How the PSLF Limited Waiver could benefit you
There was big news earlier this month when the White House administration announced most student loan borrowers could qualify for $10k in forgiveness. While there are rules and stipulations for this one-time forgiveness, I will save that for another article, because I’d like to focus on another student loan forgiveness program that has been around since 2007 and receives so little attention, that most people often forget about it. I am referring to the Public Service Loan Forgiveness (PSLF) program. The Department of Education made significant, but temporary changes to the PSLF program called the Limited Waiver. October 31st, 2022, is the deadline to seek the provisions under the Limited Waiver program and before you decide that you didn’t qualify for PSLF before or were turned down in the past, keep reading because there are several things that changed for this short time only that could make the difference for you.
The basics of the PSLF program are still the same, you will need to work full time for a qualified employer and make 120 on time payments to an eligible loan. Once you complete this, your balance will be forgiven, tax free. Here are some of the reasons people get tripped up:
- First the loans must be Federal loans and not private. Sorry folks, but the government will never forgive your private debt. And those loans must be Direct loans only. So, if you have another type of Federal loan, then it can be recommended to consolidate them to Direct to be eligible for the PSLF program. (Always talk to an advisor before consolidation so you understand the true ramifications of the transaction)
- Second is eligible payments. To be eligible you need to make sure that your payment is no later than 15 days after the due date and be on one of the following payment plans offered- Standard, Income based, Income contingent, Pay as you earn, or Revised pay as you earn. And good news the entire Covid waiver period counted as on time payments, even though they were zero dollars.
- Third, is what I think the biggest piece of all, eligible employment. You must work full time for a government employer (this can be Federal, State, City or Local), 501(c)(3), Peace Corp, Emergency Management, U.S. Armed Forces, National Guard, Public Safety, Law Enforcement, Early childhood Education, Public Health, Public Education, Public Library, School Library or other school-based services. You can always check your employer by their EIN (or tax ID) if you are unsure. You do not have to work for the same employer for all 10 years, but only the payments while you are working at each eligible employer will count.
Here are the temporary changes to PSLF that will expire on October 31, 2022 so make sure to read through and see if these could help you.
- Payments made under a FFEL or Perkins loan will count as long as the loan is consolidated into the Direct loan program and a PSLF form has been submitted before the October deadline.
- Payments made under any repayment plan on or before 10/21/2021 will count if the borrower has a Direct Loan and filled out the PSLF form.
- Payments made for less than what was due or late will be counted if the borrower was working for an eligible employer at the time.
- Borrowers with periods of active-duty military service, will have those months count even if they were in miliary deferment or forbearance. This change is permanent and not part of the Limited Waiver.
- These changes also apply to Stafford and Graduate Plus Loans.
- Periods of eligible employment used for Teacher Loan Forgiveness (a separate program) will be counted under the PSLF Waiver.
- Consolidation will not reset the PSLF payment count during the Waiver period.
- All previously denied PSLF applications will be reviewed by the Department of Education in the coming months, it would be prudent to make sure all information is up to date before the Limited Waiver expires.
So how do you apply? The largest piece will be the employment certification, especially if you have had more than one qualifying employer over the last 10 years of your payments. All eligible loans that qualify for PSLF will be moved to MOHELA for servicing, you will upload your employment certification to them, and they will verify it. MOHELA will track all eligible payments and once you have made the 120th payment, you need to submit a PSLF application before the remaining amount is forgiven. TISLA is a great resource to check out for the steps, including links to many of the forms you may need to get started.
With less than two months to go, you can’t afford to put this off any longer. If you have additional questions on how this might affect you, feel free to reach out to any of the advisors here at Mainstreet.