Public Service Loan Forgiveness Most Recent News
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The Federal Government just announced several changes impacting the Public Service Loan Forgiveness (“PSLF”) program that should make it easier for more individuals to receive debt relief who couldn’t in the past. Borrowers can now receive credit for PAST payments made on loans that would NOT have otherwise qualified for PSLF.
Borrowers who held ineligible loans (i.e., FFEL loans and Perkins Loans) or were on unqualified repayment plans (i.e., Graduated, Extended Graduated, Extended Fixed repayment plans) can now receive credit for past payments made under these ineligible loan types and repayment plans.
For those who have FFEL or Perkins Loans, and want them to qualify for PSLF, one must consolidate these loans into a Direct Consolidation loan by Oct. 31, 2022.
In either of these cases, one MUST also file one’s PSLF Employment Certification Form (“ECF form”) by Oct. 31, 2022 for the periods in which one is trying to receive credit for additional qualifying payments.
Remember that full-time employment in a qualified setting is still required to receive credit for PSLF for any prior payments. Furthermore, Parent Plus loans are still ineligible for PSLF.
Who Does This Help?
This news is being promoted as a “Overhaul of the PSLF program.” As of right now, that is a massive misleading title. These changes only help those that had issues qualifying in the past. On top of that, it is only temporary through October of 2022.
Nothing in this announcement changes the actual PSLF plan in regards to making payments, the plan you need to be on, or waiting 120 months to have your loans forgiven.
However, if you’ve done everything correctly until now (you have eligible Direct loans, submitted your PSLF ECF form, and are serviced by FedLoan Servicing), submitting the ECF form again prior to Oct. 31, 2022 could still possibly benefit you. With this limited time offer, the Federal Government will be issuing credit for past payments, if (i) in the past, you didn’t have the right kind of loan, or (ii) weren’t in the right repayment plan.
PLEASE DO NOT SCHEDULE TIMES TO SPEAK TO YOUR FITBUX COACH ABOUT THIS. IF YOU THINK YOU SHOULD GET CREDIT FOR PAST PAYMENTS THAT YOU AREN’T GETTING CREDIT FOR JUST CLICK THE LINK BELOW, FILL IT OUT, AND SEND IT IN!
https://studentaid.gov/announcements-events/pslf-limited-waiver
Past Public Service Loan Forgiveness News: Qualifying Payment Update
The Federal government has updated a new definition of a qualifying payment for PSLF as of August 2020. This new change affects you if you make a prepayment. Its easiest if I explain it via example:
Lets say your monthly payment amount is $100. You decide to make a $500 on-time payment for November 2020. Your payments will now be considered pre-paid through March 2021.
Previously, this payment would only count as one qualifying payment for November 2020. i.e Early payments made for December, January, February, and March would not be counted as qualifying because they were made more than 30 days before the due date. This policy now makes the remaining four months eligible to be qualifying payments assuming all other PSLF requirements are met, e.g., borrower also has certified employment on file. If you don’t know what certifying your income means then check out How To Get Student Loans Forgiven.
Past Public Service Loan Forgiveness News: How To Check If Your Employer Qualifies For PSLF
For years, we’ve been asked at FitBUX how can someone verify if an employer qualifies for PSLF. To date, you couldn’t until you submitted the Employment Certification form. Then you’d have to wait for 2 – 3 months until Fed Loan Servicing sent it back to you. Plus, you couldn’t complete that form until you were employed.
That has now changed. Besty Devos (the head of the Department of Education) has made an important change. The new online tool I discussed in our Next Gen FSA article includes a database designed to provide transparency into which employers are eligible. The current database contains more than one million employers!
This is how the new tool works:
- Once you are logged in, you can access a search feature that enables you to determine if your employer is eligible.
- You use your employer’s Federal Employer Identification Number (FEIN or EIN) to search the database.
- One of three statuses will be returned: Eligible, Ineligible, Likely Ineligible.
Likely ineligible most likely means you work at a non-profit that is not a 501 (c)(3). Therefore, you do not qualify.
As for what the tool actually does… Below is what we gathered in our research:
- See if your existing Federal Loans are qualified for PSLF,
- See if you employer is eligible, and
- Prepopulates the PSLF PSLF Certification form for you to print out and give to your employer to sign.
Tip: What You Can Do In Case You Don’t Qualify For PSLF
This report highlights the reason why all should take the advice we give to FitBUX Members who are pursuing/considering pursuing PSLF: Pretend it doesn’t exist.
If it didn’t exist, you would be on an income-driven loan forgiveness plan (IDR). IDR monthly payments are lower, the amount forgiven at the end of the IDR plan, unlike PSLF, is taxed at the same rate as your regular income, however.
This means that you will most likely have a significant tax bill at the end of 20 or 25 years when your loans are forgiven. At a minimum, you need to start saving for the tax as soon as possible and be sure to discuss this with your student loan planner.
When you qualify for PSLF, then great, you will have a lump sum of money available for other purposes. If you do not qualify for whatever reason, at least you are on pace to be able to cover your tax liability.
If you need expert help figuring out how much to save for the tax and to track this amount over time check out our PSLF Calculator, build your profile at FitBUX.com, and schedule a time to talk to our FitBUX Coaches.
We calculate exactly how much you should be saving to cover your estimated tax liability as well as automatically track whether you’re on pace to pay the tax liability or need to save more. In addition, we also update your forecasted numbers every time your income changes or tax laws change.
Do you think that part of the issue is that at first there were no defined or standard documents til 2012 or so? Or that the program has been more defined in the last few years?
I do think that has a huge part to do with it. There was mass confusion when they implemented. In fact, a lot of people are still confused and Fed Loans is not easy to deal with.