This fall, the first of approximately 552,931 people in public service jobs hope to receive Public Service Loan Forgiveness (PSLF), according to a report from The Washington Post.
The program, which provides student loan forgiveness for public servants who make at least 10 years of federal student loan payments, was instituted during the administration of President George W. Bush. Now, it’s under threat from the administration of President Donald Trump.
The latest attack on PSLF came earlier this week in the form of a brief filed by the Department of Education.
Department of Education states Public Service Loan Forgiveness still isn’t guaranteed
Last year, the Department of Education disqualified some lawyers working for the American Bar Association (ABA) from receiving PSLF. However, those lawyers had already received information from FedLoan Servicing indicating they worked for an employer eligible for PSLF.
The ABA, along with four plaintiffs, filed suit in December 2016, and the Department of Education has been embroiled in a legal battle since.
The Department of Education reiterated in the brief it filed yesterday that previous letters from FedLoan Servicing determining whether an employer met PSLF requirements were “interim, non-binding, individualized determinations.”
It also said there had been no final decision about who would receive federal student loan forgiveness under PSLF, only that “once a borrower has made 120 qualifying payments, she may submit an application for PSLF.”
Are your chances for PSLF on the chopping block?
Although the language the Department of Education used might seem to indicate it doesn’t have to honor Public Service Loan Forgiveness, student loan lawyer Jay Fleischman warned against abandoning a current course of action based on this lawsuit.
“The fact of the matter is that the ABA is a professional organization,” Fleischman said. “It might be [a] nonprofit, but it’s not a 501(c)(3).”
“While there’s a chance that teachers, police, and other public service jobs might be impacted, their eligibility is pretty clear-cut in those cases,” Fleischman explained. “Their Public Service Loan Forgiveness probably won’t be affected by the outcome of this lawsuit.”
Others might not be so lucky, though, according Fleischman. He referred to some workers as being in a gray area. Private security guards and private ambulance workers are among those who do something that’s considered a public good and might work for nonprofit organizations.
“Technically, they could be eligible for forgiveness since some of them work for nonprofits, even if they aren’t 501(c)(3) groups,” Fleischman said. “However, if the ABA loses this action, it could financially harm workers in this gray area.”
It’s also important to remember that the Trump administration has promised PSLF will remain intact for people already in the program, said Fleischman.
So, even if the Department of Education’s budget proposal to eliminate the Public Service Loan Forgiveness program goes through, people who are already in the system are supposed to be able to continue — assuming the PSLF application is approved at the end of 10 years’ worth of federal student loan payments.
What about recent grads choosing a public service career?
A bigger issue, said Fleischman, is that recent grads might be reluctant to take on public service jobs if PSLF disappears.
“When choosing a career, it’s difficult to get excited about a low-paying public service job when the incentive of forgiveness is taken away,” Fleischman explained. “It’s a gamble too when you realize you could work for 10 years and still have your application rejected.”
However, Fleischman emphasized that he didn’t think the current program would penalize police officers, teachers, government workers, and workers at 501(c)(3) organizations.
“I can’t imagine the government taking a protection currently in place away from student loan borrowers,” Fleischman said. “There are too many borrowers who have already declared their intentions. And these are members of politically significant groups.”
Fleischman would understand if some recent grads rethought their career paths, though. Without the assurance of PSLF, it might be worth it to start an income-driven repayment (IDR) plan right now and then look for a job that pays a higher salary.
“Anything that lowers your federal payment to an affordable level today is something you should do, regardless of Public Service Loan Forgiveness,” Fleischman said. Check your eligibility for IDR plans and evaluate which works best for you if you’re having trouble paying your student loans.
Plus, it’s still worth it to turn in the paperwork to certify that your employment makes you eligible for PSLF. Even though the Department of Education claims the right to reject your application, it doesn’t hurt to start the paperwork.
Double-check your PSLF eligibility
With the first forgiveness applications coming up, and given the uncertainty surrounding the PSLF program, it’s a good idea to double-check your eligibility. You should also calculate how much student loan forgiveness you can expect to receive under PSLF.
“It’s incumbent on every borrower to see if their loan, employer, and employment qualifies them for forgiveness for maximum peace of mind,” said Fleischman.
At the very least, Fleischman said, figure out if you’re eligible for IDR and use it to get your federal student loan payments under control. Keep making your payments and look for ways to improve your finances.
Additionally, you can check your eligibility for other student loan forgiveness or repayment programs offered by:
- State governments
- The military
- Public service organizations
- Professional organizations
And if you aren’t eligible for IDR, PSLF, or alternative programs, or if you have private student loans, consider student loan refinancing.
Although you won’t receive the same protections you would with federal programs, refinancing can help you manage your budget if you don’t qualify for other programs.
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