In 2007, the Bush Administration signed the College Cost Reduction and Access Act which was created to ease the financial burden for low income college students, cut borrowers student debt interest rates, support Historically Black Colleges and Universities, but also ensure borrowers who worked in public service professions had the benefit of loan forgiveness due to their commitment to public service.
When the program was initially established, many would argue that the U.S. government failed to roll out thorough and precise information about the eligibility requirements for forgiveness, which caused further confusion when borrowers applied for public loan discharge.
In 2017, the U.S. Department of Education began accepting applications from the first cohort and discovered that 99% of applicants were denied forgiveness. And from November 2020 to April 2021, 98% of applicants were denied.
Congress created the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) in 2018 to resolve the issue of thousands of borrowers being denied forgiveness. The TEPSLF broadened the number of repayment plans that did not qualify for forgiveness under the original PSFL program.
Essentially, the PSFL and TEPSL are very similar except the latter includes additional qualifying repayment plans. Here are 5 things you need should know to have your loans forgiveness through the PSFL or TEPSL program:
You must work full time for a qualifying employer.
You cannot work anywhere and/or part-time if you want to be approved for forgiveness.
Your profession and title has nothing to do with your qualifications, but the sector does (private vs. public) – hence the name “public service”. Public service includes law enforcement, education, non-profit, government, and academia. For example, if you worked full-time as an auditor for a “Big Four” accounting firm, you would not qualify as opposed to working full-time as an auditor with a government agency or non-profit.
Full-time classification can be defined by your qualifying employer or 30 hours a week, whichever is greater. And if you work part-time for two qualifying employers and it meets the 30 hours a week requirement that would count as full-time employment. As of July 2021, the Education Department included full time employees of religious 501(3) non-profit organizations, such as clergy members to qualify for the PSLF.
You must make payments within a qualifying repayment plan.
If you’re under PSFL, repayment plans for eligible forgiveness include income driven repayment plans such as Pay As You Earn (PAYE), Revised PAYE (REPAYE Plan), Income Based Repayment Plan (IBR), and Income Contingent Repayment Plan (ICR Plan). In the TEPSFL, the repayment plans include Extended Repayment Plan, Graduated Repayment Plan, Consolidation Standard Repayment Plan and Consolidation Graduated Repayment Plan.
Plans that do not qualify in either programs: Standard Repayment Plan and Standard Repayment Plan for Debt Consolidation.
Your loans must be Direct Loans.
Simply put, loans directly issued by the U.S. government are Direct Loans.
Examples of federal direct loans eligible for forgiveness under PSFL include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS loans (in student’s name, not parent’s/guardian’s name), and Direct Consolidation Loan.
Be careful with consolidating loans after already making qualifying payments towards forgiveness because it will cause you to start the forgiveness process over. If you have loan types such as the Federal Family Educational Loan (FFEL) and Perkins Loans, they do not qualify in either the PSFL or TEPSFL program.
You must make 120 payments – but there’s a catch.
It was reported that thousands of borrowers were not approved for forgiveness because they misunderstood the required payment frequency. One of the requirements includes making 120 payments; however, there are three things that you must know.
#1 Payments must be made monthly over a span of 10 years. Making three payments in one month does not count as three payments towards forgiveness, but rather one.
#2 The monthly payment must be made within 15 days of the due date for it to count. For example, if your monthly due date is the 10th of every month, then you should make a payment prior to the 25th of the month.
#3. The 120 payments do not have to be consecutive, but missing months will further delay your eligibility for forgiveness.
You must submit an Employer Certification Form.
Accurately completing and submitting the Employer Certification Form is the only way your loan servicer can verify you are working for a qualified employer. If you are in doubt about your forgiveness qualifications, the Employer Certification Form will outline what you need to know. The first three sections of the form should be completed by you, the borrower while the last section must be signed by the employer.
To appropriately track your forgiveness, I recommend you submit the form on an annual basis so you can see your progress as you make payments – submitting it at the beginning of January.