Your Public Service Loan Forgiveness Is Being Mishandled — Here’s What to Do

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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?

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. 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.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.