Student Loan Forgiveness is available for those who work 10 years in the public service. (Photo: Al Seib/Los Angeles Times)
Hundreds of thousands of former students in California are eligible for a federal program that could erase or reduce student loan debt for those working in government. But few signed up.
The basics of the program called Public Service Loan Forgiveness, or PSLF, seem clear: Government and nonprofit employees who make monthly payments on their federal loans for 10 years are eligible to have the rest of their debt forgiven. . But as thousands of borrowers have discovered in the years since the federal program was created in 2007, signing up for the PSLF has been extremely complicated.
Onerous rules and poor communication mired borrowers in confusion, excluding many eligible people – if they knew about the scheme. Between May 2018 and May 2019, the Ministry of Education’s loan services refused 99% of applications submitted to the PSLF, according to a federal government report.
But the rules have temporarily changed. To address the problem, the Biden administration introduced a waiver last year that relaxes program requirements through the end of October by allowing many borrowers to retroactively receive credit for prior payments that wouldn’t otherwise count.
In California, more than 825,000 people are eligible for PSLF but fewer than 15,000 borrowers have received loan forgiveness, according to a coalition of groups that launched the California Student Debt Challenge, an effort to notify borrowers of their eligibility.
Now advocates are racing to provide employers and borrowers with information about the PSLF so they can submit applications before the waiver expires on October 31.
“There are a lot of borrowers who are completely unaware that the program exists or that their job is eligible,” said Cody Hounanian, executive director of the Student Debt Crisis Center, a nonprofit that advocates for debt financing solutions. Higher Education.
What are the basics?
In addition to working in the civil service and making 120 qualifying payments over 10 years, borrowers must meet other criteria.
In the past, applicants needed a specific federal loan called a direct loan or to consolidate other federal student loans into a direct loan. And they had to enroll in an income-based repayment plan, which sets monthly payment amounts based on a person’s income. Both of these requirements are suspended under the temporary waiver.
Until October 31, borrowers can recover credit for past repayment periods, regardless of the type of federal loan they have or the repayment plan they are enrolled in, or whether a payment has been made in full or on time.
Many borrowers could receive enough credit for the rest of their loan balance to be forgiven, advocates say. Others will receive credit for loan repayments they have already made, which will partially reduce their loans and bring them closer to paying off their debts faster.
The program is separate from the plan President Biden announced in August to forgive up to $10,000 or $20,000 in federal loans for borrowers who earn less than $125,000 a year. Borrowers can participate in both programs as long as they meet the eligibility criteria.
To qualify for public service loan forgiveness, borrowers must submit a PSLF form to the Department of Education, which also requires a signature from an employer certifying a person’s employment. The ministry recommends that borrowers complete this form annually to help track and verify eligible payments.
What types of jobs qualify as public service?
Workers employed by a federal, state, local, or tribal government, or nonprofit organizations, are eligible for the Public Service Loan Forgiveness Program.
This covers a host of jobs, including public school workers and many first responders and healthcare workers. Borrowers can check if they work for an eligible employer on the federal PSLF website.
Borrowers must make monthly payments for 10 years while working for a government or nonprofit job to receive forgiveness credit, but those years need not be consecutive.
For example, a borrower who worked for three years at a nonprofit organization while making monthly loan payments would still receive credit for those payments if they chose to leave for a job at a for-profit company. If the borrower decided to work for another nonprofit later in their career, they would need to make seven years of payments to qualify for loan forgiveness.
Where can I find more detailed information and help?
Advocates focus on educating employers about the civil service loan forgiveness, who can then pass the information on to workers. They distribute information to county governments, teachers’ unions and non-profit organizations in hopes of recruiting as many borrowers before the waiver period ends.
But borrowers don’t have to wait for their employer to apply for PSLF.
“Right now, it’s pretty easy for you to certify that you’ve worked those 10 years of service,” said Samantha Seng, legislative director and policy adviser at NextGen Policy, a California-based nonprofit. “After October 31, you will have to follow the usual procedure.”
Borrowers interested in finding more information about recent changes to the PSLF can visit this White House webpage or the Department of Education’s PSLF Help Tool set up to answer questions about the changes. in the program.
Borrowers interested in finding more information about recent changes to the PSLF can visit the White House webpage created to answer questions about program changes. A step-by-step guide to applying for the PSLF is also available at pardonmystudentdebt.org.
Advocacy groups working to disseminate information about the cancellation of civil service loans include:
A worker’s experience
During her first job after grad school as a mental health therapist for a nonprofit in Santa Clara County, Christine Shea came across a federal loan forgiveness program that gave her hope. that she could one day wipe out most of her $160,000 student loan debt.
“Nobody seemed to know,” said Shea, who earned her master’s degree in 2015. “So I educated myself. I read all the fine print.
Renunciation is a new source of hope for Shea. During her four years as a therapist in Santa Clara County, the 44-year-old said she made monthly student loan payments thinking the installments would count for possible loan forgiveness. .
But when Shea quit her job, she learned that two years of her payments didn’t count towards the PSLF. The payments were disqualified from the program after she inadvertently made two student loan payments in one month instead of one payment, she recalls learning from her loan servicing company.
A National Public Radio investigation published earlier this year found “widespread inaccuracies” in the way loan officers counted payments that were supposed to count for forgiveness.
At the time, Shea said she felt too overwhelmed to go through a formal petition process to have the payments considered.
“It was very discouraging,” she said.
She plans to seek the waiver in hopes that those payments will count toward the pardon. And if they do, she said she would seriously consider finding another job in the civil service since she is not eligible for the PSLF through her current employer.
Despite the payments, Shea’s student debt ballooned to $180,000 due to interest.
“It will be forgiven before I can ever repay it because my loans just ballooned under interest rates,” she said. “I can’t keep up. »