Blog,  Student Debt

Expecting Public Service Loan Forgiveness?

The wheels of progress move slowly in Washington. Nowhere does this seem more true than when it comes to reform of student loan programs. There were campaign promises of $10,000 credits for all borrowers. There were campaign promises of wiping out the debt of anyone who attended a state university. For all these promises, over the last year there has been little substantive change. The one possible exception is the Public Service Loan Forgiveness program. 

The Public Service Loan Forgiveness Program (FSLF) is designed to forgive the remaining balance of federal direct loans of borrowers who work full-time (30 hours or more) for a “qualified employer” and make 120 “qualifying” monthly payments. Qualified employers include government organizations (federal, state, local, or tribal), and many not-for-profit organizations. So veterinary jobs in academia, the armed forces, animal shelters, rescue organizations as well as public health positions should qualify. 

Why is forgiveness so hard?

Despite appearing straight forward, historically, the chance the chance of getting loan forgiveness has been lower than the chance of being accepted to Yale. Rejection rates in some years have been as high as 99%. For some applicants (24%), there is the issue of incorrectly filled out paperwork. Accuracy counts when you are asking for a few $100k of loan forgiveness. For others (55%), payments didn’t count because they were not “qualified.” Any payment that was for more than the required monthly payment or paid before / after the due date were deemed “not qualified.” So a payment made for more than the minimum amount and made a day before the due date didn’t count. Ridiculous, but true.  For others (15%), the issue seems to involve being in the wrong repayment plan. Only payments made on non-defaulted federal Direct loans count. Loans under other federal student loan programs didn’t qualify. So you could make 120 payments for exactly the correct amount exactly on time and none of it mattered because you loan wasn’t in the William D. Ford Federal Direct Loan Program. 

Public Service Loan Forgiveness Program – Whats new?

What’s New? The education department has issued a limited waiver through October 2022. Essentially, payments previously made to any federal student loan (other than parent PLUS) will now count toward PSLF. In addition, payments made early or late are now be considered “qualified.” As long as you worked for a “qualified employer” payments made to any federal plan will be accepted. The catch? If you don’t have a Direct loan (e.g., Federal Family Education Loan) you have until October 2022 to consolidate into the correct loan program. 

If you qualify, the Public Service Loan Forgiveness Program is phenomenal way to erase student debt. Don’t let this opportunity pass. Also, don’t forget, every year (or if you change employers) you have the opportunity to submit an Employment Certification Form. This allows the Department of Education to verify that your payments and employer are “qualified.”  If you do not submit the PSLF annually, then at the time you apply for forgiveness, you will be required to provide employment certifications for each employer. If you wait until the end and there is an issue, it will be too late to correct the error. Don’t wait!