Article courtesy of Student Loan Hero
Public Service Loan Forgiveness Programs
Public Service Loan Forgiveness
In fall 2017, the first cohort of borrowers became eligible for Public Service Loan Forgiveness (PSLF). The program started in 2007 and can forgive the student debt of those who work for nonprofit or government agencies for 10 years. However, there have been questions about whether anyone has actually received forgiveness for their loans.
The Department of Education has been somewhat tight-lipped about the situation. However, a few people now claim to have actually received confirmation of their loan forgiveness. Here’s what you need to know.
Fewer than 1,000 are expected to benefit from PSLF in 2018
As of Jan. 5, 2018, the Department of Education said it has received about 7,500 unique applications for PSLF.
“Fewer than 1,000 people are expected to be eligible for a loan discharge under the PSLF program in fiscal year 2018.” the Department of Education told Student Loan Hero. This is due, in part, to the “limited availability of income-based repayment plans in the early years of the program.”
The Department of Education pointed out that the application period has only been open for a short time. They said that verifying 10 years’ worth of borrower employment and payment history can take a great deal of time.
On Reddit, a user known as Agnail shared a screenshot described as a portion of a loan forgiveness letter. Agnail claimed to have received a discharge of remaining balances.
“Those of us who have feared that PSLF might be a mirage can take some solace that. At least for now, PSLF is real, and actual borrowers have begun receiving it,” Agnail wrote. Student Loan Hero wasn’t able to authenticate the letter as of the writing of this post.
In the thread, Agnail said that the case might have been expedited due to the fact that there wasn’t a lot of complexity in the application.
How to become eligible for PSLF
In order to receive PSLF, you need to work for a nonprofit or government agency. Also, while making 120 consecutive payments on qualifying loans. One of the issues that have arisen in the last few months has been confusion over which loans are eligible for the program.
“Only Direct Loans are eligible for PSLF,” the Department of Education said in a statement. “Older loans, such as those under the Federal Family Education Loan program or the Federal Perkins Loan program, are not considered eligible loans.”
In order for those loans to “count,” borrowers must consolidate them using the Direct Loan program. However, consolidation resets the clock on the 120-payment requirement for forgiveness. So if you’ve been making payments on old loans, you might not qualify for PSLF.
For some borrowers, this reality has been sobering. One Oklahoma teacher was looking forward to PSLF but found out her loans didn’t qualify, reported CNN Money. She’d been paying for a decade and her loan balance had ballooned from $37,000 to $75,000 due to income-driven options.
Complaints against servicers over PSLF have been on the rise as borrowers claim they weren’t presented with accurate information about their eligibility.
“At the time the PSLF program was created, only an estimated 25% of the total loan portfolio consisted of Direct Loans,” said the Department of Education. This expects more people to qualify in the future as older programs phase out.
The Department of Education recommended submitting the employer certification form each year. This will make it easier to track your eligibility for the program. The first form was made available in 2012. So if you began work before then, the government will take longer to verify your status.
Note that the Department of Education makes the final decision. Even letters issued in the past saying you’re on track might not be binding.
The future of PSLF
No matter who benefits from PSLF now, the future of the program is in doubt. Legislation in Congress, known as the PROSPER Act, aims to end PSLF. Additionally, President Trump’s latest proposed budget suggests getting rid of PSLF.
However, there are expectations that those currently working toward PSLF will be grandfathered in and still receive their forgiveness if they qualify.
For now, consider whether working in a lower-paying job is worth the loan forgiveness. In some cases, it might make more sense to take a high-paying private sector job and pay off your loans early. Refinancing can help you lower your interest rate and payment if you’re in that situation.
If you want to stick with PSLF, double-check to see that your loans qualify. Additionally, make sure to turn in your employer certification form each year and track your qualifying payments.
Finally, if you think that PSLF should stick around, track the legislation moving through Congress and contact your representatives to let them know your position.
If you need help with a Federal Student loan reach out to us at Galler Law to schedule a free consultation with one of our experienced and compassionate student loan attorneys.