How to get your student debt wiped out by Public Service Loan Forgiveness

BY Sydney LakeOctober 12, 2021, 7:30 PM
Students on campus at Florida International University in Miami, as seen in September 2021. (Photographer: Eva Marie Uzcategui—Bloomberg/Getty Images)

Last week, the Education Department announced major changes to its Public Service Loan Forgiveness (PSLF) program—an initiative aimed at providing debt cancellation for public servants. Since its 2007 inception, 98% of borrowers who applied for forgiveness were denied by the program because of a number of hurdles with the approval process.

Now many federal loan borrowers may be wondering how to take advantage of the change.

“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” Education Secretary Miguel Cardona said in a statement announcing the PSLF overhaul. “The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country.”

The overhaul promises to immediately wipe out an additional $1.7 billion in student loan debt—on top of the nearly $10 billion in forgiveness for a wide variety of borrowers that President Joe Biden has announced since January 2021. 

The program was established to forgive the remaining balance on direct loans for public service workers after they made 10 years’ worth of payments (120 qualifying monthly payments). Borrowers didn’t realize, though, that many of their payments weren’t counting toward forgiveness due to unclear rules and regulations associated with the program.

If you’re a public service worker looking to ensure student debt forgiveness, read on. Fortune has compiled a list of things to do when applying for the PSLF program.

Make sure you’re enrolled in an eligible loan plan

The PSLF program was created to forgive direct loans on income-driven repayment plans for public sector employees who made 120 on-time payments. Whew. That’s a lot to keep track of in order to be eligible for debt relief.

“If any one of those things went wrong, they weren’t getting their forgiveness,” Randy Lupi, regional vice president of Equitable Advisors, tells Fortune. But now the overhaul gives borrowers another opportunity—Lupi calls it a corrective action—to ensure they’re on the right track for loan forgiveness. 

If any of your loans are through the Federal Family Education Loan (FFEL) or Perkins Loan programs, then it’s time to consolidate your loans, or switch, to the Direct Loan program. FFEL and Perkins loans don’t count toward your 120 qualifying payments needed to eventually be forgiven through the PSLF program. 

Borrowers must make the change by the end of October 2022. For now, under the immediate PSLF overhaul, borrowers who have made payments on FFEL and Perkins loans can fill out a limited waiver in order to have all of their student loan payments count toward PSLF. They’ll then have to carry out the full consolidation, though.

“This is a call to action,” Lupi tells Fortune. “[Borrowers] really need to take a hard look at their loan situation right now. It’s a very good opportunity for anyone that’s in the public sector and any nonprofit to go ahead and try to reapply [to PSLF] and see if they can get credit for some of those past payments.”

The Education Department will also review previously denied PSLF applications for errors and let borrowers have their forgiveness decisions be reconsidered.

“These actions will help identify and address servicing errors or other issues that have prevented borrowers from getting the PSLF credit they deserve,” according to the Education Department.

Complete your employer certification

Borrowers have to make 120 on-time loan payments, which can be difficult to track. One thing that will help make monitoring payments manageable is completing your employer certification each year.

“Submitting the form annually will let us track and verify how many qualifying payments you make while working full-time for a qualifying employer, among other PSLF eligibility requirements,” according to the Federal Student Aid office. 

Every year that a borrower certifies employment, the loan servicer has to go back and look at the last 12 months of payments. If the borrower made the payments on time, then 12 months will be credited toward the PSLF program, Lupi explains. This way, borrowers can see their progress updated each year and avoid being surprised by unqualifying payments.

Start on this now

Time is of the essence in the world of student loans right now. We’re only three months away from the end of the COVID student loan forbearance period, and many borrowers haven’t made payments on their federal loans for more than a year and a half.

Preparation and close attention are especially important for PSLF borrowers—they’re also under deadline. Within just a year, these borrowers need to have their long-term loan situations figured out and be sure they’re in a place to have all of their payments qualify toward forgiveness.

“Now is the time,” Lupi says. “Take a look at your situation. Let’s get a little bit ahead of the curve if we can. Start figuring out your loan payments and start figuring out if you had the right type of loans.”

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