Here is the second part of a three part installment regarding student loan forgiveness for teachers. The first post can be found here. The original blog post I wrote about this topic can be found here.
Hello, it is Heath again from Student Loan Insider. A quick review of who I am and where we were. My name is Heath and I helped over 25,000 borrowers achieve student loan success. I worked for a student loan servicer and as a coach now. I love helping people figure out their situation and want to help you too!
So when I saw this article by Heather, I realized there were points of confusion that needed addressed. So we first looked at Teacher Loan Forgiveness. Now we are going to look at another popular option for teacher forgiveness, Public Service Loan Forgiveness (PSLF).
This is also popularly known as “the Obama forgiveness program.” Before we begin, a lesson for us history enthusiasts. Despite being nick-named for President Obama, it was created under the College Cost Reduction and Access Act of 2007 (CCRAA), before he took office. But Greenland is icy and Iceland is green, so weirder things have happened.
So here is the major difference between PSLF and TLF. To qualify for TLF you just have to have the right employer, the right loans and wait. For PSLF, you have to have the right employer, loan types, and repayment schedule made within the proper payment window.
It’s not just making 120 payments as often advertised. It is making 120 QUALIFYING payments. So what makes a payment qualify? Let’s break down the different parts one by one.
In terms of employment, it has to be one of the following:
- Federal, State, local or Tribal government agency
- Public child or family service agency
- Any non-profit organization that is a 501(c)(3). This includes most not-for-profit private schools, colleges, and universities and why most of you will qualify!
- A tribal college or university
- A private non-profit organization that is not a labor union or partisan political organization that provides a public service such as Emergency management, Military service, Public safety, Law enforcement, Early childhood education, etc.
In addition, you must be full-time at this employment. Full-time is considered at least 30 hours a week. You can also hold two part-time jobs as long as both jobs qualify and equal 30 hours or more total.
Your payment must be made with the proper payment window. This window is 30 days before the due date and 15 days after. This is done as a bit of a safety net as the Department of Education is trying to avoid someone (such as a doctor) realizing their payments are low up front but will raise over time, making multiple payments to stack up on their qualifying payments.
While it has to be made in a certain window, it can be broken up as long as the full payment is received within that window.
Some quick examples:
Your payment is due on the 26th of the month. We are going to assume all 30 day months for this example. So your window is the 26th of the previous month and the 11th of the next month.
Your payment amount is $125.00 a month.
Example 1) You pay $50.00 on the 12th of the month due and $75.00 on the 29th of the month due. This payment qualifies.
Example 2) You pay $100.00 on the 10th of the month due and can’t pay the rest of the month. To “catch it up” you pay $150.00 on the 12th of the following month. This would count as one payment for the second month but the first month would not count. This is because the $150.00 was not received within the window for payment 1 (by the 11th). In addition it would only count as 1 payment even though you made enough money to count as two because you can only have one qualifying payment per window.
Example 3) You pay 50.00 on the 11th of the first month and can’t afford to pay the rest of the month. To “catch up” you pay $200.00 on the 10th of the second month. In this scenario you get two qualifying payments.
This is because payment 1 the full amount was received within the window (the last part being received on the last eligible day) but also it fell 30 days before payment 2 due date meaning it would count as well. So the criteria for both payments are met. While you can only have one qualifying payment per window, this clearly shows the windows do overlap.
Next you must have the right payment plan. This is the one that screws people up the most. You must be on one of the following plans:
- A plan thats payment is equal to or greater than what your payments would be on a Standard 10-year payment plan.
- A plan based on your income. The plans include the Pay As You Earn, Income-Based, and Income-Contingent Repayment schedules.
The first one makes no sense as after 10 years of payments (or less) you will have nothing left to forgive. So the only logical plan to qualify for PSLF is something based on your income. And because you have to include both incomes if you are Married Filing Jointly, often times this plan has a higher payment than if a borrower is doing a consolidation that stretches out his or her term to as long as 30 years or on an Extended Repayment schedule.
As a result, people can pay for a long time on the wrong payment plan and never have any of the payments count.
The final thing is your loan type has to count. The key for this plan is all loans must be Direct Loans. Direct loans are loans that are originated straight from the government rather than a bank. The loan type on these would start with DL. So if you have an older FFEL loan, it would not qualify.
This is where consolidation can come in. All consolidation loans are now Direct Loans. So if you have an FFEL loan that doesn’t qualify you can consolidate it and it will become an eligible Direct Loan. Please be careful to only include ineligible loans in your consolidation though, as any loan that already has qualifying payments on it will be reset by consolidation.
So those are the four criteria. If all four are met, your payment counts. If one of the four are not, it doesn’t. After you make 120 of these qualifying payments, you qualify for loan forgiveness. This forgiveness is not considered taxable by the IRS.
Now lastly let us talk about how you apply. To apply you must complete an Enrollment Certification Form (ECF) for any qualifying employers you’ve had since October 1, 2007. Once your employment is approved, you will be transferred to FedLoan Servicing, as they are the exclusive servicer for PSLF. They will then do a count of how many qualifying payments you’ve had since 10/1/07. Any payments before this date do not count. Any time you want your payment count updated, you must submit a new ECF form. While not necessary, it is recommended you do this annually.
A reminder from my last post. I have written a free guide for teachers that will help you avoid common myths and mistakes others have made.
Need more help? Check out these other posts on Hojos site or email me at firstname.lastname@example.org !
Want more information about student loan forgiveness? There are now four different posts on the blog to help you out! Click any of the pictures below to get more information!