UPDATE (March 8, 2014): See our new post “Obama’s 2015 Budget Proposal”: http://www.holdfasttodreams.org/?p=481
UPDATE (April 5, 2014): See our new post “The U.S. Department of Education (ED) Official Statements on Obama’s 2015 Proposed Budget: Impact on Public Service Loan Forgiveness (PSLF)”: http://www.holdfasttodreams.org/?p=494
Public Service Loan Forgiveness (PSLF) appears first glance to be one of those too-good-to-be-true programs. Surely the federal government made a mistake in offering complete student loan forgiveness in merely 10 years. Many naysayers believe Congress will wise up once the student loans begin to be forgiven in 2017 and repeal PSLF.
Hold Fast to Dreams believes PSLF will stay, at least for those already relying on the program.
PSLF’s Strict Requirements
Although the terms of PSLF sound easy to fulfill, the details show that PSLF truly accomplishes its goal of rewarding those who have served the public. Yep, not a piece of cake. Take a look at a few:
To earn PSLF, a borrower must make 120 qualifying payments on qualifying loans.
For any given payment to count towards the 120 payments required to earn PSLF, it must be:
• Made after October 1, 2007,
• Made under a qualifying repayment plan,
• Made while the borrower is working full-time at a qualifying public service organization,
• Received by the Direct Loan servicer no later than 15 days after the scheduled payment due date,
• A “full” payment. Full payments are payments on a Direct Loan in an amount that equals or exceeds the monthly amount required under your Direct Loan repayment schedule;
• A “scheduled” payment. Scheduled payments are payments made under a qualifying repayment plan after your servicer has billed you for the month’s payment.
The borrower must work full-time:
Full-time (1) means working in qualifying employment in one or more jobs for the greater of— (i)(A) An annual average of at least 30 hours per week, or (B) For a contractual or employment period of at least 8 months, an average of 30 hours per week; or (ii) Unless the qualifying employment is with two or more employers, the number of hours the employer considers full-time. (2) Vacation or leave time provided by the employer or leave taken for a condition that is a qualifying reason for leave under the Family and Medical Leave Act of 1993, 29 U.S.C. 2612(a)(1) and (3) is not considered in determining the average hours worked on an annual or contract basis.
The borrower must work at the right job:
Your job is eligible if you:
- are employed by any nonprofit, tax-exempt 501(c)(3) organization;
- are employed by the federal government, a state government, local government, or tribal government (this includes employment by the military, public schools and colleges, public health centers, etc.); or
- serve in a full-time AmeriCorps or Peace Corps position.
Alternatively, you may still be eligible if:
(1) your employer is not “a business organized for profit, a labor union, a partisan political organization, or a non-profit organization engaged in religious instruction, worship services, or any form of proselytizing;” AND,
(2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.
PSLF Brings Revenue to the Government
PSLF is available only for Direct Loans. However, borrowers with FFEL, Perkins, or Health Professions loans who are interested in PSLF may consolidate those ineligible loans into a Direct Consolidation Loan and then make 120 qualifying payments on the Direct Consolidation Loan while employed by a qualifying public service organization to receive PLSF. When borrowers consolidate into Direct Loans, this brings loan revenue into the Federal Direct lending program.
No History of Repeal
You aren’t alone in your concerns about the repeal of PSLF. Commenters on the PSLF regulations (https://federalregister.gov/a/E8-24922) urged the Department of Education to incorporate the public service loan forgiveness program as a term and condition in the Department’s Direct Loan master promissory note (MPN). The commenters believed that making this change to the MPN would prevent Congress from repealing the forgiveness benefit after borrowers have spent years working to meet the eligibility requirements.
The Department of Education has responded to this concern:
“With regard to incorporating a description of the public service loan forgiveness benefit in the MPN, the Department is already taking steps to refer to the program in the MPN and other program documents. However, the MPN will continue to state, as it currently does, that the terms and conditions of the loans are subject to the HEA as it is amended in accordance with the effective date of those amendments. Although there is no history in the program of Congress eliminating or reducing a borrower benefit, the Department does not believe that a reference to the public service loan forgiveness program in the MPN would provide the borrower with a contractual right to the benefit should Congress take action to eliminate that benefit from the HEA as of a particular effective date.”
Grandfather in Borrowers Who Relied on PSLF
But the sky may fall. At least for those who have relied on PSLF, student loan experts believe these borrowers would be permitted to complete the forgiveness process. It’s not clear what exactly the borrower would need to show reliance, but generally, reliance means taking steps, changing your position, in reliance on PSLF. Specific examples of reliance may be borrowers who have consolidated loans into Federal Direct, chosen a qualifying repayment plan, and completed a number of payments towards forgiveness.