The U.S. Department of Education recently announced some major changes to the rules and qualifications around the Public Service Loan Forgiveness (PSLF) Program. Now, for a limited period of time, borrowers may receive credit for past payments made on loans that would otherwise not qualify for PSLF.
The good news is that public service loan forgiveness is now available to more people. The bad news is that there will be more people waiting in line to have their federal student loans waived.
This issue impacts anyone from medical residents to physicians who are making payments on loans for at least ten years.
A few things have not changed. With regards to qualifying employment, you must have worked full-time for a qualifying employer when the payments were made. An employment certification form still needs to be submitted to certify the time frame when the payments were made. You can receive credit only for payments made after October 1, 2007, since that is when the PSLF Program began.
Another thing that has not changed is that you will still need a total of 120 payments to qualify for the loan forgiveness. However, what counts as a “qualifying” payment has changed and past payments that have been deemed “ineligible” may now count.
A big change is the income-driven repayment plan. Previously, only payments made while on an Income-Driven Repayment (IDR) plan counted toward the 120 payments necessary for forgiveness. What is new is that past payments under any repayment plan count. This should include standard, graduated, and extended plans.
The other change is with Federal Family Education (FFEL) and Perkins Loans. Previously, only Direct Student Loans were eligible for PSLF, and consolidating FFEL loans into Direct Loans would reset any previous progress toward the 120 payments necessary for forgiveness. Still, only Direct Loans are eligible for PSLF under the temporary waiver. However, if you request a Direct Consolidation by October 31, 2022, your previous payments will not be “reset.”
The following are some recommended next steps. The first is to verify employment. In order to verify that you have worked for a qualifying employer while making the 120 payments, you will need to submit an Employment Certification Form (or PSLF Form) for each employer you worked for during those ten years.
Second, consolidate FFEL and Perkins Loans. Once you have confirmed that your employment is eligible, you will need to request a Direct Consolidation Loan by October 31, 2022. This only needs to be done if loans are not already Direct Loans. Also, consolidation can be done for free on studentaid.gov. Do not pay any service claiming they can help with consolidation.
Third, submit an application for PSLF and Temporary Expanded PSLF. Consider using the online PSLF Help Tool through studentaid.gov.
Will Koster is a financial planner. Securities, investment advisory, and financial planning services offered through qualified Registered Representatives of MML Investors Services, LLC. Member SIPC. Supervisory office: 4350 Congress Street, Suite 300, Charlotte, NC 28209, (704) 557-9600. Spaugh Dameron Tenny is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. CRN202410-1040459.
