Act Now, Become Debt Free with PSLF!
You could save you thousands of dollars thanks to temporary changes to the Public Service Loan Forgiveness (PSLF) program. The Department of Education announced the Limited Waiver Program last fall. But time is running out! Military service members and federal employees need to act before October 31, 2022 to cash in.
Who is eligible for PSLF?
The PS in PSLF stands for public service. Full time (active duty) service members are all eligible. So are those of you working full time for state governments and most non-profits. This includes hospitals, schools, libraries, emergency services, and public interest law. Public Service depends on the organization you work for, not the actual job you do.
What is PSLF?
The LF in PSLF stands for Loan Forgiveness. That means as long as you make 120 qualifying student loan payments (that’s 10 year’s worth) you won’t have to repay the rest of your student loan balance. “Poof” your student loan payments disappear! No more debt. And you won’t owe tax on the loan forgiveness benefit you receive either. This can be a massive value depending on your circumstances.
How to Participate?
You work for a qualifying employer full-time (see above). You have federal Direct Loans. Once you make 120 on-time monthly loan payments to a qualifying loan, you apply for forgiveness.
Federal Family Education Loans, Federal Perkins Loans, and Graduate Plus Loans are NOT federal Direct Loans. Loan payments under those programs didn’t count toward forgiveness. To qualify now, you must consolidate those loans into a federal Direct Loan.
If you were late to the consolidation party, you may have made months or years of federal loan payments that didn’t count toward forgiveness. Don’t dismay. Read on to the Temporary changes.
Why the changes?
It turned out in practice, PSLF was an unfulfilled promise. The goal was to provide debt relief to public servants by cancelling student loans after 10 years. But many borrows didn’t understand the requirements, were misled by loan servicing providers, or never even qualified in the first place. The Department of Education denied loan forgiveness to almost all initial PSLF applicants. Recent changes are supposed to correct some of this and fulfill the PSLF promise.
What has changed with PSLF?
Temporary Change #1 (Almost) All Past Loan Types Can Count
Good news. If you consolidate your federal student loans now, any payments you made in the past in will count toward your 120 payments. BUT only if you consolidate to a federal Direct Loan by October 31, 2022. This do over is a limited time opportunity!
Don’t know what kind of federal loans you have? Log into your account on StudentAid.gov https://studentaid.gov/fsa-id/sign-in/landing . Go to the My Aid page StudentAid.gov/aid-summary/. Scroll down to the Loan Breakdown section. There, you’ll see a list of each student loan you have borrowed, even if you have paid the loan off or consolidated it into a new loan. Direct Loans begin with the word “Direct.” This is what you want.
If you have Federal Family Education Loans (start with “FFEL”) or Perkins Loans (include the word “Perkins”) consolidate–DON’T refinance. Consolidate into a federal Direct Loan by October 31, 2022. Get all the details for consolidation at https://studentaid.gov/app/launchConsolidation.action.
Once you consolidate your loans into a Direct Loan, your previous payments will count toward PSLF retroactively. You could have your loan balance forgiven months or even years sooner.
Note, Parent Plus loans did not qualify before, can’t be consolidated into a Direct Loan, and still won’t qualify now.
Temporary change #2 Any Past Payment Plan Qualifies for PSLF
Past payments under any repayment plan now count toward loan forgiveness. You have to enroll in an Income Driven Repayment (IDR) plan like ICR, IBR, PAYE, and REPAYE payment plans to benefit from PSLF.
Now PAST payments made under any repayment plan count toward your 120 payments. These payments are supposed to be automatically recounted, but you’ll want to keep an eye on it.
If you’re not in an Income Driven Repayment now, change to one so future payments will also count.
Temporary Change #3 All Past Payments Can Count towards PSLF
Many previous loan payments did not count toward PSLF due to technical requirements. This includes wrong payment plan, timing, or amount of a payment. Some borrowers missed out because their payments were off by one or two pennies or late by a few days.
As a fix, the Department of Education will automatically adjust the count for payments made on or before October 31, 2021 if you have certified some employment. This look back is a temporary benefit. If you have not applied for PSLF forgiveness or certified employment, do it by October 31, 2022 to get all those payments counted.
Service members on active duty can qualify for student loan deferments and forbearances. This is to help you through periods where service inhibits your ability to make payments. But often in the past, those same deferments or forbearances did not count toward PSLF. Federal Student Aid is supposed to implement a process to address this and update affected borrowers. Watch out for this too.
And one last improvement coming down the pike. The Department of Education announced it will begin automatically giving service members and federal employees credit for PSLF by matching Department of Education data with information held by other federal agencies. So be on the look out for that! In the meantime keep rectifying your employment history.
More Help on PSLF
Where can you go for more information? You can read the entire Department of Education announcement: https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul
For help with all things PSLF, tons of helpful information, and the PSLF application, go to the official website at https://studentaid.gov/pslf/
Act Now to Qualify!
#1 You must work for a qualifying employer such as the military, state and federal governments and most non-profit organizations.
#2 You must work full-time.
#3 You must have federal direct loans. If you have other federal student loans, consolidate into a direct loan before October 31, 2022.
#4 You must be in an Income Driven Repayment (IDR) plan. If you aren’t in IDR yet, switch by October 31, 2022.
#4 Make 120 on-time monthly payments. Under the temporary waiver all virtually all past payments will count. This one time boost may help push you over the line sooner than you think!