Summer’s new consolidation tool can help 14 million people reduce their student debt

This week, Summer announced the launch of its most powerful product feature yet: a loan consolidation tool to help 14 million borrowers enroll in the two most affordable repayment plans, Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), as well as the most generous forgiveness program, Public Service Loan Forgiveness (PSLF).

Using Summer’s consolidation tool, borrowers can compare their current repayment plan––most commonly the 10-year Standard Plan––with one of several federal income-driven repayment plans and then enroll in the best plan that maximizes their savings.

The genius behind Summer’s tool is that it properly identifies which loans should be consolidated in order to qualify for PAYE, REPAYE, and PSLF––and, even more importantly, which loans shouldn’t be consolidated to ensure borrowers do not lose eligibility for PSLF.

If you had to reread that sentence (we don’t blame you if you did), here’s a brief 101 on student loans that illustrates why this solution is so impactful:

• Prior to 2010, most federal loans were known as FFEL Loans (which stood for Family Federal Education Loans). In 2010, the Obama Administration terminated the FFEL Loan Program, introducing a new one where all federal loans issued henceforth would be known as Direct Loans. Nine years later, 12.4 million borrowers are still in repayment on at least one FFEL Loan, approximately 1 in 3 borrowers.
• President Obama then created the PAYE and REPAYE plans as a more generous alternative to the two income-driven repayment plans that already existed, IBR and ICR. Whereas monthly payments in IBR were based on 15% of your income and payments in ICR were based on 20%, PAYE and REPAYE payments were pegged at only 10% of income. While loans in IBR were forgiven after 25 years, loans in PAYE were forgiven after 20. As a result, by enrolling in PAYE or REPAYE, a borrower could further reduce monthly payments––often by hundreds of dollars––and save tens of thousands of dollars more overall than if she were enrolled in IBR or ICR.
• Separately, Congress created the Public Service Loan Forgiveness Program to help borrowers working for non-profit and government employers––think teachers, nurses, social workers, and military personnel. This generous program forgives whatever amount the borrower still owes after 10 years of consistent loan payments. In order to qualify for PSLF, borrowers must be enrolled in an income-driven repayment plan, and PAYE and REPAYE are the plans that maximize the amount forgiven.
• Here’s the catch: the government required that only Direct Loans could be enrolled in PAYE and REPAYE, as well as PSLF. While there’s a way to convert older FFEL and Perkins Loans into Direct Loans––known as a Loan Consolidation (confusing…we know)––the caveat is that this process resets the 10-year clock for PSLF eligibility! As problematic as that sounds, you simply cannot receive PSLF forgiveness on FFEL Loans without first consolidating them into Direct Loans––so the earlier you do so the better.
• There were three major problems with this system: (1) Loan Consolidation wasn’t widely promoted as a solution and so it remains unknown to many. (2) The process to file for Loan Consolidation is complex and confusing––arguably worse than a tax filing. For example, you can technically consolidate a group of FFEL Loans into a single FFEL Loan without even knowing you need to specifically ask for a Direct Consolidation Loan to gain access to PAYE and PSLF. (3) The Department of Education and the loan servicing companies managing this process did not effectively warn borrowers when they were making irreversible mistakes like the example mentioned in (2) and an array of other mistakes.
• The result has been disastrous. Millions of borrowers are paying higher monthly payments than they should be––enrolled in either IBR or ICR when they could be benefiting from PAYE or REPAYE. Even worse, tens of thousands of borrowers who were counting on PSLF loan forgiveness didn’t know to consolidate their FFEL Loans into Direct Loans and were only recently told they’re ineligible unless they consolidate their loans. There are countless stories of borrowers who have made 10 years of payments but were only just told they’re ineligible for PSLF. They will only qualify for forgiveness after first consolidating their loans and then paying for another 10 years. Their heartwrenching stories are the tell-tale sign of a broken system.
• This is one of the reasons why the Dept. of Education has rejected the majority of borrowers who applied for PSLF––resulting in dozens of lawsuits filed against the government and loan servicing companies.

The GAO’s 2018 Report on the PSLF Program uncovered that “56% of borrowers…were denied or had yet to record a qualifying payment.” Many of these borrowers have at least one FFEL Loan that must be consolidated into a Direct Loan for it to be counted as a “qualifying payment.”

While we wish we could go back in time to tell every borrower counting on PSLF forgiveness to properly consolidate their loans, we can’t. Instead, we channeled this pent up frustration into building a better consolidation tool from the ground up.

Summer’s mission is to help borrowers simplify and save on their student debt — the Loan Consolidation tool does just that.

Summer’s consolidation tool was designed to simplify the process from top to bottom for borrowers. We break things down into four main categories:

1) Getting Started: Tell us about you

Borrowers share their unique situation, including their state of residence, family size, marital status, and household income — all of which impacts one’s eligibility for the four income-driven repayment plans.

2) Sync your loans

Summer’s platform allows borrowers to sync their federal student loans within seconds and pulls from every servicing company that collects federal student loans.

3) Compare plans and select the one that’s right for you

Summer’s platform then identifies the best possible repayment plan for each borrower, customized to his or her unique situation.

In the example below, this borrower can enroll in the REPAYE Plan and PSLF Program — lowering her payments by $1,090/month and having an estimated $90,924 of debt forgiven tax-free. Because she has both FFEL and Direct Loans, Summer indicates that she must consolidate her FFEL Loans before enrolling them into REPAYE.

4) Submit your application

Once a borrower selects the plan that’s right for her, Summer’s platform guides her through the application process from start to finish.

After signing and submitting both forms, the borrower receives confirmation of receipt. Our Borrower Success team then reviews her two applications along with her PSLF certification form, flagging any issues that may arise before submitting them to the loan servicing company to be officially processed.

While it can take several weeks for the loan company to process the paperwork, we make sure to check back in with the borrower throughout––answering any questions she may have and sharing an update when the paperwork has been processed on her account.

Sign up to try Summer today at meetsummer.org.

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Summer is a social enterprise helping student loan borrowers navigate the complex repayment process. Founded in partnership with Yale University, Summer partners with colleges, employers, and trade associations to provide borrowers with an innovative app to track their loans in one place and enroll them in the best repayment plan.