Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF), you must first consolidate Stafford and Grad PLUS loans into one loan? If they are Federal Direct, isn't it better to keep them separate as they have different interest rates? Great webinar, by the way—I feel a bit better about managing my student loans.

Dear Latecomer: I'm glad you found the webinar useful! You do not need to consolidate as long as your Stafford and Grad PLUS are indeed Federal Direct loans. If they are FFEL loans, however, they are not eligible for PSLF and you will want to consolidate them into a Federal Direct Consolidation Loan. (You have a right to consolidate them for that purpose.) If you don't know which type of loans you have, you can find out by signing into the National Student Loan Data System.

If all your loans are Federal Direct, the decision about whether to consolidate them will depend on the relative interest rates of the loans and the convenience of having one loan to pay instead of several. That is a decision for you and your financial adviser to make.

[Get tips and tools for managing student loans.]

Dear Student Loan Ranger: I graduated from law school in 2008 and consolidated all my federal loans into the Federal Direct Consolidation Loan. My current repayment plan is IBR, which, by the way, is awesome! I have been working in public interest or in government work since I graduated, with the goal of qualifying for PSLF. I have two questions:

1. My spouse and I file our taxes as married filing separately in order to lower my monthly loan payments under IBR. As my income increases, we're wondering at what point the tax benefits of filing separate outweigh the benefits of splitting our income under IBR.

2. I heard that your income for IBR purposes is either your current income or your adjusted gross income (AGI) from your most recent taxes. I currently make more than the AGI that my IBR is based on, and would like to know which amount I should be paying based on.

Dear Married Filing Separately: It is good to know you are benefitting from IBR and working toward PSLF. Congratulations!

Let's start with your first question: Figuring out if filing jointly or separately is better depends on a host of factors, including your spouse's income and federal educational debt, your family size, and the tax benefits you will be eligible for if you file jointly. The Department of Education has an IBR repayment calculator on its website that will at least help you estimate your IBR payments if you file jointly or separately. However, I encourage you to consult a tax or financial professional to help you with this decision.

Regarding your second question, your monthly repayment under IBR is adjusted annually based on your most recent tax filings. You have a right to contact the servicer of your loans and request an adjustment if you are making less than your previously calculated AGI. This can happen, for example, if you experience a loss in income or receive a one-time bonus.

In your case, it appears that your AGI is now greater and a recalculation would result in you paying more monthly. If that is the case, you may contact the servicer of your loans to request a recalculation, but rest assured that your annual adjustment after your next tax filings will ensure your monthly payments reflect your current AGI.

[Read the 6 advantages of federal student loans.]

Dear Student Loan Ranger: I will be utilizing PSLF and IBR and was wondering if you know the best timing to consolidate my loans and choose the IBR repayment plan. I don't want to lose the six month grace period on my loans. Can I select IBR and then consolidate? Or do I need to consolidate first?

Dear Fleeting Grace Period: As you correctly noted, consolidating while still in school or before your grace period is over may result in losing it. If you have either FFEL or Federal Direct loans (or a combination of both) you can choose IBR as your repayment plan right away and consolidate later. (As I noted earlier, you can access the National Student Loan Data System to find out which kind of loans you have.) If you choose this option, you should not lose your grace period.

One additional consideration, however, is that only Federal Direct loans qualify for PSLF. If you have FFEL loans, you may want to consolidate all your loans into a Federal Direct Consolidation Loan sooner rather than later to ensure all your payments count toward PSLF. To find out how long consolidation might take, contact the Department of Education's loan consolidation center at (800) 557-7392.

I hope everyone is looking forward to a great summer! Please continue to send questions to And sign up for our Friday, July 8 webinar: Drowning in Debt? Learn How Government and Nonprofit Workers Can Earn Public Service Loan Forgiveness.

Isaac Bowers is the senior program manager for Educational Debt Relief and Outreach at Equal Justice Works. He was previously an attorney at Shute, Mihaly & Weinberger LLP in San Francisco, where he focused on environmental, land use, and planning issues. A graduate of the New York University School of Law, Bowers also has extensive experience in nonprofit advocacy and outreach.