It sounds like a financial fairytale: a few waves of a wand and ta-da, disappearing debt! But certain federal loan recipients can make it a reality with student loan forgiveness programs. Some of these programs, like those for death, bankruptcy, or permanent disability, can result from uncontrollable circumstances. For the savvy borrower, there are happier options as well, including the public service loan forgiveness programs (PSLF).
Broadly, PSLF forgives the balances on student loans for borrowers serving in certain public service positions. But as with most promises, there’s some fine print. Before loan forgiveness, borrowers need to make 120 qualifying monthly payments--that’s 10 years, total.
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It’s the “qualifying” bit that can trip you up. Graduates who want to take advantage of the program should make sure to file an Employment Certification form right away when they get a job, refile that form annually, and file it again with every new job. Some 30 percent of people who fill out the form are denied from the program, so it’s crucial borrowers don’t just assume they’ll be included. There’s an online tool that can provide guidance on whether or not a borrower is eligible, but it can't guarantee anyone will be accepted.
To qualify for the program, borrowers can work any job at the government level or for certain nonprofits, or they can join the Peace Corps or AmeriCorps. Not every nonprofit employer will qualify: Groups that are not 501(c)3 tax-exempt (that is, the ones that advertise with phrases like “donations are tax-deductible”) generally don’t unless they exist to provide emergency services, public education, public health services, or law enforcement. Some part-time jobs can qualify too, if they add up to, on average, 30 hours a week.
Only some types of student loans are eligible. The ubiquitous Perkins loan is notably not among them, although consolidating student loans may solve that issue. Loans that include the word “Direct” are already eligible.
The PSLF program has been around since 2007 and was expanded under President Obama. And presently, it could be in danger of disappearing: A House bill referred to as the PROSPER Act would eliminate the program. In addition, the current Department of Education claims there’s been no final decision on whether borrowers will have their debt forgiven. According to NPR, “The department says it has taken no final action on any of those half a million PSLF applicants. It may have accepted their paperwork, the filing states, but those are only ‘interim, non-binding, individualized determinations.’” Additionally, President Trump’s budget recommendations included eliminating the program.
The prospect is frightening for those who made life decisions based on the possibility of student loan forgiveness. As the Federal Student Aid website is quick to point out, signing the Master Promissory Note means you’re responsible for your debt. As the Common Questions section of the site notes: “The fact that you didn’t fully understand the implications of getting a loan, or the fact that it’s been many years since you signed for the loan, does not mean that you do not have to pay.”
In other words, read before you sign on the dotted line.