Important Student Loan Updates

Do you have federal student loans? Then you might have some forms to file this October. My name is Carrie Sorenson and I am an Accredited Financial Counselor who writes for Breathing Room (although I usually write about physical activity and health topics). I wanted to share this important information to make sure you can take advantage of these programs if you qualify.

There are two main programs you will want to pay attention to:

  • Federal Student Loan Debt Relief
  • Public Service Loan Forgiveness 

Both of these programs have important things happening this month and you’ll want to pay attention to make sure you don’t miss out. Here are the important details about both programs:

Federal Student Loan Debt Relief

In August, the Biden Administration announced that they would forgive up to $20,000 for some federal student loan borrowers. Over the weekend, the Department of Education announced that the application is live! You can find it here: https://studentaid.gov/debt-relief/application

The application is available in English and Spanish, is very brief, and only asks you to provide some basic information about yourself like your name, social security number, date of birth, and contact information (it WILL NOT ask for your FAFSA ID). It also asks you to self-certify that you meet the income guidelines. In order to qualify, you must have income that is under $125,000 for an individual or under $250,000 for people who are married and file taxes jointly or with one person listed as head of household. If you are unsure, go back to your 2020 and 2021 tax returns. If your income was under the limit for at least one of those years, then you qualify for the forgiveness. You may be asked to provide proof of income in the future, but not at the time you submit the application. 

You have until December 31st, 2023 to complete the application.

On a personal note, my husband and I both have student loans and completed our forgiveness applications this weekend. We were impressed with how simple and easy the application process was!

One note of warning, be careful of scams! Filing for forgiveness is free and the Department of Education will never ask you for any money in order to process your application. If someone is asking you to pay to file the application, that person is trying to scam you. 

Public Service Loan Forgiveness 

This program is for people who are working in public service (typically for a nonprofit, the military, or in federal, state, tribal, or local government). Under this program, your remaining loan balance is forgiven after you make 120 qualifying payments. This is usually 10 years or more of payments and often makes sense for people who are making payments under an income driven repayment plan.

Initially, the program required specific documentation and had strict rules that made it difficult for many to achieve loan forgiveness under the program. However, recently a waiver was passed that makes it significantly easier for borrowers to make qualifying payments and have their loans forgiven.

In order to take advantage of this waiver, you must complete an application before the October 31st deadline! So, if you think you might be able to take advantage of this program, you can visit https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service. There, you can check to make sure you qualify and apply for forgiveness. 

If you have questions about your specific student loan situation, check out https://studentaid.gov/ for additional resources on a variety of topics!

Public Service Loan Forgiveness: Temporary Waiver and an Oct. 31 Deadline

As the “Breathing Room” name implies, this blog is intended to offer you a break from life’s deadlines, stressors, and workloads, and give you a chance to take a breath, focus on yourself, and enjoy.  But, if you….

  1. Have federal student loans
  2. Are employed by any type of government or nonprofit organization
  3. Want to qualify for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program, and
  4. Want to make sure you receive maximum credit for your participation,

don’t take a break quite yet.  Now is the time act before the October 31, dare we say it, deadline.

The Public Service Loan Forgiveness Program (PSLF), was created to increase the applicant pool for government and nonprofit jobs. PSLF is a federal program designed to provide an incentive to attract job seekers to employment in much needed, but often lower paying, service work. A component of the 2007 bipartisan College Cost Reduction and Access Act, PSLF promised to forgive the outstanding federal student loan debt for qualifying workers once they have made 120 monthly payments. However, the program was created without a clear, long term plan for implementation. With legislative and executive branch turnover, problems arose.

Public Service Loan Forgiveness had strict qualification requirements (which you can read about here,) and required specific action steps (which you can read about here,) to maintain that qualification.  However, once eligibility began in 2017, many individuals had their PSLF application rejected because of missed requirements, poor guidance, and misunderstandings. Many fixes were implemented over the ensuing years.

PSLF Waiver. In late 2021, the US Department of Education announced a short term PSLF Limited Waiver. As the name implies, the Waiver, which is set to expire on October 31, 2022, waives many of the original qualifying requirements. For a limited time, payments made under the wrong loan type, payments made late, and payments made prior to a new consolidation all count.  Additionally, educators who receive teacher loan forgiveness can count their qualifying time towards PSLF, and active-duty service members can count months of deferral or forbearance toward their 120 qualifying payments.

What, specifically, has changed for the Temporary Waiver until October 31? Here are a few of the major items:

Consolidated loans. Previously, consolidating student loans restarted the 120 payment count. Under the Waiver, payments made prior to the new consolidation loans now count.

Loan type. Under normal PSLF requirements, only payments for Direct Loans counted. Through the Waiver, borrowers receive credit for payments made on FFEL or Perkins loans as well. But, they MUST be consolidated into a direct loan before the October 31 deadline.

Teacher Loan Forgiveness. Teachers have their own loan forgiveness plan which provides limited dollar forgiveness after five years. Normally, outstanding loan balances would then also be eligible for PSLF after another 120 months. The Waiver allows those two time periods to run concurrently, and payments made during the teacher forgiveness window now count toward the 120 PSLF months.

Payment Plan. Payments made under graduated or extended payment plans are now accepted under the Temporary Waiver, but the loans must be consolidated into an income-driven payment plan prior to the October 31 deadline.  

Late and Partial Payments. Previously not counted toward the required 120, late and partial payments are now being retroactively added to the total needed to qualify. This should be done automatically, but borrowers should check. Similarly, certain periods of forbearance or deferment now count. This is a particular benefit to active duty military members.

This post is not a comprehensive list of changes under the Temporary Waiver. Check with your servicer, read through the government-provided information at StudentAid.Gov, complete the required forms and other actions by the October 31 deadline.

Then, breathe!

Public Service Loan Forgiveness: Who is it for?

image-from-rawpixel-id-1247-jpeg.jpgEarning a college, graduate, or professional degree is an accomplishment to celebrate, but once school ends, the reality of paying back student loans begins. Most direct student loans offer a six month grace period, with interest subsidized by the federal government, intended to provide the borrower with sufficient time to find employment. But for the millions of students who graduated in the spring of 2019, that grace period is ending. Fortunately, the federal government has many options to ease the burden of student loan payments.  

If you work for the government or a nonprofit organization, you might be eligible for Public Service Loan Forgiveness (PSLF). This is a federal program designed to provide an incentive to attract job seekers to employment in much needed, but often lower paying, service work. Those who qualify for PSLF can have their student debt balance paid in full by the federal government, however, there are many rules to follow.   

Qualify!

Loan Forgiveness Debt Filling Application ConceptIf you want to be eligible for PSLF, keep in mind that you must do qualifying work, for a qualified employer, make qualified payments, for a qualified amount of time, under a qualified plan.  

The key word is qualified.  

  • Qualifying work –  Full-time employment, defined as 30 hours or more per week, or work that your employer considers full time. Part time hours at different qualified employers (see below) can be combined to reach the 30 hour minimum. There is a notable exception for religious work. Time spent on religious teaching, worship, or proselytizing does not apply toward the 30 hours.   
  • Qualified employer – Any government organization or a nonprofit organization recognized under section 501(c)3 of the Internal Revenue Code, or federal tax code.  Any level of government is acceptable. It could be a local, state, federal or tribal agency. However, if you work for a for-profit government contractor, a labor union, or a partisan political organization, your loan payments will not count toward PSLF.  
  • Qualified payments – A minimum of 120 payments are required before your debt can be considered for PSLF, and are only counted if they are on time (no more than 15 days after the due date), and paid in full. Payments are only considered qualified if they are made while you are working for a qualified employer. 
  • Qualified repayment plans – Borrower payment plans include all income driven repayment plans. There are several income driven repayment plan choices that a borrower can select. As the name implies, these repayment plans are based on the borrower’s income, as well as on other considerations, such as family size. 

Where can I learn more?  

Is Public Service Loan Forgiveness a good option? The best source for more detailed information is the Federal Student Loan Website.  Many rules must be followed to qualify for PSLF and it is important to follow the rules carefully to reap the benefits of this program.