Will you qualify for college tuition loan forgiveness? Edmit looks at the future of public student loan forgiveness programs.
Since its launch in 2007 under President Obama, the Public Service Loan Forgiveness (PSLF) program has given hope to thousands of graduates struggling to manage their student loan debt. Through PSLF, graduates working in the government or nonprofit sector can have the remaining balance on their Direct Loans forgiven after 10 years of making qualifying monthly payments. Since 2007, more than two million borrowers have submitted an Employment Certification Form (ECF), which, if approved, confirms one’s qualification for PSLF. Some have even planned their careers around the program, choosing to go into teaching over, say, finance in the hopes that their student loans will eventually be forgiven. However, despite so many people relying on PSLF for their financial security, it remains unclear to what extent borrowers will actually benefit from the program.
This uncertainty can be attributed to several factors: First, the student loan industry has been frequently accused of practices that effectively serve as barriers to loan forgiveness. According to a 2017 report by the Consumer Financial Protection Bureau (CFPB), many complaints have been lodged against the student loan industry for practices “that delay, defer, or deny access to expected debt relief. Consequently, borrowers report that they are not on track to qualify for PSLF.” These practices include enrolling borrowers in non-qualifying repayment plans despite their interest in PSLF and, when borrowers’ EFCF is denied, failing to inform them why. It is in part because of these practices that few borrowers are expected to benefit from PSLF this year.
October 2017 was the first time borrowers could apply for PSLF, and CNN Money reports that as of January 5, 2018, about 7,500 people have applied for forgiveness. However, although the Department of Education has not confirmed the number of approved or rejected applications, it told CNN Money that “fewer than 1,000 [people] are expected to qualify this year,” a mere 13 percent of those who applied. Hopefully, this percentage will increase in the coming years as PSLF becomes more established and borrowers become more familiar with the program requirements. Currently, however, the numbers aren’t looking good.
Second, many people remain confused or misguided about eligibility requirements. To be eligible for PSLF, borrowers must:
- have one or more Direct Loans
- make 120 qualifying monthly payments
- be enrolled in a qualifying repayment plan and
- work full-time for a qualified employer.
CFPB reports cases in which borrowers spend “years making payments, believing they [are] making progress towards PSLF, before servicers explain that their loans do not qualify for PSLF.” Borrowers with non-qualifying federal loans (like the Perkins Loan) may want to consolidate them into a Direct Loan, which would make them eligible for PSLF. However, if the borrower has already made qualifying payments toward PSLF, this may not be the best move. If borrowers consolidate their loans, they automatically lose all of their previous qualifying payments.
Finally, Trump’s budget proposal for fiscal year 2019 includes eliminating PSLF, rendering uncertain the program’s future. In the event that PSLF is eliminated, it would most likely affect potential borrowers rather than borrowers who are currently enrolled in the program. Nevertheless, Trump’s proposal has been devastating for both potential and current borrowers, many of whom have planned their careers around the program.
Susannah Snider from Kiplinger warns against loan forgiveness programs for this very reason. Before committing, students should consider the possibility that their program may not last, she argues. Any program that depends on congressional funds is not a guarantee and is subject to change as the political climate changes. “We can’t make any guarantees about the future availability of PSLF,” acknowledges Federal Student Aid, an office of the U.S. Department of Education. “The PSLF Program was created by Congress, and Congress could change or end the PSLF Program.”
Snider also advises that students commit to a program only if they’re absolutely sure they’ll see it through. Dropping out of a program not only means that borrowers lose the benefit, they might also end up losing money. “[L]ower monthly bills [under PSLF] mean the loan principal stays larger longer and accumulates more interest,” Snider explains, “If you drop out of the public sector before making 120 payments, you’ll end up losing the forgiveness and paying more than if you had paid over ten years [under a standard repayment plan].”
So how can one successfully navigate the complicated and confusing world of student loan forgiveness? First, Federal Student Aid recommends that borrowers working toward PSLF complete the ECF annually or when they change employers. As of December 31, 2017, approximately 66 percent of ECFs have been approved. However, an approved ECF doesn’t necessarily mean that a borrower will be approved for loan forgiveness. After 10 years of qualifying monthly payments, he or she still has to fill out an application for forgiveness, which can be denied even if his or her ECF was approved. Federal Student Aid recommends that borrowers use the ECF as a paper trail: They help keep track of one’s payments. According to the CFPB, borrowers often report losing years of their payment history when they are assigned a new servicer. Additionally, ECFs provide the government with information as to how many people are planning on applying for loan forgiveness. Given PSLF’s uncertain future, borrowers stand to benefit from demonstrating their reliance on the program. (You can also voice your PSLF concerns to your member of congress here.)
Second, if you’re interested in PSLF, use checklists to make sure you are on track for loan forgiveness. Two good resources are currently available from the National Education Association and the Association of American Medical Colleges, but there are others that can easily be found online. Given the number of complaints lodged against the student loan industry, you might want to make use of third-party resources, rather than trusting your loan servicer to have your best interests at heart.
Finally, if you are a potential borrower, try to minimize your loans as much as possible. Research and go after scholarships or grants—not only the big national ones most people are familiar with, but the smaller ones offered by your high school, your state, or even your place of worship. Remember that student loans are not the only way to finance your education. Successfully navigating the world of student loan forgiveness is great, but not having to enter that world in the first place is even better.
Hannah Kwak is a junior at Yale University, majoring in Comparative Literature. She has an interest in education policy and spent last summer working with Breakthrough of Greater Philadelphia preparing seniors for the college application process.