Not All Student Loan Forgiveness is Equal
You likely have heard about the recent announcement regarding the Biden Administration's Student Loan Debt Relief Plan which will forgive up to $10,000 of most types of federal loans and up to $20,0000 if you received a Pell grant in college.
We wanted to draw your attention to another program: Public Service Loan Frogiveness. Some students will still owe a balance after the Biden Administration student loan debt relief plan cancellations are processed or might not qualify for the cancellation.
Calculating Cancellation Benefits
First, it's important to see if you will need to take action on the PSLF Limited Waiver. Remember, you will only be eligible for the Biden one-time cancellation if you have federal loans and make less than $125,000 as a single person or $250,000 as a married couple.
1. Log into your FSA dashboard.
2. Identify if you got Pell grants.
3. Look at your total student loan balance (as of June 30, 2022).
- According to the Federal Student Aid website, most federal student loans are eligible. The loans must be held by the Department of Education, so some Perkins and Federal Family Education Loans do not qualify. Learn more on the one-time-cancellation page.
4. Subtract $10,000 from your total student loan balance as of June 30, 2022
- If you got a Pell grant while in school, subtract an additional $10,000.
- Note: You will only receive up to your total qualifying balance in forgiveness.
5. If you still owe a balance...
- Depending on if you work in public service and the amount that you owe, you may want to pursue PSLF.
- If you don't work in public service or have a lower debt to income ratio, start making a spending plan for when repayment restarts.
Reminder: Complete the application for this Biden Cancellation after it comes out in early October and prior to November 15, 2022, to get the cancellation amount before repayment restarts in January of 2023.
If you want an email alert about when the application for the one-time cancellation goes live, you can subscribe to the "NEW!! Federal Student Loan Borrower Updates" by clicking the box and clicking Next at the bottom of the screen.
What is PSLF?
The PSLF Program forgives the remaining balance on your Direct Loans after you have made 10 years’ worth of qualifying monthly payments (total of 120) under a qualifying repayment plan while working full-time for a qualifying employer. It is designed to encourage college graduates to join public service.
Historical Complications with PSLF
However, it has been confusing to navigate and certain types of federal loans or repayment plans did not qualify. If you have a Perkins or FFEL loan for example, those would not qualify for forgiveness, but if you consolidate them into a DIRECT loan before October 31, 2022, payments made towards these loans while working for a qualifying employer will count as qualifying payments.
Additonally, applying for the waiver before October 31, 2022, allows previous payments made while working for a qualifying employer but in the wrong repayment plan will also count, but you have to apply now!
PSLF Limited Waiver
Prior to October 6, 2021, there were several qualifying factors for people working in public service to have their payments count towards the 120 payments required to receive public service loan forgiveness.
Those requirements have been temporarily changed to allow more public service employees to qualify for PSLF.
You will need to take action now to ensure you get the benefit for payments made to Perkins or FFEL loans if you qualify.
Qualifying employer
If you work full time in public service and still have federal student loans, consider using this temporary waiver period to increase progress towards loan forgiveness. Not sure if you work for a qualifying employer? You can use the PSLF Help Tool to see if your employer qualifies.
Deadline approaching
Until October 31, 2022, you may receive credit for past periods of repayment towards your Perkins loans that would otherwise not qualify for PSLF.
The Department of Education's PSLF limited waiver page has more info on getting started and FAQ's.
Consolidate now to get credit for past payments on Perkins or FFEL loans.
You must consolidate any loans not made under the Direct Loan Program (e.g., Perkins or FFEL) now in order to take advantage of the temporary waiver. You will then receive credit towards PSLF for periods of repayment made on any type of loan. If you're not sure what types of loans you have, log into your account on the FSA website.
Make sure to select a qualifying payment plan after consolidation to get the most benefit out of the PSLF program.
Past payments under any plan will count even if you weren't on the right payment plan. Past payments that were partial or late will now count for non-consolidation loans. Also, past payments made on loans before you consolidated will now count. Check the PSLF Limited Waiver website for more specific details.
