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.”
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