Here’s What Happens to the Public Service Loan Forgiveness Program
Yesterday we touched on the core requirements of the Public Service Loan Forgiveness program and the need to strengthen federal oversight of student loan companies, but I received a number of questions about the overall status of the program, such as the following from chonkeyhong :
What Happens to Public Service Loan Forgiveness? I have heard all sorts of things about the termination of the program or about people being denied forgiveness for a loan. I applied many years ago and have not received a proper response. I’m going for 9 years of public service. Is it too late for me to do this?
And Chris:
Eight years ago, as a graduate student, I heard a call from the federal government that it needed more civil servants and agreed with them on the deal they proposed: if I worked in the public or nonprofit sector for 10 years, they would excuse any remainder.
So I decided to make a deal. I have two years left before I obediently follow through on my end of the bargain. I worked in urban education for eight years, I consolidated my government loans, I stayed in the income-based repayment program, and I re-confirmed my job annually with my loan agent.
And now that I’ve finally gotten to the point where the federal government has to keep its end of the deal, I’m very worried about whether they’ll do it or not. Rumor has it that they have no intention of forgiving these loans to government officials. I, for one, will be furious if this happens. I sacrificed a lot to fulfill my end of the bargain. Not only did I work in low-paying jobs compared to my options in the private sector, but as per the requirements of their PSLF program, I participated in income-based payment programs. With wages so low over the years, this has resulted in very low monthly payments, which in turn has resulted in the balance actually increasing over the eight years rather than decreasing. I’ll be stuck with what is now a whopping $ 65,000 and saddled with a monthly payment for years that rivals my mortgage.
I firmly believe that if this has even the remotest opportunity to materialize, the federal government should immediately report it to the people. It would be unspeakably unethical for the government to allow millions of civil servants to keep doing their part of the bargain, only to have the government on their side when their turn comes.
How do you rate the status of PSLF? Are my concerns and those of my colleagues true?
So let’s dive deeper into program state and everything else you need to know.
Government Service Loan Forgiveness State
According to the experts I spoke with, the government is unlikely to backtrack on its current promises to the PSLF. In fact, Congress has just allocated an additional $ 350 million on a first come, first served basis for government officials who thought they were enrolled in the program and were eligible for forgiveness in October 2017, but made mistakes such as being in the wrong type of repayment plan (for example , phased or extended repayment plan).
“Republican-controlled Washington gave more money to a program they didn’t need,” said Travis Hornsby, founder of Student Loan Planner . “So the chances that they are going to cancel it are negligible or nil.”
At least for people who went to school from 2007 to the present. The program is unlikely to continue indefinitely, but student loan expert Mark Kantrowitz says those already enrolled in the program are likely to be expelled if Congress halts the program in the coming years. “Usually when they make changes, the technical way it is described in the bylaws means that the ‘new borrowers as of date X’ will no longer be eligible,” says Kantrowitz.
October was the first time people were eligible for the program, and it doesn’t seem like anyone has been forgiven for a debt through the program, which Chris detailed in his question is incredibly demanding. “For someone to be forgiven last year, they would have to line up all of their ducks,” says Kantrowitz, who said he analyzed the latest Ministry of Education data that found fewer than 650 borrowers nationwide made at least eight years. timely payments.
To be eligible for forgiveness, you will need to make 120 payments on time (10 years of monthly payments) under a direct loan, income-based repayment plan, and work for a 501 (c) (3) nonprofit or government entity. Private loans are not accepted. There are many fields to check.
On the right track
So how do you collect all the ducks in a row? Not counting on a student loan serving you. You need to take the initiative to make sure you are doing everything right, and check with your loan agent twice and three times throughout the year to keep everything in top condition.
The Department of Education contracts with private companies like Nelnet, Navient, and Mohela to process and track payments, but as I wrote yesterday, there are really no federal laws governing how they do this. This means that it is very likely that your service staff will screw up the business, and it will not hurt them, when it does, it will hurt you. It is not uncommon for the agents you speak to provide you with incorrect information or withhold information from you, Kantrowitz says. As Susan Dinarski writes in the New York Times , “[s] ay the borrower is delaying his monthly payments and her lending company is calling to check on him. The rules are complex and the individual call agent’s responses are critical. “
It’s within the likelihood that the person you are calling will make a mistake, and this study by Daniel Herbst, PhD in economics at Princeton University, has shown that any agent who takes your call does affect your financial well-being. when he analyzed thousands of student loan service records. As Dinarsky writes:
Mere inclusion in an income-based repayment program reduced delinquencies by 21 percentage points to almost zero. Those who enrolled in the income-based program were 2 percentage points more likely to get a mortgage (a significant increase from the 20 percent baseline), likely reflecting the rise in home ownership. And they paid off their student loans faster than those who were enrolled in the standard plans, in which payments are fixed for 10 years and are independent of income.
“The government selected these service centers on a cost basis, which means you get help at the lowest cost,” Hornsby says. “You must take some responsibility for your situation.”
And in many cases, the service staff have no incentive to offer you the right payment plan. “Lenders are not going to spend a lot of time with you to make sure you get it right, they may not provide information voluntarily, there is a limit to what they have to do and a limit to what they are willing to do. do on top of that, ”says Kantrowitz. So call and ask to be included in an income-driven repayment plan (Kantrowitz says to use Pay As You Earn (PAYE) if you qualify) and if the agent isn’t helping or you suspect they don’t know what they are doing, hang up and call back to talk to someone else.
And this is not a one-time situation; you will have to constantly check your status for 10 years. According to Kantrovitz, any changes (such as consolidation attempts) could cause your service company to include you in a different repayment program, which means you won’t be eligible for forgiveness. “The income-based repayment plans are complex and the lenders servicing these direct loans don’t get a lot of money if you make payments on time,” he says. It will be better for them if you are late in payments or have a different repayment plan. So check back once or twice a year to make sure everything is in order, and send a recertification sheet every year.
This needs to be monitored, but unfortunately it is necessary. The Consumer Financial Protection Bureau, which in theory should hold service providers accountable for shady practices, is currently stagnant, with Republican Mick Mulvaney at the helm, and Education Secretary Betsy DeVos has warned states not to control service companies (not to mention which is little federal oversight). This means that no one will come to your aid.
Other options for forgiveness
Again, all of the above is very difficult and not applicable to many borrowers. If you are not PSLF eligible, you can try to be forgiven through an income- based payment plan after 20 or 25 years. “Everyone in the country can pay off 10 percent of their income for 20-25 years and then the loans are forgiven,” Hornsby says. “Forgiveness like that could save the life of someone who works for a private employer with a lot of student debt.”
Here are the requirements for this type of forgiveness for the Student Loan Hero :
- Eligible Loans: Subsidized and unsubsidized direct loans, Direct Grad PLUS loans, FFEL Stafford subsidized and unsubsidized loans, FFEL PLUS graduate loans, Federal Perkins loans if combined, direct consolidation loans
- You must make regular payments over a period of 20-25 years (depending on how much debt you have).
This is a good option if you have a lot of debt but are likely to receive low income. And it’s important to remember that in this case, the amount of the forgiven debt will be taxed as income – so you could potentially run into a fairly large tax bill (those who qualify for the PSLF will not pay taxes on the forgiven debt).
If you are eligible for PAYE, your payments will be limited to 10 percent of your discretionary income over 20 years. Revised Pay As You Earn, or REPAYE, is similar, but there are no income requirements (so you can end up paying quite a lot if you have a high income). You can apply for the payment of payments depending on income online StudentLoans.gov , and on other opportunities to read here . Here is a step-by-step description of how to register .
Again, if you meet the PSLF eligibility requirements, then by all means try to do so, but know that it will take a lot of effort on your part to make sure everything is in order. And if you pay off your debt for years to come, double check that you are on the right track.