If you work in the public service field and have student loans, you’ve probably heard about the Public Service Loan Forgiveness (PSLF) program. In fact, you might be hoping to qualify for PSLF, which forgives your remaining student loans after 10 years of payments while working in a qualifying position.
Normally, to see if you qualify for Public Service Loan Forgiveness, you submit a form to the Department of Education. FedLoan Servicing then responds with a letter stating whether or not the employer meets the requirements for PSLF.
However, in new legal filings, the Dept. of Education stated it has never issued approvals to participate in its Public Service Loan Forgiveness program, according to the American Bar Association.
In other words, the FedLoan letters of certification are not binding. This means if your employers were previously “approved” in a letter from FedLoan, you could have that approval rescinded. In that case, your PSLF certification for past payments could be retroactively denied.
American Bar Association sued the Dept. of Ed over PSLF denials
In December 2016, the American Bar Association filed a suit against the Department of Education. According to a statement, the ABA sued because the Dept. of Education started to disqualify some of those who were already approved for the PSLF program.
The ABA suit aimed to hold the Dept. of Education to the initial employer certifications sent through FedLoan. But in its response, the Dept. of Education seems to make it clear that such certifications are not official approvals for PSLF. The FedLoan letters do not guarantee in advance that payments qualify for forgiveness.
Instead, the borrower must make 120 qualifying payments and then submit an application for Public Service Loan Forgiveness. Only after an official application is in will the Dept. of Education make an official approval or denial.
You must make PSLF payments without knowing if you qualify
The earliest you can formally apply for PSLF is in October 2017 (only payments made after October 2007 qualify for the program). Plus, the laws that govern the Public Service Loan Forgiveness program are often unclear and untested.
Borrowers who fall into gray areas of the law apparently have no assurance that they can count on loan forgiveness for their public service.
Nonprofit organization employees might have a harder time knowing if their jobs qualify them for PSLF. Whether these employers qualify is less clear than for government organizations, according to The New York Times.
But borrowers have to make decisions on student loans now, such as whether to enroll in an income-driven repayment plan, without knowing if they’ll get student loan forgiveness.
“It’s clear that the Department of Education changed the rules in midstream,” wrote Jack Rives, executive director of the ABA, in a recent statement to his staff. “That action forces public service employees to gamble with their financial futures and run the risk of being saddled with crushing, interest-enhanced debt.”
Make sure your payments count toward PSLF
The Dept. of Education has indicated in its legal arguments that there’s only one sure way to know if student loan payments qualify: by filing an official application for forgiveness.
If you’re hoping to take advantage of the Public Service Loan Forgiveness program, however, some of this is in your control. Here’s what you can do to double check that you meet the requirements for PSLF:
- Submit an Employment Certification Form. This is the best way to help you figure out if you’ll be eligible for PSLF. If you get an approval letter, that’s a good sign (but as mentioned, not a guarantee).Even if your employer is rejected for PSLF, you can keep trying to establish eligibility. Gather and provide further information that supports your assertion that your employer qualifies for PSLF.
- Choose your employer carefully. If you work for a government agency or a 501(c)(3) nonprofit, you’re likely in the clear. However, PSLF eligibility can get tricky with nonprofits that don’t hold the 501(c)(3) designation. Sometimes a nonprofit clearly provides a public service. Other times (as in the case with the ABA), it’s less obvious whether a nonprofit organization’s mission qualifies as public service. If you have a choice, opt to work for an employer that clearly meets the public service requirements vs. one that doesn’t.
- Make sure you’re on the right student loan repayment plan. Not all federal student loans qualify for PSLF. You might need to consolidate your federal student loans to a type of loan and repayment plan that qualifies.
Revisit your student loan repayment plan
This new information from the Dept. of Education makes it harder than ever to know if you can count on PSLF. Without knowing for sure, PSLF might not be worth it for some borrowers.
It might be time to revisit your student loan repayment options. Check out our Public Service Loan Forgiveness calculator to see how much of your balance could be forgiven. Then compare that potential outcome to other strategies, such as refinancing or income-driven repayment plan forgiveness.
The Public Service Loan Forgiveness program offers vital student loan relief to 550,000 borrowers. This news underlines that the Dept. of Education is still ironing out many details of PSLF. But that’s not a reason to automatically rule it out. Just be sure you understand your student loan options so that you can protect yourself.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for 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 will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). 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 10 years or less. For loan terms of 10 years 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 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, 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 08/21/18. 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 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for 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.
5 Important Disclosures for 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. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|