Public Service Loan Forgiveness Takes A Big Step Forward
On January 31, 2012, the Department of Education (DOE) made a long overdue announcement on the Public Service Loan Forgiveness (PSLF) Program which should significantly help borrowers qualify for this loan forgiveness option.
The PSLF Program was initially established by Congress with the passage of the College Cost Reduction and Access Act of 2007 toward the goal of encouraging student loan borrowers to pursue vitally important public service sector positions. It works this way.. IF the borrower makes 120 separate, one time monthly payments in certain loan repayment plans WHILE maintaining work in a public service organization(s) during the 120 month period THEN the borrower may have the remaining balances of their Direct Loans forgiven.
Beyond the basic 120 payments while in the public service field, PSLF comes with a couple of other important eligibility criteria. First, only borrowers with Direct Student Loans qualify. However, if the borrower had the older Federal Family Education loans (i.e. federal loans issued by commericial lenders) or Perkins loans, the borrower could consolidate those into a Direct Consolidation Loan to take advantage of PSLF. Second, the borrower must be using either the 10-year Standard Repayment Plan, Income Contingent Repayment (ICR) or Income Based Repayment (IBR) to pay back the loans. The reality is that only ICR or IBR works to the borrower’s advantage for PSLF in that the lower monthly loan payments (calculated on the actual ability to pay) leaves the borrower with a significant enough balance at the end of the 10 years to make forgiveness a true benefit.
The big step forward is that 5 years since PSLF’s inception, DOE has now developed a system for borrowers to track their public service employment for the required 10 years (120 months) of payments. Up until now, borrowers working toward PSLF completion were tasked with self-documenting their public service and maintaining records of their employment on their own with a layer of uncertainty as to what DOE would ultimately require as proof at the end of the 10 year period. All that changed in January, when DOE announced the availabiltiy of the “Employment Certification For Public Service Loan Forgiveness Form“. This form makes life easier for the borrower in terms of capturing consistent data from each qualifying employer in a standard template. More importantly, borrowers can submit the forms to DOE on an ongoing basis throughout their 10 years of repayment either annually or even as they change employment positions. DOE, in turn, will track and even confirm employment eligibiilty for PSLF based on each form submission. As such, borrowers will always be assured that they are making progress to have full loan forgiveness.
The Employment Certification Form is available for download at the PSLF website which also includes information on what type of public service position (a wide range!) qualify as well as other resources on this program.
The big question mark for PSLF is what happens in 2017, the year when the first group of borrowers participating in the program finally qualify for the loan forgivenss? Hopefully the new certification process will prepare both the borrowers and DOE for that moment.