What you need to know about public service lending revision
US Secretary of Education Miguel Cardona.
Bloomberg | Bloomberg | Getty Images
After paying off her student loans since 2005, Karen Tongson is finally debt free.
In November, Tongson, a professor of English and gender studies, checked into her credit account and found that her credit had gone from $ 47,000 to $ 0 thanks to the public service loan program.
Enacted in 2007 by then-President George W. Bush, this program allows nonprofit and state employees to cancel their remaining federal student loan after 10 years or 120 payments.
However, the program is fraught with problems and rejections, with borrowers often believing they will pay their way to loan cancellation only to learn at some point in the process that they do not qualify, often for strange and obscure reasons. Lenders have been accused of misleading borrowers and miscalculating their qualifying payments.
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“I noticed a lot of my payments weren’t counted,” said Tongson, 48. “And I never understood why.”
Tongson’s surprise last fall was due to Corrections made by the Biden administration to the loan program. It has reevaluated borrowers’ applications and recounted their payments, and it estimates that more than 500,000 people are now closer to getting a loan.
The U.S. Department of Education also reimbursed Tongson for $ 20,000 for her year-long overpayments, and many other borrowers are likely to face reimbursements as well, experts say.
Here is what borrowers should know about the program’s updated rules.
To get your student loan waived under the PSLF, you must have made 120 payments over a 10 year period while in a public service position.
The problem the Biden government is working to fix is that many borrowers are being told by their lenders that they have made fewer payments than they actually have, or that some of their payments are due to technical reasons, e.g. loan they hold up or be a month late.
Now, in order to give people the proper credit for their payments, the administration is not checking the number of your qualifying payments, it is checking the months that you have said it was back Elaine Griffin Ruby, senior executive and communications specialist at Edvisors.
Even if you didn’t make student loan payments during the government’s pandemic hiatus, those months still count towards public service loans, Griffin Rubin added.
“Payments made under any repayment plan under a state student loan program may count,” said Mark Kantrowitz, a college expert. “This includes partial payments and late payments.”
You want to act as soon as possible, said Kantrowitz. That’s because the Biden administration’s new rules for granting public sector loans are set to expire on October 31, 2022.
If you have either a Federal Family Education Loan (FFEL) or a Federal Perkins Loan that don’t normally count towards public service loans but now do so temporarily, you will need to consolidate them into direct loans with your servicer.
“It usually takes 30 to 45 days for the consolidation to take place,” said Kantrowitz.
“Borrowers should do this even if they don’t expect 120 payments by the deadline as the previously ineligible payments only count if they do,” he added.
In addition, borrowers are also required to provide evidence that their work has been viewed as a public service for the period of time they attempt to be credited for forgiveness. To do this, you should contact your servicer for a so-called Employer certification form for every employer you’ve had throughout your timeline.
Borrowers who are currently unemployed or not in the public sector may still be eligible for forgiveness as long as they have made 120 qualifying payments in the past, Kantrowitz added.
Some borrowers seem to automatically receive forgiveness after the government examines these accounts, but by following these steps you can take advantage of the new rules.
“All payments over 120 will be automatically refunded as long as those additional payments are made after consolidation,” said Betsy Mayotte, President of The Institute for Student Loan Advisors, a non-profit.
If some of your payments were not eligible for any reason other than an illegible credit type, you should still get a refund as long as you have reached those 120 payments.
The refunds shouldn’t have any tax implications, Mayotte said.
“However, some states tax the amount waived under the PSLF,” she added.