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Am I Too Late For Public Service Loan Forgiveness?

Michael Lux Blog, Student Loans 0 Comments

Last week we received an email from a reader who wanted to know if her previous employment with the federal government counted towards Public Service Loan Forgiveness. She also wanted to know what would happen if she “signed up” for it today.

There is no set deadline for applying for Public Service Student Loan Forgiveness. Borrowers can technically apply to have their loans forgiven after they have completed the required 120 payments. However, there are severe risks to waiting.

When it comes to PSLF, what a borrower should do and what a borrower is required to do are different. Today we will cover the minimum requirements and explain why it is best not to wait.

Using Previous Employment Towards Public Service Loan Forgiveness

Borrowers can use previous jobs to count towards Public Service Loan Forgiveness. However, there are stringent requirements. These previous payments must be “certified eligible payments.” Meeting this standard can be tricky.

For a payment to be a certified eligible payment, it must:

  • Be made using an eligible repayment plan – Not all federal repayment plans can be used towards Public Service Loan Forgiveness. If you were on the IBR, PAYE, or 10-year standard repayment plan; it is eligible. Repayment plans like the extended repayment plan or graduated repayment plan are not eligible. Even if you paid more than what you would have paid on IBR, the payment is not eligible.
  • Be a certified payment – This requires an employer certification form. This form requires your employer to certify two things. First, your employer must certify that you were working in a public service job. Second, your employer must also certify that you were working sufficient hours. The form explains that your employer must consider you to be full-time and that you must average over 30 hours per week.

Beyond the basics, there are several details that borrowers should understand. This article on Public Service Loan Forgiveness should be of some assistance. Ultimately, it is up to each borrower to get their payments certified. Submitting employer certifications every year is a good way to make sure that your payments are all counting towards the 120 eligible payments that need to be made for forgiveness.

Is it too late to sign up?

Public service loan forgiveness isn’t a program with a “sign up” procedure. Instead, it is something that you certified that you did, to have your loans forgiven.

Not having a defined deadline is a good thing. However, because of the fine print associated with the program, many borrowers will find that their past public service efforts may not count. Public Service Loan Forgiveness is something that takes some planning to do it right. Some individuals may luck into having met the requirements, but this is likely a rare exception. As we have explained, the certified eligible payment is a strict standard, and any requirement not met will mean that month’s payment does not count.

The Danger of Waiting

The most significant danger has been in the news a lot lately. 99% of the first wave of Public Service Loan Forgiveness applicants have been rejected. I think the numbers make things sound a bit worse than what they are, but it is a cause for concern. Waiting to apply will only make things more complicated and increases the odds of rejection that cannot be fixed.

Part of the PSLF application is an employer signature verifying the nature of the work and the hours worked. The passage of time will only make collecting this signature more difficult. This factor is part of the reason it is recommended that borrowers send employer certification forms yearly. People who wait too long may find it impossible to get the right signature.

A new wrinkle is the recently created Temporary Expanded Public Service Loan Forgiveness, or TEPSLF. The new program was designed to help borrowers who were on the wrong repayment plan qualify for Public Service Loan Forgiveness. This is a temporary program because there is a finite amount of funding, and once the money runs out, the program is gone. Borrowers who might need to utilize TEPSLF would be wise to take advantage of this program as soon as possible.

Keep an Eye on the News

It is possible in the months and years ahead that you could become too late to sign up for the public service loan forgiveness program. If PSLF is ever eliminated by Congress, they may create a procedure so that people who are working towards loan forgiveness can get enrolled, and therefore grandfathered into the program.

Admittedly, this is nothing more than speculation now. We do know that the program will be expensive to the federal government and that there have been proposals to cap or eliminate the loan forgiveness. At present, there are a lot of variables. The most important thing from a borrower’s perspective is to keep a close eye on the news and to be an active citizen if you hear the word that Congress is considering the elimination of public service loan forgiveness.

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