More than half a million Americans are working toward Public Service Loan Forgiveness (PSLF), a program that eliminates federal student loan debt for people with jobs in the public sector. But the proposed 2018 White House budget reportedly calls for ending PSLF for future borrowers — and even current participants’ status could be in doubt, with a lawsuit claiming the government has reversed previous assurances given to certain borrowers that their employment qualifies.
Final decisions have not yet been made in either scenario. But even with this uncertainty, there are steps both current borrowers and interested potential future PSLF participants can take to make themselves as secure as possible.
First, a quick primer on PSLF: The program began in October 2007 under George W. Bush, and it wipes clean the remaining federal student debt for qualifying borrowers who have made 120 payments, or 10 years’ worth (more information is available at StudentAid.gov/publicservice). So the earliest any public service worker could receive loan forgiveness under PSLF is October 2017.
“The idea is to avoid making debt a disincentive to choosing public service,” explains Mark Kantrowitz, a student loan expert and publisher at college scholarship site Cappex.com. “Think about a public defender. They might make $40,000 a year, but they’ll incur $120,000 in debt for law school. That debt-to-income ratio is impossible, so PSLF makes that career path possible — and attracts people who might have otherwise taken high-paying private-sector jobs.”
The two current scenarios that throw PSLF into question: The big one is President Donald Trump’s 2018 White House budget proposal. As reportedly written, the budget would eliminate PSLF — citing costs — and replace all current income-based repayment/forgiveness plans with a single income-driven system. While existing borrowers would be grandfathered into PSLF, any new students who take out their first federal loans on or after July 1, 2018, would not qualify. Still, all of this can happen only if Congress passes the budget — and it remains to be seen whether this section will pass as currently written in the proposal.
But even existing borrowers working toward PSLF can’t fully relax. As first reported by The New York Times, the Department of Education added a serious wrinkle by sending letters to people saying their employment was no longer eligible, after the borrowers had confirmed with the PSLF servicer that they qualified. Four borrowers and the American Bar Association have filed a lawsuit against the department, and the case is currently in progress.
What to know if you’re an existing borrower planning to take advantage of PSLF: If you’re one of the more than 550,000 borrowers who is already working toward forgiveness — that is, you have already taken out at least one federal loan and/or you’ve completed school and are working in public service — the proposed cancellation of PSLF won’t affect you.
Qualifying for PSLF depends on meeting several specific requirements, though, so it’s important to make sure your loans and employment check all the boxes.
Here are 5 ways to tell if you qualify for Public Service Loan Forgiveness:
1. Your loan qualifies. PSLF provides forgiveness only for federal Direct Loans — see this official PSLF handout for more information. Note that loans made under other federal student loan programs may become eligible for PSLF if they’re consolidated into a Direct Consolidation Loan, but only payments toward that consolidation will count toward the 120-payment requirement.
2. You’re enrolled in the right type of repayment plan. You must be enrolled in one of the Direct Loan repayment plans, some of which are income-based. The umbrella term for these plans is income-driven repayment plans, which include the Pay As You Earn and Income-Based Repayment plans. While payments under other types of Direct Loan plans, like the 10-year Standard Repayment Plan, do qualify and count toward your 120 payments, you’ll want to switch to an income-driven plan as soon as possible — because if you stick with a standard 10-year repayment, you’ll have paid off your loan in full after 10 years with nothing left to be forgiven under PSLF. Check the official PSLF site for more details. And note that private loans, including bank loans that are “federally guaranteed,” do not qualify.
3. You make 120 on-time payments while you’re employed full time by a public service organization. If you drop to part-time work, those payments won’t qualify. You must also be employed full time in public service at the time you apply for loan forgiveness and at the time the remaining balance on your eligible loans is forgiven. After you make your 120th payment you’ll need to submit the forgiveness application, which the Department of Education says will be available in September 2017.
4. Your employer counts as a public service organization. This is the big one. The types of employers that qualify include governmental groups, not-for-profit tax-exempt organizations known as 501(c)(3)s, and private not-for-profits. That last category includes military; public safety, health, education, and library services; and more.
ON A MOBILE DEVICE? CLICK HERE TO SEE THE LIST OF QUALIFIED EMPLOYERS.
5. You certify annually that your employer is included in the program. Each year and whenever you change employers, you should fill out and send an Employment Certification form to FedLoan Servicing, which handles PSLF. The form isn’t required, but it helps you keep track of progress toward your 120 payments and ensure there is no change to your eligibility.
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