In fall 2017, the first cohort of borrowers became eligible for Public Service Loan Forgiveness (PSLF). The program started in 2007 and can forgive the student debt of those who work for nonprofit or government agencies for 10 years. However, there have been questions about whether anyone has actually received forgiveness for their loans.
While the Department of Education has been somewhat tight-lipped about the situation, a few people now claim to have actually received confirmation of their loan forgiveness. Here’s what you need to know.
Fewer than 1,000 are expected to benefit from PSLF in 2018
As of Jan. 5, 2018, the Department of Education said it has received about 7,500 unique applications for PSLF.
“Fewer than 1,000 people are expected to be eligible for a loan discharge under the PSLF program in fiscal year 2018,” the Department of Education told Student Loan Hero. This is due, in part, to the “limited availability of income-based repayment plans in the early years of the program.”
The Department of Education pointed out that the application period has only been open for a short time and said that verifying 10 years’ worth of borrower employment and payment history can take a great deal of time.
On Reddit, a user known as Agnail shared a screenshot described as a portion of a loan forgiveness letter, claiming to have received a discharge of remaining balances.
“Those of us who have feared that PSLF might be a mirage can take some solace that, at least for now, PSLF is real, and actual borrowers have begun receiving it,” Agnail wrote. Student Loan Hero wasn’t able to authenticate the letter as of the writing of this post.
In the thread, Agnail said that the case might have been expedited due to the fact that there wasn’t a lot of complexity in the application.
“The fact that I worked for the same employer for the full time probably made it easier for the Department of Education to verify my PSLF application,” Agnail wrote. Additionally, Agnail turned in the employer certification form each year after it became available in 2012.
How to become eligible for PSLF
In order to receive PSLF, you need to work for a nonprofit or government agency while making 120 payments on qualifying loans. One of the issues that have arisen in the last few months has been confusion over which loans are eligible for the program.
“Only Direct Loans are eligible for PSLF,” the Department of Education said in a statement. “Older loans, such as those under the Federal Family Education Loan program or the Federal Perkins Loan program, are not considered eligible loans.”
In order for those loans to “count,” borrowers must consolidate them using the Direct Loan program. However, consolidation resets the clock on the 120-payment requirement for forgiveness. So if you’ve been making payments on old loans, you might not qualify for PSLF.
For some borrowers, this reality has been sobering. One Oklahoma teacher was looking forward to PSLF but found out her loans didn’t qualify, reported CNN Money. She’d been paying for a decade and her loan balance had ballooned from $37,000 to $75,000 due to income-driven options.
Complaints against servicers over PSLF have been on the rise as borrowers claim they weren’t presented with accurate information about their eligibility.
“At the time the PSLF program was created, only an estimated 25% of the total loan portfolio consisted of Direct Loans,” said the Department of Education, which expects more people to qualify in the future as older programs phase out.
The Department of Education recommended submitting the employer certification form each year to make it easier to track your eligibility for the program. The first form was made available in 2012. So if you began work before then, the government will take longer to verify your status.
Note that the Department of Education makes the final decision. Even letters issued in the past saying you’re on track might not be binding.
The future of PSLF
No matter who benefits from PSLF now, the future of the program is in doubt. Legislation in Congress, known as the PROSPER Act, aims to end PSLF. Additionally, President Trump’s latest proposed budget suggests getting rid of PSLF.
However, there are expectations that those currently working toward PSLF will be grandfathered in and still receive their forgiveness if they qualify.
For now, consider whether working in a lower-paying job is worth the loan forgiveness. In some cases, it might make more sense to take a high-paying private sector job and pay off your loans early. Refinancing can help you lower your interest rate and payment if you’re in that situation.
If you want to stick with PSLF, double-check to see that your loans qualify. Additionally, make sure to turn in your employer certification form each year and track your qualifying payments.
Finally, if you think that PSLF should stick around, track the legislation moving through Congress and contact your representatives to let them know your position.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 5.87%1||Undergrad & Graduate|
|2.47% – 8.03%4||Undergrad & Graduate|
|2.95% – 6.37%2||Undergrad & Graduate|
|2.48% – 6.25%5||Undergrad & Graduate|
|2.72% – 8.32%6||Undergrad & Graduate|