How to take advantage of changes to student loan forgiveness – Forbes Advisor


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For nonprofits and government workers, the Public Service Loan Forgiveness Program (PSLF) seemed like a dream come true. The promise was simple: After working full time at their job for at least 10 years and paying off their debt, the federal government would cancel their student loans.

In reality, it turned out to be much more complicated than that. According to the latest available data, around 5% of the PSLF forms submitted – around 3,600 out of over 171,000 – were eligible for loan forgiveness through the program as of April 30.

To address program issues, the US Department of Education announced changes to the PSLF rules. The changes, announced on October 6, will only last for a limited time, but could extend the student loan exemption to more borrowers.

Presentation of PSLF updates

The US Department of Education has made changes to the PSLF program as part of its efforts to help borrowers struggling with student debt. This decision temporarily extends PSLF-eligible loans and removes some of the payment requirements for loan cancellation, making it easier to qualify for the program.

What counts as an eligible payment for the PSLF?

The most significant change to the PSLF program concerns eligible payments. Previously, you had to sign up for a qualifying payment plan to participate in the PSLF. Prior to the changes, only payments made under an Income-Based Repayment Plan (IDR) could count towards the PSLF. But with the new changes, any payments you’ve made, regardless of your repayment plan, will count toward the number of payments needed.

For example, if you made payments under a standard repayment plan before signing up for a qualifying IDR plan, those payments can now be included in the 120 monthly payment requirement.

The changes are retroactive. If you have already made payments on your student loans that were not counted in the PSLF, you can now request that they be posted.

Which loans are eligible for the PSLF?

Before the US Department of Education announced changes to the program, only federal direct loan borrowers were eligible for the PSLF. Borrowers with other types of federal student loans, such as Perkins loans or Federal Family Education Loans (FFELs), were not eligible.

However, that has now changed. If you have FFEL or Perkins loans, you can qualify for the PSLF – and get credit for payments you’ve made in the past – as long as you consolidate your debt with a direct consolidation loan by October 31. 2022.

What stays the same

The majority of the requirements of the PSLF program are intact. Borrowers must always meet the following criteria:

  • Type of loan: Borrowers must have federal student loans. Private student loans are not eligible for the PSLF.
  • Use: Applicants must work for a qualifying nonprofit or government agency full time for at least 10 years.
  • Payments: The borrower must make 120 monthly payments to be able to claim forgiveness.

How to take advantage of these new rules?

Although the changes take effect immediately, not all are applied automatically. You may need to take some steps to get credit for past payments or to pursue PSLF with FFEL or Perkins loans.

If you have direct loans

If you have federal direct loans and have not yet submitted a PSLF form or employment certification form, be sure to complete and submit the PSLF form by October 31, 2022. If you do not send not your form before that date, you cannot get credit for past payments. You can submit the PSLF form online with the PSLF Help Tool.

If you have FFEL or Perkins loans

For FFEL or Perkins loan borrowers, you must consolidate your loans with a direct consolidation loan by October 31, 2022. If you do not consolidate by that date, you will not receive credit for the payments you have made. Once you have consolidated your loans, submit a PSLF form to your loan manager.

Note: If you have FFEL or Perkins loans, the PSLF help tool may tell you that your loans are not eligible, but that is only because the tool has not yet been updated to reflect these changes. According to the Office of Federal Student Aid, it could take several months for the tool to be updated. You can still certify your employment eligibility or request a reunification, but you cannot yet use the tool to submit a PSLF application.

If you have PLUS loans

PLUS Loans include Grad PLUS Loans and Parent PLUS Loans. PLUS loans are issued under the federal direct lending program and are eligible for the PSLF, but there are a few important distinctions.

  • Graduate PLUS: Grad PLUS loans are eligible for all IDR plans and do not need to be consolidated beforehand to be eligible. To pursue PSLF, borrowers must submit a PSLF form and use the PSLF Help Tool to ensure their payments and employment are eligible for the program.
  • Parent PLUS: Changes announced by the US Department of Education do not apply to Parent PLUS loans. The only way borrowing parents can claim the PSLF is to consolidate their debt with a direct consolidation loan and sign up for an income-tested repayment plan – only parents on the IDR plan are eligible under current rules .

What if I don’t know what type of loan I have?

It is not uncommon to not know what types of student loans you have. Many college graduates leave school with eight to twelve different loans, so it’s easy to get lost. You can find out what loans you have with one of the following approaches:

  • Connect to the Federal Student Aid website. You can use your Federal Student Aid (FSA) ID to log into the Federal student aid website. It will tell you what loans you have and which loan manager is handling them.
  • Call the Federal Student Aid Information Center. Call 800-433-3243 to speak to a representative.

What if I still have questions?

If you have any questions about the PSLF and whether or not you are eligible for the program, you can use the following resources:

  • Contact your loan manager. Your loan manager is your primary contact for questions about your loans, repayment plans, and your forgiveness request. Call or email your loan manager customer service to help.
  • Use the PSLF help tool. Use the PSLF Help Tool to find out if your employment and loans are eligible for a rebate. Based on your answers, the tool will also generate the necessary forms that you will need to fill out to certify your job and apply to the PSLF.
  • Visit the website of the Federal Student Aid Office. You can consult the Federal Student Aid website for PSLF program updates and get answers to frequently asked questions.

Note: FedLoan Servicing is the designated PSLF loan manager. However, the company announced in September that it would no longer serve federal student loans after its current contract ended. Borrowers who are currently with FedLoan Servicing and borrowers who intend to sue PSLF will be transferred to another loan department in the coming months. To make sure you don’t miss any notifications, make sure your loan officer has your most up-to-date contact information.

Continuation of loan forgiveness

While the PSLF program can be confusing, the latest changes will make loan forgiveness accessible to more borrowers. If you work for a nonprofit or government office and have federal student loans, you may be more likely to qualify for the PSLF and get months or even years of loan forgiveness. earlier than expected.

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