Public Service Loan Forgiveness: When President Donald Trump took office in January 2017; many student loan borrowers wondered how their loans would be affected by the administration’s policymaking. Public Service Loan Forgiveness (PSLF) being one of them.
The news for Public Service student loan borrowers has not been good. Numerous reports show that 99% of Public Service Loan Forgiveness (PSLF) applications are denied. Will the Trump Administration take things one step further and eliminate the program entirely?
President Donald Trump will have a very difficult time eliminating PSLF. Borrowers are protected by federal law, the current political climate, and contracts with the government. Anyone considering PSLF should understand the threats as well as the protections that are in place. Read on.
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 get Public Service Loan Forgiveness (PSLF)
Most borrowers are denied because they don’t meet the program’s many requirements. But having your loans forgiven is possible if you follow the program’s rules.
Correct Type of Loans, or Consolidate
Only loans that are part of the federal Direct Loan Program are eligible for PSLF. Private student loans are not eligible.
You can consolidate other types of federal student loans. This includes; Federal Family Education Loan or Perkins loans — to make them PSLF-eligible. Do this as soon as possible, because any progress made toward forgiveness will be erased when you consolidate.
Become a Full Time Worker for a Qualifying Employer
Eligibility in the program depends less on the type of work you do and more on who your employer is. Qualifying employers include:
- Government organizations at any level.
- 501(c)(3) nonprofits.
- AmeriCorps or the Peace Corps.
- Nonprofit organizations that don’t have 501(c)(3) status but provide a qualifying public service as their primary purpose.
Complete an employment certification form to confirm that your employer qualifies. Send the form to FedLoan Servicing, the contractor that oversees PSLF for the department. When the form is processed, your loans will be transferred to FedLoan to be serviced going forward.
Submit a new form annually, or whenever you change jobs, to make sure you’re on track for forgiveness. You’re not required to submit the form every year, but it’s a good idea to do so for your records. You can also apply for forgiveness once you’re eligible and certify your employment retroactively.
Switch to Income-Driven Repayment
To count toward PSLF, your payments must be made on the standard 10-year plan or on one of the four income-driven repayment plans.
You’ll save the most money if you make all qualifying payments on an income-driven plan. If you make all payments on the standard plan, you’ll pay off the debt by the time you’ve made enough payments to qualify for PSLF.
Make 10 Years’ Worth of Payments
You must make 120 monthly loan payments. These payments must be made:
- For the full amount due.
- On time, meaning within 15 days of your due date.
- On or after Oct. 1, 2007.
- While you’re working full time for a qualifying employer and on a qualifying repayment plan.
Each qualifying payment must be a required payment, meaning extra payments don’t count. Payments also don’t count if they’re made while you’re in school, in deferment or forbearance, during a grace period, or if your loans are delinquent or in default.
The payments do not need to be consecutive. For example, you could make some qualifying payments, pause payments through forbearance and then resume repayment, picking up where you left off.
You can also change jobs, switching between qualifying employers and no qualifying employers. However, payments only count toward PSLF when you’re working for a qualifying employer.
Apply for Forgiveness
Once you’ve met all of the above requirements, submit the Public Service Loan Forgiveness application. You must be working full time for a qualifying employer when you apply.
Along with the application, you’ll need to submit an employment certification form for your current employer and each employer you had while making the 120 payments. If you’ve been completing these forms regularly, you’ll need to submit only one for your current employer.
FedLoan Servicing will notify you when it receives your paperwork. You aren’t required to make loan payments while it processes your application.
Trump Decision on Public Service Loan Forgiveness Program (PSLF)
As it stands today, the program gives public sector and non-profit employees who qualify for the program the ability to have their student loans forgiven after they’ve made 120 on-time, consecutive monthly payments.
How will President Trump’s budget impact Public Service Loan Forgiveness? Rather than modifying or simplifying the program, Trump would eliminate the PSLF program entirely, in the hopes that it would save taxpayers anywhere from $100 to $200 billion annually.
One thing to note, however, is that the PSLF program was created in 2007 by an act of Congress, so it would require a second act of Congress – or a bill being passed on Trump’s 2019 budget for higher education – to have it removed as a student loan forgiveness option. Print form NOW.
Trump repealing PSLF is likely but only for future borrowers who take out loans past July 1, 2018. Trump’s budget would also eliminate REPAYE, PAYE, and IBR and replace them with a 30 year version of IBR. This new plan will probably not have an interest subsidy like with REPAYE.
As part of the $350 million in funding allocated for the PSLF program, the Department of Education announced a new temporary program for borrowers denied PSLF approval. Known as Temporary Expanded Public Service Loan Forgiveness (TEPSLF).
This new program helps borrowers whose loans didn’t qualify for PSLF earn the same benefits as the original PSLF program.