Can Public Service Student Loan Forgiveness Help You?
By Louisa Quittman
Still have student loans? You may be able to get loan forgiveness - even if you thought you weren't eligible. While you may have read about dedicated teachers and other public servants making years of payments just to be denied over minor technicalities, the good news is that the program has made changes to make it easier to get your federal student loans forgiven. But it is important to know - some of these changes have a deadline of October 31.
Due to the Covid-19 national emergency, the US Department of Education (ED) has provided many forms of relief for federal student loan borrowers. PMI/PMF alumni will be particularly interested in ED’s decision to waive several rules related to the public service loan forgiveness (PSLF) program. These rules are waived until October 31, 2022, enabling more public servants to gain loan forgiveness, even if they previously were ineligible. ED estimates that 100,000 borrowers may now be eligible for forgiveness.
As with many things involving federal student loans, the details are complex, but the payoff may be very worthwhile if you have student debt, including multiple kinds of federal student loans. Once your loans are forgiven, you will not be required to make any more payments on them -- you will be free and clear.
Here’s some things to keep in mind:
You may be eligible if you have made 120 payments (generally paying for 10 years or more) on or after October 1, 2007.
Your payments may count even if they were made on different types of loans, including FFEL, Perkins and other non-Direct loans, such as Federally Insured Student Loans [FISL] or National Defense Student Loans [NDSL]). For payments on different types of loans to count toward PSLF, you need to consolidate them into a Direct Consolidation Loan by Oct. 31, 2022. You can log in to Aid Summary to find out how many and what types of loans you have.
Past periods of repayment will now count regardless of whether you made a payment, made that payment on time, for the full amount due, on a qualifying repayment plan. But, periods of deferment or forbearance, and periods of default, still do not qualify.
Borrowers seeking PSLF don't need to make payments until the extended automatic forbearance expires on August 31, 2022. As long as you're still working full-time for an eligible employer, those months of nonpayments will count toward the 120 payments needed to qualify for PSLF.
In other words, if you have not made payments since March 2020 and won't make another until September 1, 2022, you are still 29 months closer to forgiveness.
Normally, to get forgiveness, you must continue to work full time for a qualifying employer. This includes the US government (including US military, Peace Corps and Americorps), Tribal government agencies, state and local governments, and many non-profit organizations. However, under the waiver, until October 31, 2022, that is not required, so alumni who have left public service should still consider seeking forgiveness.
If you haven’t already, you must file a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF form).
According to the Internal Revenue Service (IRS), student loan amounts forgiven under PSLF aren’t considered income for federal tax purposes, so you won’t have a “tax bomb” on your federal taxes, although state tax rules may vary.
Learn more here: https://studentaid.gov/announcements-events/pslf-limited-waiver
Interested in learning more about the PSLF and recent changes? Want to see if you might be eligible? Join us on April 28th when we will host Ashley Harrington from the Department of Education as part of a special, Extended Couchella Session. Register here!
Louisa Quittman is a PMI Alumni who has worked for more than 20 years at the U.S. Department of the Treasury on community development, financial inclusion, and financial education. She led the development of the Financial Literacy and Education Commission’s 2019 Best Practices for Financial Literacy and Education at Institutions of Higher Education. Louisa serves as a PMAA board member.