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 This means if your employers were previously “approved” in a letter from FedLoan, you could have that approval rescinded.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