This month, as the lucky public service employees who qualify to get the remaining balance of their federal student loans forgiven (after ten years of on-time payments) get their big payoff, others are headed for a big disappointment. Over one-quarter of Americans could qualify but only if they chose the right repayment plan, the correct federal student loans, and complete ten years of employment in public service.
Rachel Fishman expects to get public service loan forgiveness in 2020, but she knows she may not if her career or life trajectory changes. She's the Deputy Director of Research for the New America foundation's Higher Education Initiative, but she still finds the program confusing.
"In grad school, I paid close attention to the program and always made sure I chose the right repayment plan," Fishman says. "I also had federal loans that weren't with direct lending. I consolidated those loans because only direct lending loans qualify."
I'm reading stories about individuals who waited ten years for public service loan forgiveness only to find out they didn't qualify because they picked the wrong repayment plan, she says. Extended plans such as consolidated plans for 30 years don't qualify, but income-driven repayments and standard repayment plans do.
The bad news for someone who chose the wrong repayment plan is any payments made thus far don't count for the program, but future payments do. So while starting now to get forgiveness in 10 years may not be appealing to someone who is 20 years into a 25 or 30-year repayment plan, it still is for someone five years in. They would just need to get on an income-driven repayment plan and consolidate to direct lending if they have loans that are federal government loans issued by banks.
Here are three important facts you need to know about it if you may qualify now or in the future:
1. What kind of loans you have
If you're unsure what type of loans you have, log into studentloans.gov. If the details on your loans are confusing call 800-4FEDAID.
2. Know if your employer qualifies
Fishman does worry about whether or not she'll qualify for PSLF if she loses her job in the future, has to work in the private sector, or needs to reduce her hours to work less than full time. The payments she made thus far will count but you only get forgiveness if you complete all ten years. The good news is it may delay her forgiveness, but she still may receive it if she continues public service employment in the future. Work doesn't have to be consecutive. Since qualifying is based on the employer and not the job, you may qualify if you work for a hospital in the marketing department. If you have an inkling you might qualify, fill out this form.
3. If you're still in college, don't count on Public Service Loan Forgiveness but do count on income-driven repayment plans
No one in Congress is considering getting rid of repayment plans based on income, but they some representatives are considering the idea of legislation to eliminate PSLF, says Fishman. This means that loans you have borrowed would qualify but you wouldn't get any forgiveness on new loans.
Fishman is looking forward to her payout if her career trajectory stays on course. She'll get between $35,000 and $45,000 of student loan debt paid off by the program.
Public Service Loan Forgiveness is a completed program. Do what you can to see if you qualify and verify that you are taking the correct steps and choosing the right repayment plan. Your diligence can mean the difference between $0 and $45,000 in student loan debt owed.
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