The Public Service Forgiveness Denial

Michael Lux Blog, Mailbag, Student Loans 4 Comments

Yesterday we received a heartbreaking email from a couple in their 60’s who are on the brink of retirement.  The husband dedicated his career to public service, even though he could have made more money working in the private sector.  The two of them believed that his remaining federal loans would be forgiven in 2017, based upon a 2007 law forgiving the remaining student debt for those that make 120 timely payments and work in pubic service for 10 years.  The email did didn’t make it clear why the past eight years of payments didn’t count towards forgiveness, but the likely explanation is that they were on the wrong repayment plan.

Today we will address two critical student loan topics.  First we will cover what to do if you find yourself in the same situation.  Second, we will discuss the things that all borrowers should do to ensure that they don’t run into the same problem.

If you just found out years of payments will not count towards public service student loan forgiveness…

Unfortunately, there is no easy solution.  Federal law sets out the requirements for public service student loan forgiveness, and if you don’t meet them, there isn’t much that you or your lender can do to help.

If there is a bit of good news for the people trapped in this situation, it is the fact that they are not alone.  As we approach 2017, the numbers of people who realize they don’t qualify will only grow.  The sooner the magnitude of the problem is put before the powers that be, the better the odds of finding a solution.  One way to shed some light on this issue would be to file a complaint with the Consumer Financial Protection Bureau (CFPB).  If they get enough complaints they should get with lenders and policy makers to see what can be done to fix the problem.  They may also start alerting consumers about the potential problems if they are not careful.

If you think that your lender made a mistake or mislead you about student loan forgiveness, now is the time to immediately start collecting documents and emails.  IF they did make an error, simply saying so will probably not be enough, you will want as much proof as possible to show that they screwed up.  This is another situation where a CFPB complaint can be very beneficial.  Your lender will be forced to respond to the allegations that you make.

Finally, now that you recognize that this problem does exist, it is time to do what is necessary to mitigate the harm.  The sooner you get signed up for the right repayment plan, the sooner the 10-year clock officially starts.  (You may even find that switching to one of the income based repayment plans results in lower payments, so that may be a pleasant surprise).

Making sure that your student loans are eligible for Public Service Loan Forgiveness (PSLF)…

Get signed up for the right repayment plan.  There are many Federal government repayment plans, but not all of them qualify for PSLF.  Plans like the extended repayment plan and graduated repayment plan are very popular, but not eligible.  Most people will want to sign up for IBR or PAYE.  Not only are these plans PSLF eligible, but they will likely result in the lowest monthly payment for most borrowers.  Other plans such as the standard 10-year plan and ICR are also eligible.

Make sure your loans are eligible for PSLF.  Obviously, private loans do not qualify.  What complicates matters is the fact that certain federal loans are also not eligible.  One such example would be the Parent PLUS loans.  Making things really complicated is the fact that some federal loans are not eligible, but they can become eligible if consolidated into a federal direct consolidation loan.  This site has previously discussed that process.  However, be advised that consolidation is not a magic fix all for you loans.  It can restart your 10-year clock and if you mix in the wrong loans you may lose program and payment plan eligibility.  The best way to handle this situation is to learn everything you can on the topic and then call your lender.  Make sure you are talking with someone knowledgable and then hame them address all of your questions and talk through your plans.  If there is an issue with your student loan plan, hopefully they will be able to bring it to your attention.

Get your payments certified!  This is the only way to be 100% certain that you are eligible.  Your loans are only forgiven once you have made 120 certified public service payments.  The sooner you get your previous payments certified, the better.

In order to get payments certified, contact your lender to get the necessary documents that need filled out.  Forms and instructions are available here.  Part of the process will involve getting your employer to affirm that you are in a public service or not for profit position.  It isn’t an overly complicated process, but is is essential.  It will also bring any potential issues to light.  If there is a problem, you will want to know as soon as possible.  If there isn’t, then you have your first chunk of certified payments on your way to 120.

The Bottom Line

Getting your student loans forgiven after 10 years of public service can provide a huge boost to your finances.  Because so much money is at issue, the federal government has a huge incentive to make the process difficult and complicated.  Use every resource at your disposal to make sure you dot ever i and cross every t.  It may be tedious, but the payoff will be worth it.

  • Nikki

    I have been screwed. My lender Sallie Mae lied to me for years telling me I was right on track. It was not until after 6 years of payments that I found Dept of Ed certification form. I was happy to finally see something official that would tell me where I was at in the repayment process. Little did I know that my world would be completely devastated and that I would receive a denial letter. Until 2015 I had never heard of a differentiation between a “direct” and non direct loan. I am now at a complete loss of where to turn to get my 72 payments to date to count. My loans were conveniently moved from Sallie Mae to Navient (same overall company) in 2013 so no previous phone records are supposedly kept. Several representatives stated I was right on track for my PSLF Program eligibility. Any advice or direction would be greatly appreciated.

    • Sharcy Ray

      In the same boat. Had Sallie Mae then got switched to Navient. As of last fall I finally am with FedLoan Servicing. I graduated college in 2012 and there was NO paper information on the program at that time. I was told to just ‘keep making payments’ and by the time the first people will be eligible for forgiveness in 2017 there will be plenty of information and guidance to follow. Just spoke with my provider today and was told I only have 28 qualifying payments – 28! This is after five years of making payments. Looking into filing a complain with the Consumer Financial Protection Bureau (the CFPB) but I have no idea what that will be like. I am so upset, I chose my current career with the federal government partially on the fact that I was getting this deal.

    • Nikki

      Good luck with the CFPB. All they did for me was simply contact Navient. They didn’t get involved in the issue at all. But please keep me posted if you are able to get any help from them! That would be great.
      You know there has got to be a ton more of us. There has got to be a way for all of us to stand together and hold them responsible for their lies. I hate that I feel so foolish for trusting both the gov and Sallie Mae. They purposely took advantage of us by only verbally offering these incentives for employment. I was told for years by Sallie Mae that I was on track. Since Sallie Mae conveniently transferred everything to Navient, they have no prior phone records of these conversations at all, supposedly. PSLF was the deciding factor in accepting a gov position. I feel so betrayed that i have wasted several years now working an organization that can’t stand by its word. I have started looking for employment elsewhere for there is no point being there any longer.

  • Tiffany Butler

    I have federal subsidized and un-subsidized Stafford loans that I consolidated with Sallie Mae after graduating from college. They switched me over to Navient a few years back. I went to submit my verification form since I am getting close to 10 years of public service only to be denied because they said that my loan was technically disbursed through the banks from the Department of Education and that I should have consolidated directly with the Department of Education for my payments to qualify.