The Public Service Loan Forgiveness (PSLF) program is a way for those who work in the public sector to get their federal student loan balance forgiven after 10 years by making 120 qualifying payments. Historically, those payments had to be made through an income-driven repayment plan like IBR, PAYE, or REPAYE. There were also rules about paying over or under the required amount, the timing of payments, etc. that had to be followed to the letter. For a limited time, the Department of Education is expanding its definition of a qualifying payment and many people will see their credited payment count increase, but there are certain actions that must be taken to ensure you get all possible payments counted.
If you currently work, have worked, or intend to work full time (as defined by the employer or a minimum of 30 hours/week) for 10 years in the public sector – meaning government, public educational institutions, the military, or nonprofits like health care and charitable organizations (see the official definition here) and have federal student loans, you will most likely benefit from this Limited Waiver PSLF expansion opportunity. Until October 31, 2022 borrowers who reapply for PSLF will have their qualifying payments reassessed and new payments may be credited.
Payment history on loans like Family Federal Education Loans (FFEL) and Perkins Loans, can now be counted if the loans are consolidated into Direct loans. It used to be that once loans were consolidated, the payment history would be lost, but that is one of the special allowances that is being granted to borrowers who consolidate and reapply for PSLF before the end of October 2022. Also, payments made under traditionally amortized repayment plans like Standard, Extended, or Graduation will count now where they didn’t before.
Sometimes payments weren’t credited because people would pay over the required amount thinking that would shorten their repayment term, but those overpayments only counted as one payment. Those payments will be reassessed. Additionally, late and partial payments will be counted.
The Department of Education is asserting that everyone’s count will be reassessed and new payments attributed automatically. But, to be safe, it would be best to review your payment and employment history and write a physical letter to FedLoan and the Department of Education detailing how many payments you feel you should be credited. By law, they have to process physical mail differently from email. Since FedLoan and Navient will no longer be servicing student loans, it would be smart to download your records in case they get lost in the transfer to the new servicer.
So, to recap –
Who does this announcement apply to, and who doesn’t it apply to?
This benefit DOES APPLY to student loan borrowers:
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- With federal loans
- Who are still paying (haven’t already received forgiveness)
- Who currently work, have worked, or intend to work full time in the public sector for at least 10 years
This benefit DOES NOT APPLY to student loan borrowers:
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- With only private loans
- Whose total federal loan balance has already been forgiven
- With federal loans that were only disbursed before the PSLF program was created in Oct 2007
- With only Parent Plus loans
- Who have only ever worked in the private sector, only part-time in the public sector, or do not plan on working in the public sector for at least 10 years
What should someone do to help ensure all possible payments are credited toward PSLF?
- Update their contact information and download their student loan records from their servicer.
- Review your payment and employment history and determine how many payments you think should count.
- If you have loans other than Direct loans, consider consolidating those into Direct loans.
- Apply for PSLF. There is only one application – it updates your employment status and income information.
- Write a physical letter to the Dept of Ed and FedLoans detailing how many payments you think should be applied.
This could be a game-changer for a lot of folks out there as some people’s loan balance will be forgiven when they weren’t expecting that to happen. Most people who work in the public sector will see their count increase and that means forgiveness will come sooner!
Written by: Jennifer Edwards, CFP® and CSLP®
