Note: Be sure to bookmark this page for public service loan forgiveness news updates!
Qualifying Payment Updates
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. It will now be considered pre-paid through March 2021.
Previously, this payment would only count as one qualifying payment for November 2020.. I.e. The four early payments for December, January, February, and March would not be counted as qualifying because they were made more than 30 days before the due date. As a result of the policy change, the remaining four months will now be 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.
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.
Past Public Service Loan Forgiveness Update
Below, we discuss data that has been released for the PSLF program. It also discusses how to protect yourself just in case you don’t qualify for PSLF in the future. If you want more information on the PSLF Program be sure to checkout FitBUX’s Public Service Loan Forgiveness Guide.
Be sure to check out our PSLF Resources page as well. It contains a number of resources to help you qualify for forgiveness.
One of the biggest fears for FitBUX Members pursuing Public Service Loan Forgiveness (PSLF) is the chance that they may not qualify, thus costing themselves a lot of money in the long run.
Since the PSLF program was launched in the fall of 2007, the first eligible individuals to qualify were able to apply for forgiveness in October 2017. The government released a report last week with the most up-to-date figures (Click here for the full report).
The data provides us with two very important keys to follow:
- Don’t believe the hype.
- You have to have a solid backup plan in case you don’t qualify.
Public Service Loan Forgiveness News: Updated Figures
Before we dive into the two important keys, here is the summarized data from the report:
- Overall, 136,473 borrowers submitted applications for forgiveness (Total Applications)
- 75% of applicants (approximately 102,300 people) were denied for not having eligible loans and not having qualifying employment! This is something we stress time and time again when creating repayment strategies with FitBUX members considering going onto PSLF.
- Another 24% (approximately 32,750) were denied for missing or incomplete data on the application.
- Overall, 1,139 unique borrowers qualified to have their loans discharged.
- That is 1.04% of unique borrowers.
Don’t Believe The Hype
Public Service Loan Forgiveness news headlines highlight that only 1.0% have gotten loans forgiven. These headlines imply the program is a failure which is not the case. There is good reason why most people applying don’t qualify. The report also highlights why its important to follow directions! Not only this, but many of the problems that plagued the PSLF Program in the beginning no longer exist.
Of the 75% that got denied for not having eligible loans and not having qualifying payments, many should have never applied to begin with. For example, private loans don’t qualify so if you have private loans don’t apply!
Not working for a qualifying employer used to be a problem. However, about 4 years ago the government rolled out a new form. You can complete it and send it in. Not only does the government confirm that your employer qualifies, they will also confirm that your loans qualify. Everyone on PSLF should complete this, period, no questions asked.
Those that had been on PSLF prior to the PSLF certification form being rolled out may have been given wrong information by their loan servicer. The Trump administration realizes this which is why they set up a fund to forgive those loans.
The astonishing data point is that 24% of people were denied for missing or incomplete information. That amazes me because these are college educated individuals that should be able to read and complete the necessary information. I apologize if that sounds rude but “common man!”. Your asking for thousands of dollars to be forgiven. Take a few minutes to make sure you do everything correctly.
As I said when the first update was released a few months back, the PSLF program was chaotic when it was first introduced. Over the recent years, applying and verification has become more “streamlined” and easier to do. Therefore, we should see an uptick in those that have there loan forgiven.
We’ve already started seeing this uptick. On the first report 0.3% of applicants qualified, 0.5% on 2nd report, and now 1.04% on this report. Side note…100% of people that followed the programs rules and procedures had their loans forgiven!
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). While 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.
Also, be sure to read our Income-based repayment guide because you have to be on one of these plans to qualify for PSLF.