Congress surprised and pleased many in March when it set aside $350 million for the Department of Education to help borrowers gain student loan forgiveness under the Public Service Loan Forgiveness Program (PSLF). Donald Trump and Education Secretary Betsy DeVos wanted to do away with the PSLF program altogether. But in its $1.3 trillion spending bill passed in March to fund the government through September, Congress not only ignored many of the Trump administration’s education budget proposals, but also allocated $350 million for borrowers who were in a qualified public service job but were barred from PSLF debt forgiveness, because their repayment plan did not qualify.
Background on the Public Service Loan Forgiveness Program
The PSLF was born in 2007. Its purpose was to entice graduates to take qualified public service jobs that served the community and to enable forgiveness of all student loan debt for those borrowers after 120 payments over 10 years into an income-driven repayment plan. The government offers several repayment plans for federal student loans. To normally be eligible for forgiveness under PSLF, you must be on an income-driven repayment plan. However, student loan borrowers have complained that the PSLF program is incredibly complex to navigate, and some say their loan servicers assured them that they were on track for forgiveness in 10 years, only to find out after years of making payments that their payment program made them ineligible for PSLF forgiveness. Last year, the Consumer Financial Protection Bureau even published a report outlining how student loan servicing practices sometimes put unknowing borrowers into repayment plans that made them ineligible for forgiveness. One fix was to change repayment plans, but that often meant losing years of making on-time payments, because the borrower had to start the 120 required payments from scratch. The $350 million is earmarked for those who meet all qualifications but were paying into a graduated or extended repayment plan, which are not normally eligible.
Limitations of the New Program
- The biggest issue with the program is that $350 million is not at all likely to cover the need. To give some perspective, Senate Democrats tried to get $4 billion to fix the program, so that should give you some idea of the limitations of the $350 million allocations. Therefore, the money will be distributed on a first come/first served basis. The legislation states that the Department of Education must create an application process within 60 days of becoming law. That means you should be able to apply in May.
- The new legislation only cures issues around repayment plans. If you have a type of loan that does not qualify, there is no relief.
- This is a one-time only expansion of the federal Public Service Loan Forgiveness program. If you miss it, you have probably missed it for good.
- If you have not been making high enough monthly payments, you will not qualify. Your most recent monthly payment and the monthly payment from one year before will be compared to what you would have paid under a normally eligible payment plan. If those payments are lower than payments under the normally eligible plan, you are out of luck and will get no forgiveness.
Other Requirements for PSLF Remain Unchanged
The changes regarding PSLF eligibility do not impact other requirements. In order to be eligible for PSLF, borrowers have to work for an organization that qualifies under the program such as a government organization (not a for-profit government contractor), a Section 501(c)(3) charity or a not-for-profit that qualifies due to services it provides even if it is not tax exempt. Working full-time as a volunteer for Americorps or Peace Corps is also acceptable. You must have a federal Direct Loan that is not in default and have made 120 payments over 10 years before you can apply for forgiveness. Direct Consolidation Loans are eligible and available for those who would like to consolidate loans that do not qualify.
Apply as Soon as Possible
In order to ensure you are on track and paying into a qualified repayment plan and have a qualified employer, you should submit an Employment Certification form annually and also if you change jobs. Of course, that form was not available until 2012, so for five years there was quite a lot of guesswork. Since the program was just launched in 2007, people who signed up in the early years are just now reaching the 10-year point when they may be eligible for forgiveness. Some will find they are not qualified, because they had the wrong kind of repayment plan. This may result in many people applying for their piece of the $350 million relief. In other words, if you wait too long to apply, you may miss out even if you are otherwise eligible for the relief. There is only so much money in the pot, and it’s not enough to go around
Compare the Best Student Loan Refinance Rates
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.