Considering Public Service Loan Forgiveness? Here’s What You Should Know Now
What takes a few seconds to do takes years to undo, and it’s a choice millions of Americans rue today. With a swift tap of an “I Accept” button, cumbersome student loans strap to your back with the promise of perpetual attachment.
Today, an estimated 44 million Americans have amassed more than $1.5 trillion in student loan debt, according to Time, a whopping amount that only continues to rise.
One solution to this spiraling crisis is Public Service Loan Forgiveness (PSLF), the Department of Education program that cancels some federal debt for eligible borrowers who’ve worked in government and nonprofit jobs.
When the highly-anticipated results from the first round of forgiveness applications were finally revealed in 2017, though, they were bleak.
As of June 2019, 90,962 federal student loan borrowers submitted 110,729 applications for PSLF. Of the applications processed, just 1,216 had been approved. Only 845 borrowers had collectively received $52 million in forgiveness, according to Forbes.
That's less than 1%.
The 99.3% of applicants who were rejected for PSLF were given often persnickety reasons: 55% of borrowers were rejected because their payments didn’t qualify, 24% applied with missing information, 15% had ineligible loans, 2% listed ineligible employment dates and 2% had ineligible employment.
What this student loan officer learned about PSFL
Jessie Suren’s criminal justice degree cost her and her family $72,000. Because $45,000 of the substantial balance was from parent PLUS loans under her mother’s name, Suren felt saddled with the responsibility to diligently pay down the debt.
And diligent, she was.
After eight years of experimenting with repayment methods, Suren’s student loan balance was down to $0 by the end of 2018. She says the lessons learned along the way are priceless but cautions borrowers to carefully vet their options before counting on them, including the PSLF program.
After graduating from LaSalle University in 2010, Suren chipped away at her debt for three years. Because she had to manage payments for separate loan accounts — hers and her mother’s — within one year, her $140 monthly payments quickly turned to $600.
Shortly thereafter, Suren made significant budget cuts to afford extra payments and began shelling out $900 per month in hopes of making a dent in her principal balance.
When Suren learned of PSLF during her stint as a student loan officer, she planned to take advantage of it to pay off the $45,000 in parent PLUS loans, because her mother had an eligible job with the federal government.
Three years later, Suren was cautiously navigating the rigid PSLF process, responsibly making on-time payments on the proper plan and following other rules as required. But her efforts weren’t reflected in her remaining balance.
Despite six years of on-time payments totaling $40,000, Suren’s student loans swelled to $90,000 by 2016 — a hefty increase of nearly $20,000 in interest. Including her $20,000 car and credit card debt, Suren faced a $110,000 mountain of debt.
What is Public Service Loan Forgiveness?
Public Service Loan Forgiveness is a government program created by Congress in 2007 to forgive the Direct Loans of public service professionals after they’ve made 120 qualifying payments, generally over 10 years. There’s no guarantee of forgiveness, a fact Suren felt dismayed by.
The Department of Education administers PSLF. To qualify, you must work for these types of not-for-profit organizations:
- Government organizations at any level (federal, state, local or tribal).
- 501(c)(3) not-for-profit organizations.
- Other not-for-profit organizations if their primary purpose is to provide qualifying public services.
- AmeriCorps or Peace Corps (if you work as a volunteer).
Once you’ve secured a role in an eligible field, heed these requirements:
- Employment: You must work full-time, defined as 30 hours or more per week, to be eligible. You can also qualify if you have part-time jobs and maintain a combined average of 30 hours per week, and all your part-time jobs are eligible.
- Repayment: Only the REPAYE, PAYE, Income-Contingent or Income-Based plans are eligible. Payments made under graduated or extended plans don’t qualify, so verify you’re enrolled in one of these income-driven repayment plans (IDR). Even if you don’t receive PSLF after 10 years, an IDR forgives your remaining balance after 20 or 25 years, depending on the plan.
- Additionally, payments made while your loans are in a grace period, deferment, forbearance or in-school status will not qualify.
While income-driven repayment plans are a boon for struggling borrowers, going this route means you might pay more in total interest because of the extended term of IDR plans, which is what Suren experienced.
Since releasing the dismal results of the first PSLF applications, the Department of Education has improved the program to ward off future negative experiences:
- An Employment Certification Form is available for annual filing to ensure you’re on track.
- The first-come, first-served Temporary Expanded PSLF Program is for borrowers with eligible employment who made payments on their Direct Loans under the wrong repayment plan. Of this, 681 borrowers received $28 million of student loan forgiveness, reported Forbes.
- The PSLF Help Tool can help anyone understand more about the program and what the forgiveness requirements are.
The release from debt
Suren ended her journey with PSLF in 2016 before she would have applied. When her mother fell ill the following year and had to retire from her federal job, the $45,000 parent PLUS loan balance was medically discharged, thus reducing Suren’s debt total to $65,000.
She spent the next two years continuing her frugal lifestyle — working around the clock and renting a room at a family member’s home instead of living independently, for starters — to wipe her slate clean. She followed a lot of financial guru Dave Ramsey’s advice.
As PSLF evolves, millions of public servants will have their loans forgiven, resulting in a decreased rejection rate.
In the meantime, Suren urges borrowers to assess their loans before relying on PSLF. Depending on your balance, she believes it’s worthwhile to avoid the risk of doubling or tripling the interest on your loan and paying it down in other ways.
Whichever route you decide to take, the former student loan officer advises one simple thing: Don’t stop paying.