Federal forgiveness programs student loans always seem well-intentioned, but the way they are deployed can leave a lot to be desired. When you take a closer look at the Public Service Loan Forgiveness Program (PSLF), for example, you’ll find a program with rules so complicated that many applicants don’t really understand them.
This has led to a situation where almost everyone who applies is approved, and many people spend years thought they strive for a loan forgiveness only to find out that they’ve had the bad loans or the bad job from the start.
So how does the PSLF work? As a reminder, this program was created to help people get away from it all. student loan debt when they agree to hold qualifying employment for 10 years and make 120 payments on time. Other requirements apply, but the end result is that loan balances are written off after 120 payments and 10 years have passed.
Sounds good, doesn’t it? It certainly is, but the reality is much more complicated. To understand just how bad the PSLF has become, one need only look at the Public Service Loan Forgiveness data released by the US Department of Education. Here are some of the most glaring statistics of the April 2020 Report:
- At the end of April 2020, 196,046 PSLF applications had been submitted by 150,545 borrowers
- Of the 180,798 requests processed, 177,422 were rejected and 3,376 were approved
- 2,215 unique borrowers had their PSLF discharge processed
- A total of $ 146,322,876 in balances was settled
Even taking into account typos or confusion about the program, it is difficult to understand how only 3,376 applicants out of 150,545 people were approved. If you took these statistics at face value, you should believe that less than 3% of people completed their application the right way or qualified for the program.
But let’s dig another layer deeper into this mess. Remember when the federal government implemented the Extended Public Service Temporary Loan Forgiveness Program (TEPSLF)? This program was created to help more people qualify for loan forgiveness, but little has changed. So far, 1,826 TEPSLF applications have been approved and 28,888 applications have been deemed ineligible.
How to improve your chances of approval
When it comes to the PSLF, the US Department of Education shares a long list of issues that have made too many people ineligible for the programs. These include:
- Not enough eligible payments (58%)
- Missing information (23%)
- No eligible loan (14%)
With that in mind, improving your chances of getting approved should be pretty straightforward. I say “should be” because it should be extremely obvious that qualifying for the PSLF is much more complicated than it looks.
If you want to increase your chances of getting approved and avoid a situation where you are stuck in a limbo of forgiveness, you need to pay close attention to the details of qualifying for this program. Here are the main steps you can take to work on loan cancellation and make sure you don’t waste time.
Have the right type of loan
To be eligible for the PSLF, you must have certain types of student loans called direct loans. Any loan under the William D. Ford Federal Direct Loan Program (Direct Loan) qualify, while other federal loans like FFEL loans and Perkins loans do not.
If you don’t have the right kind of federal student loans, you can bring your loans into compliance with the PSLF by consolidating them with a direct consolidation loan. But remember, you need to do this first because payments made on other types of student loans will not count towards the 120 payments you need to qualify for the PSLF.
Make sure you’re on the right repayment plan
In addition to having the right kind of student loans, you must also pay off your loans on an income-based repayment plan. This includes plans like Pay As You Earn (PAYE), Income Based Repayment (IBR), Revised Pay As You Earn (REPAYE), and Income Contingent Repayment (ICR), all of which allow you to pay a percentage of your discretionary income for 20 -25 years before leading to the cancellation of your loan balance.
If you are not paying off your loans on an income-based repayment plan, you will need to switch to a plan before your payments start to count for the PSLF.
Certify your job every year (or more if necessary)
Finally, you must have the right type of public service position to be eligible for the PSLF. Specifically, the United States Department of Education states that you must be employed full time by a “United States federal, state, local, or tribal government or nonprofit organization.”
In order to make sure that you are on the right track with a qualified job, you must also complete a Employer’s attestation form, and update with a new one every year.
You must also complete a new one if you change jobs in the middle of the year. You don’t want to have to search for past employers to fill out this form.
This form ensures that, without question, your employment qualifies you for the PSLF in the year you complete it. Not only do you have to complete this form as soon as you apply for your first job that would make you eligible for the PSLF, but you must complete one if you change employers and once a year otherwise.
May the odds always be in your favor
Qualifying for the PSLF may seem nearly impossible, but some candidates seem to be successful. I guess the issues were rampant among the applications submitted and many people just don’t understand all the requirements of the program – requirements like having to pay back on an income-driven plan, having direct loans, or avoiding prepayment status.
If you want to make sure you get the forgiveness you crave – and that you’re not wasting years making payments that won’t matter to PSLF – now is the time to take the details seriously. Make sure you have the right loans, that you are paying off your loans on an income-oriented plan, and that you complete the employer certification form every year. Once done, everything should fall into place.