Are you a teacher or social worker who’s struggling with student loans?
Have you heard of Public Service Loan Forgiveness, but aren’t sure how it works? Or maybe you’ve tried to start the process but became discouraged or confused?
You’re not alone.
A recent report on student loan complaints, released by the Consumer Financial Protection Bureau (CFPB), found that loan servicers have mishandled the program, making it difficult for borrowers to apply for forgiveness.
Here’s what you need to know.
What is Public Service Loan Forgiveness?
Introduced in 2007, the Public Service Loan Forgiveness (PSLF) program encourages borrowers to pursue careers like nursing, firefighting, and teaching. It allows public servants to earn loan forgiveness after 10 years of service and payments.
Now a decade since PSLF’s introduction, October 2017 is when the first cohort of applicants can apply to have their loans forgiven. (Although the Trump administration’s proposed budget might eliminate PSLF for new borrowers after July 1, 2018, the program is expected to remain intact for people who have already taken out loans.)
The problem? Many eligible public servants either don’t know about the program or don’t know how to take advantage of it.
The CFPB estimates 25 percent of Americans work in public service, yet only 500,000 are pursuing debt relief under PSLF.
Elisabeth Steward, a firefighter and EMT from Oregon, has heard of PSLF but hasn’t enrolled. “I think it’s a great program,” Steward said. “I just wish it were more clear how to sign up and where to start.
The most common PSLF student loan complaints
The CFPB analyzed more than 11,000 federal student loan complaints between March 2016 and February 2017 and found a wide range of problems when it came to PSLF.
“Those in public service positions who want to qualify for this program are depending on their servicer to help them follow through,” said Richard Cordray, CFPB director, in a press release.
“But borrowers reported that servicers are giving them the runaround,” added Cordray. “This can stall their progress toward the debt relief they have earned, and can lead to months or even years of unnecessary payments that can cost thousands of dollars and extend their time in debt.”
Here are the most common complaints, according to the CFPB:
- Incorrect or insufficient information about eligibility: Borrowers are not receiving accurate or timely information regarding eligibility for PSLF.
- Processing delays and errors: Some borrowers complained that servicers put their loans in forbearance, preventing them from making qualifying payments. “Others report that when employers help in making student loan payments, servicers misapply these payments in a way that denies the borrower credit toward loan forgiveness,” reported the CFPB.
- Job certification problems: Some borrowers eligible for PSLF are wrongly denied by loan servicers. Borrowers also say they do not know how to correct this mistake.
All these errors could mean months or years of additional payments for our nation’s public servants, which could add up to thousands of dollars.
For those pursuing debt relief, that’s no small matter. Two-thirds of public servants earn less than $50,000 per year, reported the CFPB. Eighty-six percent are earning less than $75,000.
“When slipshod student loan servicer practices make things even harder for borrowers who are already struggling to repay their debt, the financial fallout can be severe,” said Cordray.
For Kate G., a social worker from San Diego, the road to PSLF has been drawn out and disappointing.
“A year ago, I started the process of applying for PSLF, and it proved a lot more difficult than I’d hoped,” she said.
“And despite multiple phone conversations with my servicer, I was never informed that getting married and filing my taxes jointly would drive up my income-driven repayment amount — and make PSLF pointless.”
To alleviate some of these issues, the CFPB is updating its exam procedure.
Moving forward, Cordray promised its examiners would “scrutinize” whether servicers are accurately telling customers how to qualify, calculating the number of payments, and evaluating borrower eligibility and progress.
How to apply for PSLF
Think you might qualify for PSLF?
Even though it requires some additional paperwork, it could save you a lot of money in the long run. Try our PSLF calculator to see just how much you can save.
Whether you’re fresh out of school or a few years into your career, here are five steps you can take right now:
1. Check if your employer qualifies
First off, make sure you’re eligible to receive PSLF. You must work full time for a government agency, 501(c)(3), or qualifying nonprofit organization. Part-time work for multiple organizations counts too, as long as it adds up to an average of 30 hours per week.
2. Make sure your loans are eligible
Only federal Direct Loans qualify for the program. And if you don’t know what type of loans you have, click here to find out.
If you have other types of loans, you might want to consider consolidating them into a Direct Consolidation Loan. But before doing so, it’s important to note that any payments made prior to consolidation will not count towards the 120 payments needed for PSLF.
3. Enroll in an income-driven repayment plan
If you’re on a regular 10-year payment plan, your loans will be paid off by the time you’re eligible for forgiveness. So, make sure you’re enrolled in an income-driven repayment plan to extend your repayment term.
4. Certify your payments
Each year or whenever you switch jobs, you can submit an Employer Certification Form. It checks your eligibility for PSLF and records the payments you’ve made. Although not required, it can help you ensure you’re on track for PSLF. You should also fill it out every time you switch jobs.
5. If necessary, file a CFPB complaint
If your loan servicer isn’t providing you the support you need, don’t hesitate to contact the CFPB. You can file a student loan complaint online, or by calling (855) 411-2372.
You can also encourage your employer to take the public service pledge, which will prompt the CFPB to provide it with PSLF resources.
Just make sure you take action because, as Cordray said, “Our potential leaders of tomorrow should not be forced to forgo their public service careers just to make ends meet. If they cannot follow their dreams to serve, we all will suffer the consequences.”
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 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 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% 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 April 17, 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 04/17/2019. 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 firstname.lastname@example.org, or call 888-601-2801 for more information on our student 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.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed 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.
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.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
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 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|