Kristen Ahlenius — If you’re familiar with the college space - whether as a borrower, lender, parent, student, or partner - you’re likely aware of the burden of student loans. The cost of higher education keeps rising and families every day sign for thousands of dollars of debt. I fear, too often, the reality of this financial burden isn’t realized until the payments become due after graduation. Once repayment begins, I’m often asked if there is anything a borrower can do about their monthly payment. There is (currently) a program which offers forgiveness to a specific subset of borrowers and it’s called Public Service Loan Forgiveness (PSLF). If you’ve seen much about this program you’ve probably heard the claims about only 1% of persons being awarded forgiveness. However, the vast majority of these applications were denied due to incomplete information and failure to meet the criteria stated below. If attempting to qualify for this program it’s crucial that you understand what loans qualify, how long you need to pay, and how to make payments in the interim. The first thing you need to do if you’re trying to determine if you qualify for PSLF is identify from whom you borrowed money. If the funds borrowed were distributed from a private company you do not qualify for PSLF. If your loans are “federal” loans you need to determine the loan type as only “direct loans” are eligible for PSLF. Perkins loans and private loans are NOT eligible for PSLF. As of the date of this blog, a large portion of student loans are on administrative forbearance due to the COVID-19 pandemic. If your loans were automatically part of this forbearance, you should have direct loans. Ergo, your loans are PSLF eligible. Loans which were not automatically included in this forbearance are part of one of the other programs (FFEL, Perkins, or private). These loans are not PSLF eligible. If you’re reading this piece post-forbearance or if you’re still unsure, go ahead and give your loan servicer a call. Once you’ve established loan eligibility you need to determine if your employment qualifies for PSLF. To be eligible for PSLF you must work for a qualifying employer. If you work for an organization of the government, a not-for-profit, or an organization that provides qualifying public services, your employment might be eligible for PSLF. You must work full-time for this employer, which is defined by a minimum of 30 hours/week of work. Finally, if you meet the above criteria you must then make 120 qualifying payments (10 years of payments). For a payment to certify as 1 of the 120 payments the payment must be made on time, in full, and under a qualifying repayment plan. The qualifying repayment plans are:
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Pay As You Earn Repayment Plan (REPAYE)
- Income - Based Repayment Plan (IBR)
- Income - Contingent Repayment Plan (ICR)
There are a few miscellaneous items to note regarding PSLF:
- Payments must be made, in full, no later than 15 days after they’re due. If a payment is made after it’s not considered a qualifying payment
- Payments made which are not required do not count toward PSLF. If your loans are in deferment, forbearance, or you’re still enrolled full time payments made will not count toward PSLF.
- PSLF is not automatic
- Government contractors are not eligible for PSLF as they are not directly employed by the government or a government agency.
There are several nuances within the PSLF program. The only way to be 100% certain your payments, employment, and loans are eligible is to complete the PSLF Certification Form. This form must be completed by both you (the borrower) and your employer. Once complete, the form must be sent to FedLoan Servicing. You will receive a letter stating how many qualifying payments you’ve made of the 120 payments. I recommend completing this form annually to ensure you are tracking as expected toward your 120 payments. If your hope is to receive any amount of student loan forgiveness, it’s very important to know the steps that lie between you and said forgiveness. If it is your hope to receive PSLF, please be your own advocate. Ensure you’re on the right payment plan, always make your payment on time, and certify your employment annually to ensure you’re progressing as expected. ****During the current administrative forbearance your required monthly payment is $0. These “payments” are considered qualifying payments for PSLF as long as you are still working full time and have Direct Loans. You will still need to have these payments certified annually.