Dr. Tony Bartels

Photo by Dr. Audra Fenimore

Dr. Tony Bartels, a debt consultant for the Veterinary Information Network, on Handies Peak in Colorado with dog Addi.

Procrastinators win again! People carrying United States student debt — which includes a sizable proportion of veterinary professionals — have been given more time by the federal government to combine their borrowings in a way that could render them debt-free sooner, if not immediately.

But time is running out.

Holders of federal student loans (but not holders of private student loans) now have until June 30 to apply for a Direct Consolidation Loan, marking a second extension to a deadline that initially was set at Dec. 31, then moved to April 30. Consolidating opens an opportunity to shrink the length of time it takes for a borrower's debt to be canceled by the government.

The cancellation, known as loan forgiveness, occurs 20 or 25 years after a loan enters repayment. Any remaining balance at that time is forgiven with the catch that the forgiven amount could be taxed as income.

Applying for a Direct Consolidation Loan before the deadline enables some borrowers to receive a one-time payment count adjustment toward forgiveness. The adjustment benefit brings loan forgiveness closer by including certain time periods that were previously excluded from the count. This may include repayment time spent in plans that hadn't provided forgiveness, such as standard, extended and graduated repayment plans. Your new consolidation loan will also be credited with forgiveness time equal to your oldest remaining loan in repayment.

For example, say you consolidate loans that are 15 years into repayment with newer loans that are 10 years into repayment. The new Direct Consolidation Loan balance will receive 15 years of forgiveness credit when the count adjustment is applied. That means your newer loans, now combined with the older loans, are five years closer to reaching forgiveness than they were before consolidation.

Note: Not everyone needs to consolidate to receive the count adjustment. Borrowers with any type of Direct Loan — the predominant loan type carried by most borrowers, including veterinarians — automatically receive a count adjustment. However, if your loans are not fully consolidated into a Direct Consolidation Loan yet, you may still benefit by doing so before June 30.

Veterinarians who graduated from veterinary school before 2015 should also be on the lookout for Federal Family Education Loans (FFELs) in their portfolios. FFELs were the predecessor to the Direct Loan type and discontinued as of July 1, 2010. Some FFELs are held by the government, and some by a private lender. Those with privately held FFELs who wish to receive the count adjustment must apply for a new Direct Consolidation Loan before the deadline to be eligible.

And for anyone with either type of FFEL, consolidation before the count adjustment deadline is a rare opportunity to make them eligible for more beneficial repayment plans, preserve existing forgiveness-eligible credit, and potentially add to it. The VIN Foundation offers a My Student Loans tool that helps veterinary borrowers identify their loan types (details here).

To recap, you should apply for a Direct Consolidation Loan to potentially add to your forgiveness credit or to make non-qualifying loans become eligible for forgiveness. In other words:

• If you have multiple federal loan types (Direct, Federal Family Education Loans, Health Professions Student Loans, Loans for Disadvantaged Students, or Perkins Loans), then consolidate.
• If you have federal loans with differing periods of repayment time remaining, then consolidate.

But if you have fully consolidated loans already (Direct Consolidation Loan(s) with the same date) or have all federal Direct Loans with the same amount of repayment time, then do not consolidate.

Forgiveness time is extremely valuable. The more you receive, the less you'll pay and the sooner you can be done with repayment. It's always better to have more forgiveness time than less.

If you haven't reviewed your loans yet or are unsure if you would benefit from the count adjustment, ask! Post to the Student Debt Message Board of the Veterinary Information Network, an online community for the profession. The special area is available to any veterinarian or veterinary student, whether a VIN member or not.

Another big change is coming

Accessing the one-time count adjustment isn't the only opportunity that will disappear at the end of June.

On July 1, the government is phasing out two income-driven repayment (IDR) plans that can be used to repay federal Direct Loans and reach forgiveness. As the name suggests, IDR plans base a borrower's minimum monthly payment on their income. After the one-time forgiveness count adjustment is applied — anticipated by Sept. 1 — borrowers with remaining repayment time will need to use an IDR plan to reach forgiveness.

Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) are the two plans that will be phased out.

This marks the first time the U.S. Department of Education has eliminated any IDR options. Starting July 1, anyone not already using ICR or PAYE will not be able to use those plans. However, borrowers who are in the plans on July 1 can remain in them for as long as they choose.

Buckle up, because this next section is going to be bumpy. Two distinct groups are impacted most by the phase-out:

1. Anyone eligible for PAYE but not eligible for the new Income-Based Repayment (IBR 2014) plan.

Eligibility for IDR plans differ, based on loan types and loan history. There are five IDR versions that you could potentially use: ICR, Income-Based Repayment (IBR 2009), PAYE, new Income-Based Repayment (IBR 2014), and the newest, Saving on a Valuable Education (SAVE).

Working out which plan is right for you can be a daunting task, but one that can be made easier by checking out the IDR profiles (see sidebar) used by the VIN Foundation to help borrowers navigate their choices. Borrowers in IDR profile 1 have the best selection of repayment options, descending to borrowers in IDR profile 4, who have the least amount of choice.

For example, being eligible for PAYE and the new IBR plan (IBR 2014) is the most flexible of the IDR profiles (IDR profile 1).

To be eligible for PAYE, you must be a new borrower as of October 1, 2007, and receive at least one Direct Loan after October 11, 2011. To be eligible for new IBR 2014, you must be a new borrower as of July 1, 2014.

Determine your IDR profile by uploading your federal student aid data file into the VIN Foundation My Student Loans tool and reviewing the IDR Eligibility tab. Review the IDR profiles guide here.

What does IBR 2014 have to do with the PAYE phase-out? Both plans are nearly identical, so anyone in IDR profile 1 is not significantly impacted by losing access to PAYE because they still have IBR 2014 as an option. Still, instead of opting for IBR 2014, you should choose the new SAVE plan, but more about SAVE later.

All Direct Loans are eligible for ICR and SAVE IDR plans. FFELs are only eligible for IBR 2009. Any Direct Loans that are not eligible for IBR 2014 are also eligible for IBR 2009.

2. Anyone who will receive nearly 25 years of forgiveness-eligible repayment time when the one-time forgiveness count adjustment is applied.

In the case of borrowers whose debt is low relative to their income, ICR (the other plan being phased out) will most likely result in the lowest forgiveness-eligible monthly payment since it caps out at a maximum of two times a fixed 12-year monthly payment. For a hypothetical borrower with $25,000 of new Direct Consolidation Loan balance with a 3% interest rate, the highest the monthly ICR payment can be is $414/month. With only a few years remaining to reach forgiveness, ICR can get you there even with a high income. Until the count adjustment, there was little benefit for anyone to use ICR. Now, you have less than a month to see if it may work for you.

It's not entirely clear when the application deadline is for a plan like ICR or PAYE. However, if it were my dog, I would not wait until June 30 to apply. Keep good records of your application, and as long as you have an application before July 1, you should be granted access to your plan.

You lose some, you win some: SAVE

Even as borrowers lose a couple of IDR options, they've gained one — SAVE. The plan was introduced in October 2023, when repayment resumed after the pandemic pause. At that time, any borrower who was on an IDR plan called Revise PAYE, or REPAYE, was automatically converted to SAVE.

SAVE is the most generous of the available IDR plans, providing the lowest monthly payment available for most borrowers and a 100% unpaid interest subsidy. The subsidy covers all of the interest that a borrower's minimum monthly payment does not cover. In other words, if your monthly payment does not fully cover the interest on your loan, the unpaid interest will not be tacked onto your balance. It is covered by the Department of Education. This is very beneficial because it eliminates the growing balances commonly seen with other IDR plans.

Any federal Direct Loan borrower not already in SAVE should compare it against ICR and PAYE to determine which plan is best for them before the July 1 phase-out.

I've just said that SAVE is the most generous of the IDR plans, so you may wonder how PAYE could be better. There is a scenario (IDR profile 2) that I affectionately refer to as The Pickle.

PAYE vs. SAVE: The Pickle

For borrowers with graduate school student loans (like veterinarians), you can reach forgiveness after 20 years of qualifying payments under PAYE versus 25 years for SAVE. Reaching forgiveness sooner is sometimes more beneficial. Do you prefer to pay more monthly, less overall, and finish student loan repayment sooner, with a bigger potential tax on forgiveness; or make smaller monthly payments but for a longer period of time, receive a 100% unpaid interest subsidy and pay a smaller potential tax?

It's a tricky decision, right? That's why I call IDR profile 2 The Pickle. And you don't have much time to mull. If PAYE's your path, you need to get into the plan before July 1.

The easiest way to work your way through The Pickle is to compare your repayment options using the VIN Foundation Student Loan Repayment Simulator, comparing monthly payments, total projected costs, and forgiveness outcomes for PAYE and SAVE.

For anyone eligible for IBR 2014 (IDR profile 1), there is no Pickle, because get this: You have the option of using SAVE for up to five years, and then switching to IBR 2014 and receiving forgiveness at 20 years. But you must remember to make that switch before the five-year mark! From July 1, the government will start counting your SAVE time. And anyone with more than five years logged in SAVE will no longer be eligible for IBR 2014.

For those not eligible for PAYE or IBR 2014 (IDR profile 3), the decision is easy: Choose SAVE or ICR. If ICR will help you to reach forgiveness with the lowest forgiveness-eligible monthly payment, then apply for ICR before the July 1 phase-out.

Anyone with only FFELs remaining (IDR profile 4) should run to the Direct Consolidation Loan application to receive the forgiveness count adjustment. Apply for either SAVE or ICR during consolidation, whichever has the lowest forgiveness-eligible monthly payment.

Consolidation changes on the horizon

Starting July 1, and after the count adjustment is applied, federal Direct Consolidation Loans will no longer erase previous forgiveness-eligible time as they did before the count adjustment. Instead, a new consolidation loan will receive credit for a weighted average of payments that count toward forgiveness. Returning to the previous example, for a borrower that has 20% of their loan balance with 15 years of forgiveness-eligible repayment time and 80% with 10 years, the resulting consolidation loan submitted after July 1 would receive 11 years of forgiveness credit.

If the past is prologue, then federal student loans will continue changing. More is missed by not looking than not knowing. Review your student loans and reach out if you have questions ahead of the June 30 deadlines: studentdebt@vinfoundation.org. We're here to help!

Dr. Tony Bartels graduated in 2012 from the Colorado State University combined MBA/DVM program. He and his wife, a small-animal internal medicine specialist, have more than $400,000 in veterinary-school debt that they manage using federal income-driven repayment plans. By necessity (and now obsession), Tony's professional activities include researching and speaking on veterinary student debt, providing guidance to colleagues on student loan repayment strategies and contributing to the Veterinary Information Network and VIN Foundation resources. Beyond debt, his professional interests include small animal practice. When he's not staring holes into his colleagues' student-loan data, Tony enjoys fly fishing and exploring Colorado with his wife, Audra, their daughter Lucy and their two rescued canines, Addi and Maggie.