PSLF is Not A Waste of Time - Due Diligence is Key
I believe the media has done a fantastic job scaring people out of trusting that the Public Service Loan Forgiveness (PSLF) program will do what it was designed to do:
Provide Loan Forgiveness for Public Service Employee Borrowers [who spend at least 10 years working in a public service profession and make income-based payments through the Direct Loan program] by having their remaining loan balances forgiven after 10 years.
For some background, 2017 was the first year borrowers could potentially see balances forgiven since this program was enacted in 2007 under The College Cost Reduction and Access Act of 2007. Public service attorneys played a large part in lobbying for this legislation - Congress enacted the program in 2007 with the goal of helping people pursue often low-paying government and public service jobs by allowing them to discharge the remainder of the federal student debt after 10 years.
My take: Forgiveness is DEFINITELY achievable and is a fantastic option if you are eligible, but this route does require YOU to do your due diligence on your loan situation on the front-end to verify your eligibility to ultimately achieve forgiveness successfully. This is where technicalities DO matter, and knowing your full loan situation is imperative.
To insure you know you qualify (fully) for PSLF, there are specific things you need to make sure you know about your loans and do as soon as you graduate, or ASAP, in regards to your repayment plan - NOT try to figure it out years later. 1️⃣ You need to make sure your loans qualify: ONLY Direct loans qualify for PSLF. If you have FFEL loans, or any loan that does not have DIRECT in front of it, those do not qualify for PSLF unless you consolidate them into a Federal Direct Consolidation Loan.
*Weigh the pros & cos of Consolidation - see my blog titled "Pros & Cons to Federal Consolidation"* 2️⃣ You need to make sure your employer qualifies/is approved for PSLF & complete the PUBLIC SERVICE LOAN FORGIVENESS (PSLF): EMPLOYMENT CERTIFICATION FORM. Employment with the following types of organizations qualifies for PSLF:
Government organizations at any level (federal, state, local, or tribal)
Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program
3️⃣ You must work full-time for this qualifying employer. You are generally considered full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater. 4️⃣ You must pay your loans on an Income Driven Repayment (IDR) plan. Current plans you could be eligible for depend on your loans and borrowing dates but could be ICR, IBR (new or old), REPAYE, or PAYE.
ICR: Payment based off of 20% of discretionary income
Old IBR: Payment based off of 15% of discretionary income
New IBR: Payment based off of 10% discretionary income; You qualify for New IBR if you borrowed on or after 7/1/2014 and had no outstanding loans prior to
PAYE: Payment based off of 10% discretionary income; You qualify for PAYE if you did NOT have loans outstanding prior to 10/1/2007 AND you must have borrowed on or after 10/1/2011
REPAYE: Payment based off of 10% discretionary income
5️⃣ Then finally, You need to make 120 qualifying payments - essentially 10 years of on-time payments, re-certifying your income each year. A qualifying monthly payment is a payment that you make:
After Oct. 1, 2007
Under a qualifying repayment plan
For the full amount due as shown on your bill
No later than 15 days after your due date
AND while you are employed full-time by a qualifying employer
So in summary, forgiveness is definitely achievable and is a very real option if you are eligible, but as you may have noticed, it requires YOU to do your due-diligence on ALL THE ABOVE to insure your loan situation all qualifies.
Speak to a Certified Student Loan Professional™ if you have questions or concerns around qualifying for PSLF.
Meagan Landress, CSLP®
Certified Student Loan Professional™
Financial Coach Meagan