Why Your PSLF Approval Letter Might Not Actually Mean Anything

pslf

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 This means if your employers were previously “approved” in a letter from FedLoan, you could have that approval rescinded.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.

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Published in Federal Loan Servicing, Federal Student Loans, News, Public Service Loan Forgiveness, Student Loans

  • WillIam

    This is insane. My wife has been working in the non-profit law field for over 7 years. We’re counting on this. Interest has been accruing as well. This qualifies as cruel and unusual punshiment. What can be done?

    • J King

      Yeah this is absolutely insane. I specifically chose to work at a non profit hospital for less money, have 5 years left and I have paid close to $50k already payments, with the balance not changing because the interest rates for gov loans are sky high insane. Every financial decision I’ve ever made has been based on this. We are considering buying a house and having kids. Now I’m freaked out.

    • Hi William,

      We agree that it’s a pretty awful situation. However, it’s possible she might be eligible. Has she filed a certification form for PSLF before?

      Cheers,

      Jeffrey

  • Sam Dangremond

    This article failed to hit the key issue: if you’re working for a non-profit that is a 501(c)(3), you’re fine… if you’re working for a non-profit that ISN’T 501(c)(3) you may have problems. Most people are in the former category.

  • Kristen Kendall

    Question: Aren’t the loan services you listed at the end of the article private providers, therefore if I consolidate with them, I wouldn’t qualify for the loan forgiveness plan discussed in this very article?!
    Another Question: Can we, as the loan payee, apply for the loan forgiveness program prior to the 10 years? I thought you could only officially file for it after the 10 years of paying. Which is kinda dumb to be in limbo for those 10 years.
    Last Question: If you are not able to apply for the loan forgiveness this way (if you don’t work for a non-profit or end up not qualifying for whatever reason), could you do the 20 year plan and get the rest forgiven (which is basically the same but for those who don’t work at a non-profit or gov. location)?

    • Hi Kristen,

      To answer your first question, yes, that’s right. You cannot refinance federal student loans and still get PSLF. However, many borrowers still have private student loans that they may wish to refinance while leaving their federal loans as is. Unfortunately, many borrowers do not qualify for PSLF either, which is why we mention refinancing. Sorry for any confusion!

      You technically can’t apply at this time, but the Dept. of Ed. encourages borrowers to submit the certification form for PSLF. You can find it here: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf

      Even if you don’t end up qualifying for PSLF, your payments still should be counting towards a plan that offers forgiveness after 20-25 years. Borrowers must enroll in these income-driven plans to be eligible for PSLF anyway. You can learn more about PSLF here: https://studentloanhero.com/featured/public-service-loan-forgiveness-do-you-qualify/

      Hope this helps! If there’s anything else I can do, let me know.

      Best,

      Jeffrey