On Friday, President Donald Trump signed an omnibus spending bill into law. Among the provisions in the $3.1 trillion bill — which passed Congress with bipartisan support — is one aimed at bolstering the Public Service Loan Forgiveness (PSLF) program to the tune of $350 million.
According to USA Today, tens of thousands of student loan borrowers are thought to have enrolled in the wrong repayment plan, thus making them ineligible for PSLF. However, the new bill provides an opportunity for some of these borrowers to get a measure of relief from crippling debt.
“While it’s a good step, the reality is that the scope of this plan is fairly limited,” said Mark Kantrowitz, a student loan and education policy expert. “As with so many of these types of bills, some will benefit and some won’t.”
Here’s what you need to know about this one-time PSLF expansion.
PSLF help for borrowers in the wrong plan
“Some borrowers said they were misled into choosing a graduated or extended payment plan when, really, they should have been in one of the income-driven repayment plans,” said Kantrowitz.
“If you can show that you’ve been paying more each month than you should be under income-driven repayment, you are likely to qualify for a share of the $350 million.”
Here’s how it works:
- Verify that you are in a graduated or extended repayment plan by contacting your loan servicer.
- Take a look at your monthly payment from a year ago.
- Estimate how much your monthly payment would be under an eligible income-driven repayment plan. (This calculator can help.)
- If your current payment is more than what it would be under one of the four income-driven repayment plans, you might qualify for additional help.
Kantrowitz pointed out that borrowers will have to apply for PSLF using the application on the Department of Education website, but he hopes the process will be somewhat streamlined for borrowers who might be eligible for a portion of this $350 million.
“It’s described in a very complicated manner in the legislation and there are a lot of hoops to jump through,” said Kantrowitz. “The Department of Education will need to find a way to incorporate this reality into its process of awarding PSLF.”
How will the money be distributed?
The legislation allows for the $350 million to be awarded on a first come, first serve basis. Borrowers who can show that they are in the wrong plan and file for PSLF quickly are more likely to succeed in their efforts to have some of their student debt forgiven.
For borrowers who might benefit from this new bill, Kantrowitz recommended getting into an income-driven repayment plan as quickly as possible.
“Then, when you meet all the other requirements for PSLF, you can submit your application,” he said. “The Department of Education will have sort out which of your payments under graduated or extended plans qualify. And, if there’s money left, you’ll get some forgiveness.”
FFEL student loan borrowers still left out of PSLF
Like Kantrowitz, student loan lawyer and consumer advocate Jay Fleischman believes the PSLF expansion in the omnibus bill will have limited impact on student loan borrowers.
“It’s a nice publicity stunt to say you’re giving the popular PSLF program a boost of $350 million to help struggling borrowers,” said Fleischman. “But the real people bearing the brunt of this problem are those in an old federal loan program that doesn’t qualify for PSLF.”
Fleischman is referring to the Federal Family Education Loan (FFEL) program, which was discontinued in 2010. Under FFEL, private lenders made federal student loans. However, it was phased out and completely replaced by the Direct Loan program — and only Direct Loans qualify for PSLF.
“A large number of FFEL borrowers have been negatively impacted,” Fleischman continued. “Many servicers have either misled them or their representatives just haven’t understood what’s required of the program. These are folks who need the help more than anyone.”
The lack of information has impacted borrowers like Ingrid Haftel, who thought she was on track for PSLF before finding out differently by watching coverage.
“I just found out my loans don’t qualify [for PSLF], even though my servicer told me they did,” said Haftel. “It’s critical that folks understand this, so they don’t end up in my situation.”
Fleischman added, “If we’re really going to provide a permanent solution to the looming student debt crisis, especially among our public servants and nonprofit workers, we need to address the FFEL part of the PSLF equation.”
What to do next
If you hope to receive PSLF, now is a good time to verify that you’re on track. Here are some things you can do to increase your chances of qualifying:
- Go to the National Student Loan Data System and find out which loan program your debt is in.
- Verify that your loans are in the Direct Loan program.
- Find out if you are enrolled in an income-driven repayment program that is eligible for PSLF.
- Each year, fill out your employment certification form to help the Department of Education keep track of your qualifying payments.
- If you are on a graduated or extended repayment plan, but you qualify for income-driven repayment and your employment qualifies you for PSLF, contact your student loan servicer to discuss switching plans.
Lastly, realize that PSLF might be in danger going forward. Budget proposals from the Trump administration, as well as the PROSPER Act in Congress, propose getting rid of PSLF entirely. If you disagree, contact your legislators to let them know how you feel about student loan forgiveness.
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1 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 2.47% APR (with Auto Pay) to 6.97% 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 Month/Day/Year, 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 08/21/18. 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 ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. 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. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
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.
3 Important Disclosures for SoFi.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|