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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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is 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 April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates 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 co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
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.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 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 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% 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 July 31, 2020, 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 7/31/2020. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 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.
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 0.18% effective July 10, 2020.