How to navigate recent changes to the Public Service Loan Forgiveness Program
This column will provide a step-by-step guide to help you navigate the changes to the Public Service Loan Forgiveness Program announced earlier by the Department of Education.
We have been writing for several years about the difficulties nurses, social workers and teachers have had in obtaining the relief promised. Many times, these borrowers didn’t realize they were not eligible for relief — sometimes due to technicalities — until they had spent years planning their financial lives in preparation for eventual forgiveness.
How PSLF was supposed to work
This is despite the fact that the program’s basic premise, which was approved in 2007, is quite simple: You must work in public service for ten years, repay your student loans, and then cancel the balance.
Miguel Cardona, Secretary of Education, described the experiences that he had heard from borrowers earlier in the year. Cardona stated that the hurdles they had to clear were almost designed to frustrate them during a roundtable discussion of public servants.
An announcement by the Department aims to assist public servants in receiving more monthly payments towards the 120 monthly payments required for relief. Cardona stated that “We’re going really to cast that broad net and bring back those borrowers.”
The Department uses a temporary waiver in order to allow monthly payments to be made that were previously not eligible due to borrowers having the wrong type of repayment plan or borrowers who had received the wrong federal loan.
The limited waiver addresses the payment plan and loan type issues, which are two of the most significant obstacles that public servants face in accessing the Public Service Loan Forgiveness Program.
There are some caveats to this announcement. Parent PLUS loans aren’t eligible for the waiver, and the program doesn’t increase the eligibility of certain types of employment. (More details below). To count the payments, borrowers must be employed full-time by a qualified employer at the time they make them.
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Big changes
Finally, deferment or forbearance periods will not count towards the 120 required payments to be eligible for relief under the limited waiver, unless you are a military-connected student loan borrower. The Department is looking for suggestions to improve PSLF’s long-term operation. This includes counting forbearances and deferments towards Public Service Loan Forgiveness Program.
However, the waiver period will allow for loan type and payment plan modifications that are beneficial to a large number of people, at least 550,000 according to agency estimates. The best part is that the Department will make some adjustments automatically.
It’s not difficult to see why many borrowers remain skeptical. It was not easy to get forgiveness under PSLF in the past. This included having to keep a lot of records and talking with student loan companies. Sometimes, even after all that, you were still rejected.
The student loan system is also in flux. Four student-loan servicers including FedLoan Servicing (the organization that previously managed the Public Service Loan Forgiveness Program) have announced that they will not be renewing their contracts.
Eric Harrington, Senior Counsel at the National Education Association, an organization representing educators, stated that “one of the challenges of the program is people can be rightly cynical since so many people have denied it.” “I want you to know how important this is and how real it really is.”
Borrowers will have to act in some cases to be eligible for the waiver. They will need to act by October 31, 2022.
This is a step-by-step guide on how to get relief.
Step 1 – Make sure that the Department of Education has the most current contact information
The Department of Education’s Office of Federal Student Aid (DFE) will reach out directly to borrowers to inform them about the changes and, in some cases to suggest steps they can take to reap the benefits of the PSLF overhaul.
A Department of Education official stated that “having up-to-date information is the best way to be able to do that” during a conference call earlier this week.
Borrowers must register with the Office of Federal Student Aid to create an FSA ID. Click here to create an account. You already have an FSA I.D. Make sure that your contact information is current if you already have an FSA I.D. To do that, the first log into your FSA account and then go to StudentAid.gov/settings.
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Step 2 – Check to see which federal student loans you have
One of the biggest challenges in navigating Public Service Loan Forgiveness has been that only one type of federal student loan is eligible — a Direct Loan. During the waiver period, borrowers who have made payments on other types of federal student loans may be able to count those payments towards the 120 required for relief.
In some cases, however, the borrower will need to take steps to make those payments count. It is important to determine which type of federal student loan you have. It’s not uncommon for borrowers to not know what type of federal student loans they have.
To figure it out, log in to your account at StudentAid.gov, go to the My Aid page, or StudentAid.gov/aid-summary/, and go to the Loan Breakdown section, which provides a list of your federal student loans.
Direct Loans are loans that begin with the letter “Direct”. If all your loans are Direct Loans, including if you have previously consolidated any other types of loans into the Direct Loan Program, you can skip to Step 5.
Step three is for Family Federal Education Loans that start with “FFEL” (in the Loan Breakdown section) or Perkins Loans that have the word “Perkins in their name.
Step 3 – Check if you are eligible for PSLF
If some of your employment has been certified for PSLF, that means you have submitted an employment certificate from before November 2020 and it was approved. Or you have submitted a PSLF application after that date. You can skip to Step 4.
The announcement this week did not expand the list of categories of employees eligible for Public Service Loan Ingiveness. This means that payments made while you are employed by the government, a non-profit organization, or 501(c),(3) organization providing a designated public service count towards 120 required for forgiveness.
If your employer is not a 501 (c)(3) or the government and you aren’t certain if you’re eligible for PSLF, and you have FFEL and Perkins Loans, you might want to verify your eligibility before you proceed to step 4, which is to consolidate your loans into the Direct Loan Program. Consolidation can alter certain aspects of your loan, such as the interest rate. This could be detrimental to you if you don’t work for an eligible employer under PSLF.
Go to the PSDLF Help Tool to see if your employer is eligible. You can search the database to see which employers have been approved for PSLF.
It’s worth checking whether you were employed by a qualified employer when you are retired or have left the public service. All payments made during the restricted waiver period can be counted toward relief for borrowers who have previously worked in the public sector and have since quit.
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Step 4: Consolidate FFEL and Perkins Loans into Direct Loan Program before October 31, 2022
To count any payments borrowers have made on FFEL loans or Perkins loans towards the 120 required for relief under the limited PSLF waiver they must first consolidate the loans into the Direct Loan program.
Borrowers have the option to consolidate their non Direct Loans at any point in time, but they may wish to do so as soon as possible. Borrowers must consolidate non-Direct Loans before Oct 31, 2022, in order to make any FFEL or Perkins loan payments count under the limited waiver.
If you have previously consolidated non-Direct Loans into Direct Loans, payments made before consolidation will count towards the 120 monthly payment requirements for relief under the waiver.
Consolidate your loans by clicking here. Consolidating federal student loans is free. Any company that claims to assist you in the consolidation process without charging a fee has no connection with the Department of Education.
The consolidation application should be completed in one session. It should take approximately 30 minutes. You will have the option to select which type of repayment plan to use when consolidating your loans. An income-driven repayment program will ensure that your Direct Loan payments count towards Public Service Loan Forgiveness.
Step 5 – Submit a PSLF Form before October 31, 2022
If you have only Direct Loans but you previously certified your employment to PSLF, that means you either submitted an employment certification form and it was approved before November 2020 or you submitted a PSLF Form after that date and your employment approval was granted. You can skip to Step 6.
If you only have Direct Loans, and you have not submitted a form certifying employment, it is worth doing so. Verifying your employment with the Department of Education will indicate to the agency that your interest in relief is genuine. This will allow the Department to examine your payment history and determine if any of your previous loans payments count towards the 120 required for forgiveness. You should verify any employment that you haven’t certified if you have already certified some portion of your employment.
You can use the PSLF tool to verify your employment or to certify parts of it. You can also complete the PSLF form manually and mail it. To ensure that your payments are eligible under the waiver, fill out the PSLF Form by October 31, 2022.
You must submit a PSLF Form if you have just consolidated your FFEL and Perkins Loans into a direct loan. Even if you have previously applied for PSLF or certified your employment, To do this, you can visit the Perkins Loan help tool. You can also complete the form to mail it in.
Betsy Mayotte (president of The Institute of Student Loan Advisors) said that we are still in the waiver window. This will make it easier to complete the PSLF form. A consolidation typically takes six to eight weeks.
To ensure that your payments are eligible under the waiver, please fill out the PSLF Form by October 31, 2022.
Although the processing time for a PSLF application is variable, most borrowers will be able to see the results within two weeks after submitting the form to the Department. For the fastest processing, the agency recommends the PSLFHelp Tool.
There are two things that can delay processing: 1. If your eligibility has not been determined for a portion of your work, 2. If your loans have not been assigned to FedLoan Servicing. This week’s announcement is expected to bring an influx of applicants, which could delay processing.
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Step 6: Hang tight
According to a spokesperson for the Department, it could take several weeks or even months for your adjusted payment amount to be reflected in your account information. This process is not easy and will take patience.
However, you will hear back from the Department regarding the changes and what they may mean to you. You will receive the communication via email. It is important that you do step one, and make sure your spam filters are checked.
Federal Student Aid will contact borrowers who have previously completed forms to certify employment and were previously assigned to FedLoan. They will also be emailed information about the estimated increase in qualifying payment, according to a spokesperson for the Department.
Next, the Department will email those borrowers with Direct Loans that they do not consolidate — who have not previously certified their employment and are therefore assigned to FedLoan. FSA will email this group in November. FSA plans to send the remaining borrowers emails in December.
