Married Couples PSLF 2020 Latest Updates – Advantages Tips.
Married Couples PSLF: It’s no secret that great minds think alike. That’s probably one reason why it’s common for people to choose a spouse based on their own profession. So I will help you in understanding PSLF as married couples.
Even if your spouse isn’t in a similar public service job, knowing how PSLF works—and how it impacts your family finances—can help you make an informed decision about what the right course of action for dealing with your student loans is.
Public Service Loan Forgiveness (PSLF)
Public Service Loan Forgiveness (PSLF) program is a United States government program that was created under the College Cost Reduction and Access Act of 2007 (CCRAA). This is to provide indebted professionals a way out of their federal student loan debt burden by working full-time in public service.
The program permits Direct Loan borrowers who make 120 qualifying monthly payments under a qualifying repayment plan; while working full-time for a qualifying employer, to have the remainder of their balance forgiven.
The earliest time in which borrowers could receive forgiveness under the program was after October 1, 2017. The Department of Education reported that 864 borrowers had their respective loans forgiven under the program as of March 31, 2019.
How to Qualify for Public Service Loan Forgiveness
To qualify for PSLF, you’ll need to make 120 qualifying payments while employed full-time in a government or non-profit 501(c)(3) position. These payments do not need to be continuous (i.e., you don’t lose your balance of qualifying payments if you take a temporary break to work for a private employer).
Each year you’ll need to complete an employment certification form and send it in. It’s not technically required to send it in each year, but you will need one on file for each year, so it’s easier to do it now rather than 10 years down the line. Then, after you’ve made 120 payments, you complete a form to apply for your loan balance to be wiped away like a Mr. Clean Magic Eraser.
Let’s be clear, your Federal student loans will always stay in your name. Your spouse will never hold legal liability to pay back your federal student loans for you, except in the unlikely event you receive an unfavorable court ruling in a divorce.
However, just because you’re technically on the hook for your loans and your spouse is on the hook for theirs doesn’t mean that each person’s loans won’t impact the other person.
The point is that you’d like to be responsible for your own student loan debt—and, legally, you are. But in reality, it’s not possible for you or your spouse’s loans to not affect the other person unless you never get legally married. Even then, if you live together in a non-married domestic partnership, it will still affect your joint finances.
Taking Advantage of Public Service Loan Forgiveness
It’s pretty common to have one or both spouses switch from a public service job to a private-sector job. After all, the paychecks are usually higher in the private sector. If you or your spouse think this is possible in the future, it might be better to go with the REPAYE plan.
Here’s why: while you’re paying off your loans, interest will continue to accrue. If the amount of interest that you’re supposed to pay each month is higher than your monthly payment amount under an income-driven plan, it will be tacked on to your loan balance, and it will continue to grow over time rather than shrink.
But, if you’re on the REPAYE program, the government will pay half of the difference between the interest owed and your annual payment, meaning that your loan balance will grow slower over time.
Let’s look at an example;
If Bob Loblaw owes $300 in interest as a part of his student loan payment. But, if his monthly payment amount is capped at a smaller amount—say, $200—there’s a $100 difference.
Then if Bob Loblaw is on a non-REPAYE plan, each month that $100 difference will be tacked on to his loan balance, and it will get larger over time.
But if Bob Boblaw is on the REPAYEprogram, the government will pay half the difference—$50—while the other $50 is tacked on to his loan balance. It will still grow over time but at half the rate.
If Bob Loblaw decides to leave his public service job and start a private practice with his wife Bobetta. He’ll have a much smaller balance to pay off or have forgiven over time thanks to the interest subsidies from the REPAYE program.
Finally, let’s look at a couple common questions we get from readers and clients.
1. What are the Public Service Loan Forgiveness Income Limits?
There are no income limits for the PSLF program.
However, if your income is high relative to the balance of your student loans, you might not qualify for an income-driven repayment plan. In general, we find a lot more high-income individuals would qualify for PSLF than they realize.
2. Is the Public Service Loan Forgiveness Grandfather Clause a Real Thing?
Not specifically. If any changes are made to the PSLF program (a very likely thing with the current administration), we feel 90% confident that current people in the PSLF program will be grandfathered in.
When new legislation is passed, this is typically what happens. However, it’s not a 100% guarantee, and new borrowers would not be eligible for the program anymore.
3. What is the Public Service Loan Forgiveness Maximum Forgiveness Amount?
There is currently no cap as to how much can be forgiven. In 2015 legislators tried to impose caps on the amount that can be forgiven, however, this was shot down. It shows that there is very little political will to impose caps on forgiveness amounts for this popular program.
4. Can I Consolidate My Student Loans With My Spouse?
No. Oddly enough, this is a question on the application form for Federal student loan consolidation, however, it’s not allowed under present rules. It’s a classic example of government bureaucracy falling behind itself with all of the rule changes.
5. Is My Spouse Responsible for My Student Loans if We Divorce?
It depends on which state you live in. The court splits your assets and debts during a divorce. And it’s possible that you could be assigned some of your spouse’s student loan debt. Not all states do this, however, which is why it’s necessary to consult with a divorce attorney.
The key is to make sure you’re not sticking your head in the ground trying to avoid thinking about your loans because they’re stressful. Use our free tips or hire someone to help figure it out for you.
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