Editor’s Note:
It is with great pleasure that I deliver this holiday gift to you, from Susan Bogart, Mansfield University Class of 1991. This contribution has a new ring to it based upon our historical posts and approach. In this post, Susan’s expert knowledge in financial aid is relayed in an easy-to-follow narrative about how to navigate and understand the complex Public Service Loan Forgiveness (PSLF) program. Do you have student loans? Do you work in the public service sector? We all know someone who does, right? Unwrap this gift and discover who you may be able to help. Thank you, Susan!
The Dream of Student Loan Forgiveness
One of the most important things I learned at Mansfield University is that I wanted to work in education—specifically higher education. I wanted to help people to achieve their dreams. And now, I’m fortunate enough to do that for a living. But while public service work provides amazing intrinsic rewards, it is not always financially lucrative. In an effort to make public service careers more attainable, in 2007 the
College Cost Reduction and Access Act
became law and created the federal
Public Service Loan Forgiveness
program (PSLF). This program is designed to provide forgiveness of any remaining federal student loan balance after the borrower has made ten years of payments. This means a person can choose a public service career without signing on for a lifetime of paying on student loans. It seems like it should work brilliantly.
PSLF, however, has had a bad rap in the news lately. Recently the federal Department of Education reviewed the first round of applications for student loan forgiveness under the PSLF program, and the results were underwhelming, to say the least. Only 96 of the 28,000 or so applications submitted were approved for forgiveness. Some people blame the Department of Education for denying applications that should have been approved. Some people blame loan servicers for not guiding borrowers better. But those of us who work day in and day out in the student loan industry are unsurprised at this initial result and confident that things will improve dramatically going forward.
While the concept behind PSLF is relatively simple, the details that go into the process are not. Being approved for PSLF requires that you have a lot of things exactly right:
- The right employer
- The right kind of student loan
- The right loan repayment plan
- The right kind of payment
- The right number of qualifying payments
- The right paperwork in place
The reality behind the “96 out of 28,000” statistic is that most of those people were lacking at least one of these “right” things. If your dream is PSLF, I want to help you to achieve it by giving you a complete run-down of how to make sure you are in the “right.”
Let’s start with the definition of
public service work
. The actual definition in the law is pretty lengthy, but the quick and dirty summary is this: You qualify if you are working
full-time
for any level of government, for a non-profit 501(c)(3) organization, or for a non-profit that is not a 501(c)(3) but has a primary purpose of providing a qualifying public service. It has to be full-time work. And your
employer
has to qualify—not so much your job description. If you are doing public service work as a contractor for a private corporation, you will not qualify because your employer doesn’t fit the bill.
If you are confident that your career is qualifying public service work, your next step is to make sure that you have borrowed the right type of student loans. Only Federal Direct Loans are eligible for PSLF. And many colleges and universities (including MU) were not offering this type of loan prior to 2010. You may have other types of federal student loans, such as Perkins Loans or Stafford Loans made under the old Family Federal Educational Loan Program (FFELP). Those loans are not eligible for PSLF in that form, but they can be made eligible by doing a
federal loan consolidation
through the Federal Direct Loan Program. This replaces the old loans with a new loan that is eligible for PSLF.
With the right job and the right kind of loan in place, your next step is to make sure you on the right payment plan. You MUST be on an income-driven payment plan for this to work. There are five different
federal income-driven payment plans
, all with different terms and similar names, so this is where a lot of people get lost. The options are Income Contingent Repayment (ICR), Income Based Repayment (IBR), New Income Based Repayment (New IBR), Pay as You Earn (PAYE), and Revised Pay as You Earn (REPAYE). The plans that work out to be most favorable for most borrowers are PAYE and REPAYE. But it’s definitely worth having a conversation with your loan servicer to select the one that is best for your situation.
Armed with the right payment plan, you still have to make sure that you are making your payments in such a way that they count as “qualifying” payments. A qualifying payment is made on-time (paying early or late does not count), in the correct income-driven payment amount, while you are working full-time in your public service job. Once you get to a total of 120 qualifying payments, you are eligible to apply for forgiveness. The 120 payments do not necessarily need to be consecutive, so if you leave public service work and then come back to it, you don’t have to start all over. Once you arrive at that total of 120 qualifying payments, you are good to go.
But forgiveness is not an automatic thing. As with most things in the federal government, there is paperwork along the way. While you are working through your ten years of payments, you should be submitting the
Employment Certification Form
each year, as well as each time you change jobs. There is a section for you to complete, as well as a section for your employer. Once the form is completed, it goes off to the loan servicer. When it is processed, you should receive a letter verifying that your employment qualifies (or doesn’t) and telling you how many qualifying payments you have made so far. Once you have completed your 120 payments, you will need to submit the
Application for Forgiveness
, and continue working full-time in public service and making payments while it is being processed. Any payments made after the point where you have earned forgiveness should be refunded to you when the forgiveness is processed.
All in all, this sounds really complicated. And it’s not something that everyone needs to do. But, if you are carrying a higher amount of student loan debt and your public service salary doesn’t seem to keep up with the payment, this could be the difference between being done with student loan debt after only ten years or paying on it for several years longer. The forgiveness (which is tax-free!) could be tens of thousands of dollars (or even more), depending on how much you have borrowed and how much you are earning.
For some people (like me), a career in public service is a dream come true. And, if you do all of the “right” things, you can also achieve the dream of student loan forgiveness.
The Writer
Susan Bogart graduated in 1991 from Mansfield University with degrees in music and English. She also earned an MA in College Student Personnel from Bowling Green State University in 1993. She has been working in financial aid administration for 25 years and currently serves as the Director of Financial Aid at Penn State Law at University Park. She continues her Mansfield University experiences by performing in musical theater and sharing in live music as often as possible.
