Public service loan forgiveness guidelines: what you need to know


Public service loan forgiveness eligibility program is temporarily extended until October 31, 2022, so that it now includes borrowers who have older loans that were not originally eligible as well as those who were in the wrong repayment plan but who met the other requirements.

More than 550,000 people could have their debt written off sooner than expected due to changes to the PSLF, the education ministry said. This includes 22,000 borrowers who are immediately eligible for debt relief.

This is what student loan borrowers need to know who is eligible and what steps they may need to take to qualify for debt relief.

The program was created in 2007 and encourages workers to keep lower paying public service jobs despite their student loan debt. Teachers, social workers and first responders may be eligible, as well as doctors and lawyers – if they were employed full-time by a non-profit organization or the government while making payments.

After borrowers make 120 monthly payments, their remaining federal student debt is written off.

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But before the recently announced changes, eligibility also depended on having a direct loan and being enrolled in an income-based repayment plan, which sets payments based on income and family size. . Those who received federal family education loans, made by private lenders but backed by the government, were ineligible. Over 80% of borrowers who filed forms that did not meet program requirements received one of these loans.

Borrowers say these qualifications were not always clearly communicated by the company that manages their loans, and many found they were not eligible for debt relief only after making almost 120 payments. .

Borrowers are allowed to consolidate a federal family education loan into a direct loan to become eligible for the program, but none of their previous payments would count towards the required 120 – so far.

Here’s who got the eligibility

Federal student type no longer matters due to temporary waiver a borrower’s loan or the payment plan to which he is registered. All payments will be eligible for the public service loan forgiveness program if the borrower was working full time for an eligible employer.

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The Department of Education will review past payments to count those made on federal family education loans. It will also count the months that service members spent on active service with the PSLF, even if loan repayment was temporarily suspended through deferral or forbearance.

The department’s review will also look at payments that have been potentially mis-counted by the business or organization that manages the loan. In some cases, borrowers missed their payments because their payments were delayed by a penny or a few days. Sometimes a payment was recorded, but the record showed that no invoice had been generated. The education ministry said it would also adjust the number of borrowers affected by the problem.

What to do now and how long will it take

Some borrowers will have nothing to do and the ministry will automatically review their payments. This applies to anyone who has ever consolidated their loans into a direct loan and had at least one qualified certified job.

These borrowers should seek an email from Federal Student Aid in the coming weeks regarding the number of additional payments that may be eligible.

Borrowers who currently have an ineligible loan, such as the Federal Family Education Loan, must first consolidate their debt into a direct loan and then submit a PSLF form to show qualifying employment by October 31, 2022.

The ministry warns there could be delays in processing what it expects to be an influx of PSLF nominations. He says he expects account adjustments to be made in the “coming months.”

How the account is different this time

Borrowers who have experienced errors on the part of their loan manager – the company that handles billing and other services – or received incorrect information about the remittance of civil service loans in the past may be skeptical about to changes.

FedLoan, the servicer responsible for managing PSLF borrowers, has often been criticized for his mistakes. He settled a lawsuit brought by Massachusetts Attorney General Maura Healey earlier this year that alleged he violated federal and state consumer protection laws. FedLoan recently announced its intention to end its loan service contract with the government. It is not known which organization or company will handle the loans next.
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But under the new waiver, the review of PSLF payments will be carried out by the education ministry itself based on a separate database from loan officers that shows when a payment has been made. carried out.

“That’s what makes this solution great. They eliminate all these other problems,” said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. The association provides free advice to student loan borrowers and offers advice about the new PSLF changes here.

VSa does a borrower receive a refund?

Yes it’s possible. Borrowers who have made more than 120 qualifying payments may receive reimbursement for the additional payments if they were made after their loan was consolidated.

For example, a borrower who made 60 payments on a federal family education loan, then consolidated and made 70 payments on a direct loan could be repaid for those 10 additional payments in addition to having their unpaid debt canceled immediately.

These people remain ineligible

Parents who have borrowed what is called a PLUS loan from the federal government do not receive any benefit from the Public Service Loan Forgiveness Waiver. PLUS loans are the only federally guaranteed loans available to parents, and they generally have higher interest rates than student loans.

Parents with a PLUS loan who work in an eligible government or nonprofit position can still consolidate that loan into a direct loan to become PSLF eligible – as they could before the new guidelines were put in place. But payments made before the consolidation will not count towards the 120 needed for forgiveness.

Payments that borrowers may have made while a direct loan was in default will continue to not count towards the remission, and borrowers who have already paid off their loans will not receive a refund if more than 120 payments have been made. carried out.

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