A couple months ago, President Trump signed a spending bill into law that includes a $350 million Public Service Loan Forgiveness (PSLF) program.
There are student loan debt forgiveness programs available to help relieve the debts of borrowers in public service careers. These include teachers, nurses, doctors and police officers. The problem is that many of these borrowers are ineligible for the programs because they’ve signed up for the wrong repayment plan or took out non-qualifying loans.
This new law aims to help give those borrowers another opportunity to have their loans forgiven.
Who Will Benefit from the Modified Student Loan Forgiveness Program
Public Service Loan Forgiveness (PSLF) sounds like an incredible opportunity, but it’s not the right solution for everyone.
You need to make payments for 10 years to qualify, so if your loan amount will be mostly paid off in that time, it’s not really worth applying. It’s most beneficial for borrowers with steep student loan debt.
Borrowers on the graduated repayment plan or extended plan are the likeliest to benefit. That’s because so many people on those payment plans should have been on an income-driven plan. Graduates who can prove that they have been paying more than they should have been, based on income, may qualify for some debt relief.
If you think you might be eligible for this new program, get on an income-driven repayment plan as soon as possible. That is one of the qualifications, so after you get that done, the process will move quicker. (Another caveat to know about: PSLF requires eligible borrowers to have made 120 qualifying payments on a Direct Loan on time, and in full.)
How to Participate
If you’re thinking about applying for PSLF, you will have to do so through the Department of Education’s online application. The money will be distributed on a first come, first serve basis. So the quicker you apply, the likelier you are to get a piece of that $350 million.
Next, you’ll have to make sure you qualify. You can do that by checking to see if your loans are in the Direct Loan Program through the National Student Loan Data System. Joshua Cohen of The Student Loan Lawyer remarks “I consider this a band-aid because it fixes a small part of the PSLF program but ignores anyone with a FFEL loan.”
If they are Direct Loans, you should next find out if you are making payments in an income-driven repayment plan that qualifies for PSLF. Are you on a graduated or extended repayment plan? Call up your student loan servicer to discuss switching to the income-driven option.
Once those are both checked off, you’re on track to potentially have your debt forgiven. You will have to fill out an employment certification form annually to track your payments.
The Future of Public Service Loan Forgiveness
The future of PSLF is unclear. The Trump administration’s 2019 budget proposal proposes cuts in education, and that includes student loan forgiveness. This budget would eliminate PSLF entirely for new studen loan borrowers after 2019.
The PROSPER Act is another threat to PSLF. This is a higher education bill that would cap interest payments after 10 years of repayment for income-driven repayment. However, it would also eliminate any student loan forgiveness.
Keep that in mind as you move forward, but still seek out an income-based repayment plan if you believe you’re eligible for PSLF.
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