In a report recently published by U.S. News, the most recent spending bill that was signed last month has opened the doors for some who found out that their loan payments did not qualify them for PSLF. The new bill allocates $350 million to the Department of Education. This money is to be used to offer forgiveness to those who would have otherwise qualified for PSLF but were currently enrolled in an ineligible repayment plan.
The way PSLF works is that after you have made 120 qualifying monthly payments under a qualifying repayment plan on your Direct Loans while working full-time for a qualifying employer, the remaining balance on your loans is forgiven.
Sadly, many people who were planning on this forgiveness in 2017, the 10th anniversary of the PSLF and the earliest date the first-time borrowers could start using PSLF, some found out that their payment plans did not qualify them. As suggested by the U.S. News article, this program was not heavily advertised by the federal government and loan servicers. Now that media coverage has spiked, the amount of “employment certification forms increased.”
To those that found out that their repayment plan, which was the graduated and extended plans, did not qualify due to a technicality, they would have to essentially start from zero and begin making 120 qualified monthly payments all over again.
The new federal spending bill aims to adjust this problem, however, there are several limitations that will have to be hurdled. The budget of $350 million that has been allocated will be “offered on a one-time-only, first-come, first-served basis.” Many fear that this will not be enough.
And the next roadblock will be that those who had a graduated or extended plan may still not qualify for PSLF. The Department of Education and the servicers that work on their behalf will begin analyzing a borrower’s current monthly payment, comparing it to their payment a year ago, and what their payment would have made under a qualifying income-driven repayment plan. Those who ended up paying more than they would have if they were enrolled in an income-driven repayment plan will be eligible to receive this expanded forgiveness.
If you are interested in obtaining this newly expanded forgiveness, you should contact your loan servicer as soon as possible. As mentioned before, the funds will be used on a first-come, first-serve, basis. So, the longer you wait, the less of a chance you have of getting this forgiveness.
To read the original U.S. News article, you may follow the link here.