How To Take Advantage Of The Student Loan Forgiveness Changes – Forbes Advisor
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For nonprofit and government employees, the Public Service Loan Funding Program (PSLF) sounded like a dream come true. The promise was simple: After working full-time for at least 10 years and paying off the debt, the federal government would cancel the student loans.
In reality, it turned out to be a lot more complicated. According to the last available data, qualified by 30th
To address the problems of the program, the US Department of Education announced changes to the PSLF rules. The changes announced on October 6th are for a limited time, but may expand student loan issuance to more borrowers.
Overview of PSLF updates
The U.S. Department of Education changed the PSLF program to help borrowers struggling with their college debts. The move temporarily expands the number of loans that are eligible for PSLF and removes some of the loan waiver payment requirements, making it easier to qualify for the program.
What counts as a qualifying payment for PSLF?
The most significant change to the PSLF program concerns qualifying payments. Previously, you had to enroll on a qualifying payment plan in order to participate in the PSLF. Prior to the changes, only payments under an income-based repayment plan (IDR) could be offset against the PSLF. However, with the new changes, whatever payments you make will count towards the number of payments required, regardless of your repayment schedule.
For example, if you made payments under a standard repayment plan before signing up for an eligible IDR plan, those payments can now be counted towards the monthly payment request of 120.
The changes are retroactive. If you have previously made payments for your student loans that were not counted towards the PSLF, you can have these counted now.
Which loans are suitable for PSLF?
Before the US Department of Education announced changes to the program, only federal direct borrowers were eligible for PSLF. Borrowers on other types of federal student loans, such as Perkins loans or Federal Family Education Loans (FFELs), did not qualify.
But that has now changed. If you have FFEL or Perkins loans, you can qualify for PSLF – and get credit for payments you’ve made in the past – as long as you consolidate your debt with a direct consolidation loan through October 31, 2022.
What stays the same
Most of the requirements of the PSLF program are unaffected. Borrowers must still meet the following criteria:
- Credit type: Borrowers must have federal student loans. Private student loans are not eligible for PSLF.
- employment: Applicants must have worked full-time for a qualified nonprofit or government agency for at least 10 years.
- Payments: The borrower must make 120 monthly payments to qualify for waiver.
How do I use these new rules?
Although the changes take effect immediately, they are not all applied automatically. There may be a few steps you may need to take to get credit for past payments or to track PSLF with FFEL or Perkins loans.
If you have direct loans
If you have federal direct loans and have not yet submitted a PSLF form or certificate of employment, be sure to complete and submit the PSLF form by October 31, 2022. If you do not submit your form by this date, you will not be able to receive credit for past payments. You can download the PSLF form online using the PSLF help tool.
If you have FFEL or Perkins loans
For FFEL or Perkins loan borrowers, you must consolidate your loans with a direct consolidation loan by October 31, 2022. If you do not consolidate by that date, you will not receive credit for the payments you have made. After you’ve consolidated your loans, submit a PSLF form to your loan service provider.
Note: If you have FFEL or Perkins loans, the PSLF Help Tool may indicate that your loans are ineligible, but that’s just because the tool hasn’t been updated to reflect these changes. According to the Federal Office for Student Funding, it can take several months until the tool is updated. You can still certify your employment eligibility or apply for consolidation, but you cannot yet use the tool to submit a PSLF application.
When you have PLUS loans
PLUS loans include Degree PLUS loans and Parent PLUS loans. PLUS loans are made under the state direct loan program and are eligible for PSLF, but there are some key differences.
- Degree PLUS: Degree PLUS loans are eligible for all IDR plans and do not need to be consolidated first to qualify. To track PSLF, borrowers should submit a PSLF form and use the PSLF Help Tool to ensure their payments and employment are eligible for the program.
- Parents PLUS: The changes announced by the US Department of Education do not apply to Parent PLUS Loans. Parental loan borrowers can only qualify for PSLF if they consolidate their debts with a direct consolidation loan and sign up for an earnings-based repayment plan – the only IDR plan parents are eligible for under current regulations.
What if i don’t know what type of loan i have?
It’s not uncommon for you to be unsure of what types of student loans you have. Many college graduates leave school with eight to twelve different loans so it’s easy to get confused. You can use one of the following approaches to find out what kind of credit you have:
- Register on the Bundesstudienhilfe website. You can use your FSA card to log into the Federal Student Aid website. It will tell you what loans you have and which loan service provider is processing them.
- Call the Federal Student Support Information Center. Call 800-433-3243 to speak to a representative.
What if I still have questions?
If you have any questions about PSLF and whether or not you are eligible for the program, here are the resources you can use:
- Contact your credit service provider. Your credit service provider is your main contact for questions about your loans, repayment plans, and waiver applications. Call or email your Customer service department of the credit service provider for help.
- Use the PSLF help tool. Use the PSLF Help Tool to find out if your employment and loans are waiverable. Based on your responses, the tool will also generate the required forms that you need to fill out to confirm your employment and apply for PSLF.
- Visit the website of the Federal Office for Student Support. On the website of the Federal Student Office you can find Updates to the PSLF program and get answers to frequently asked questions.
Note: FedLoan Servicing is the designated PSLF credit service provider. However, the company announced in September that it would no longer service federal student loans after its current contract expired. Borrowers who are currently with FedLoan Servicing and borrowers who wish to track PSLF will be transferred to another loan service provider in the coming months. To make sure you don’t miss any notifications, make sure your loan service provider has your most up-to-date contact information.
Strive for lending
While the PSLF program can be confusing, recent changes will make loan waiver more accessible to more borrowers. If you work for a nonprofit or government office and have federal student loans, the more likely you will qualify for PSLF – and get loan waiver months or even years sooner than expected.