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Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program is a United States government program that was created under the College Cost Reduction and Access Act of 2007 (CCRAA) to provide indebted professionals a way out of their federal student loan debt burden by working full-time in public service. It is available to anyone who has a direct federal student loan and is employed by a qualifying public or non-profit entity while making payments under a qualifying repayment plan.[1] The New York Times reported at least one borrower had received forgiveness under the program as of May 4, 2018.[2] On September 20, 2018, Forbes reported that 96 borrowers had their respective loans forgiven under the program as of June 30, 2018.[3]

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Qualifying employersEdit

Government organizations or agencies (Federal, State or Local), 501(c)(3) organizations as defined by the IRS, and some other types of not-for-profit organizations providing designated public services qualify for PSLF.[4]

Moreover, the nature of the individual's job responsibilities is not a determining factor in whether the employment qualifies. Only the employer's status as a qualifying employer determines whether the employment qualifies.

With limited exception, the individual must be directly employed by the qualifying employer. Therefore, government contractors will not qualify on the basis of their government contracts. Instead, they must independently be a qualifying employer. Another example is the national labs. Employees at national labs such as a Department of Energy or National Nuclear Security Administration Lab, do not qualify on the basis of managing a lab for the government; rather, the managing entity of the lab must be a qualifying employer.

Eligible loansEdit

Any loan made under the Direct Loan Program can qualify for PSLF. In particular, Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Federal Direct Consolidation Loans qualify for PSLF.

Loans in the FFEL program or Federal Perkins Loans can be consolidated into a Direct Consolidation Loan to become eligible for the program.[5] Private student loans are ineligible to be consolidated into a Direct Loan and thus cannot be discharged under the PSLF program.

Qualifying for forgivenessEdit

An individual qualifies for PSLF after making 120 on-time, monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. After the borrower has made 120 qualifying payments for a period of ten years, any remaining balance of the borrower’s eligible student loan is forgiven without any tax implications. Currently, there is no cap as to the amount of forgiveness a borrower can receive.

Those interested in receiving PSLF should regularly submit the "Employment Certification Form" for PSLF. This form will be used by the Department of Education's contractor, FedLoan Servicing, to determine whether an individual's employment and payments qualify for the program.[6]

Qualifying payment plansEdit

Multiple plans are available to those interested in the PSLF program. Those wishing to seek forgiveness under the PSLF should make payments under one of the income-driven repayment plans, including Income Contingent Repayment, Income Based Repayment, Pay As You Earn, or Revised Pay As You Earn.[7]

On May 23, 2018, the U.S. Department of Education announced a second-chance plan for people in public service jobs who were denied loan forgiveness because they chose the wrong repayment plan. The DOE will use $350 million set aside by Congress in a fix-it fund to help people seeking reconsideration. The money will be distributed on a first-come, first-served basis.[8]

Future reduction proposalsEdit

For his 2015 budget proposal to Congress, President Barack Obama proposed capping Public Service Loan Forgiveness at $57,500 for all new borrowers.[9] Analysis at the website Educated Risk, however, details the difficulty of modifying PSLF:[10] The 2016 Republican budget resolution proposes to eliminate the PSLF program to all new student loan borrowers.[11][12] A recent GAO report found that the cost of loan forgiveness has been underestimated, leading many commentators to speculate that a new Republican administration and Congress will take steps to curb the problem. [13]

President Donald Trump has proposed eliminating the PSLF in his budget proposal. Similarly, the Republican-proposed PROSPER Act eliminates the PSLF. Any changes would only apply to new borrowers as of July 1, 2019.[14]

Contradictory claims by the government regarding eligibilityEdit

In December 2016, it was reported that some employees who had been previously told by the government that their jobs were eligible for the program were later told that their jobs were not eligible.[15] In response, the American Bar Association, joined with four individual plaintiffs who were denied eligibility under PSLF, filed a lawsuit against the United States Department of Education to stop the Department’s decision to retroactively refuse to honor loan forgiveness commitments it made to individuals who "have dedicated their careers to public service."[16] The ABA argues that the Department of Education has "substantially changed its policy on PSLF-eligible employers" which directly contradicts statutory procedures for modifying regulations requiring public notice and comment periods.[17] Both sides have filed motions for summary judgment, both of which remain pending.[18]

ReferencesEdit

  1. ^ https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service
  2. ^ https://www.nytimes.com/2018/05/04/your-money/student-loan-forgiveness.html
  3. ^ https://www.forbes.com/sites/markkantrowitz/2018/09/20/very-few-borrowers-qualify-for-public-service-loan-forgiveness/#5d65d3d2a6fb
  4. ^ Qualifying Employment | studentaid.ed.gov
  5. ^ https://StudentAid.gov/publicservice
  6. ^ https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
  7. ^ Qualifying Payments | studentaid.ed.gov
  8. ^ http://www.abajournal.com/news/article/public_service_workers_denied_loan_forgiveness_due_to_wrong_repayment_plan/
  9. ^ WH 2015 Budget | blogs.wsj.com/washwire/2014/03/04/2015-budget-white-house-proposes-broader-debt-forgiveness-for-students/
  10. ^ "Is Public Service Loan Forgiveness For Real?". Archived from the original on 22 March 2014.
  11. ^ Gale, Rebecca (22 April 2015). "Student Loan Forgiveness for Staff on Chopping Block". Roll Call. Archived from the original on 25 April 2015. Retrieved 25 April 2015.
  12. ^ "REPORT OF THE COMMITTEE ON THE BUDGET HOUSE OF REPRESENTATIVES TO ACCOMPANY H. Con. Res. 27" (PDF). House of Representatives. 20 March 2015. p. 115. Archived (PDF) from the original on 28 April 2015. Retrieved 28 April 2015. actions taken by the committee of jurisdic- tion to streamline, reform, and simplify the current system could include ending the Public Service Loan Forgiveness Program.
  13. ^ Berman, Jillian (2016-11-30). "Feds may have underestimated cost of student loan forgiveness". Archived from the original on 2016-12-01. Retrieved 12 February 2017.
  14. ^ https://www.huffingtonpost.com/entry/quit-paying-student-loans-legally_us_5afe0700e4b07309e0564a1c
  15. ^ They Thought They Qualified for Student Loan Forgiveness. Years Later, the Government Changes Its Mind., New York Times, December 20, 2016
  16. ^ [1] ABA sues Department of Education over retroactive denials to lawyers under Public Service Loan Forgiveness, December 20, 2016
  17. ^ https://abaforlawstudents.com/2017/11/02/aba-suit-on-pslf-promises/
  18. ^ https://abaforlawstudents.com/2017/11/02/aba-suit-on-pslf-promises/

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