Public Service Loan Forgiveness – Help Is On the Way

Because of a major change announced last week, millions of people with student loan debt may be eligible for a discharge without having to file for bankruptcy. If you work in public service, read on because changes to the Public Service Loan Forgiveness program may help. 

In this post, I’ll give you a brief introduction to how the Public Service Loan Forgiveness works as well as how it’s changing for the better.

Introduction to PSLF

Student loan debt was rising rapidly back in 2007, so much so that lawmakers worried people wouldn’t take public service jobs. (Little did they know how much more student loan balances would grow over the next decade.) It was (and still is) a serious concern because there are a lot of people who work in public service, almost 25% of student loan borrowers. 

So with the cost of student loans, we may not be able to have educated teachers, social workers, or even relatively higher paid professionals like doctors or lawyers who serve under-privileged communities work in those jobs. In order to pay their student loans, the most highly educated might have to work in more highly paid private sector jobs.

The less educated would be the only people who could afford the take public service jobs, or so the thinking goes.

How Public Service Loan Forgiveness works

Enter the Public Service Loan Forgiveness Program. At a high level, the Public Service Loan Forgiveness program discharges student loan debt after you make 120 total monthly payments (10 years total) while you’re working in “public service.”  

The payments don’t have to be consecutive (e.g., you can switch jobs and you don’t have to stay in public service continuously). And the payments don’t necessarily have to be unaffordable because repayment plans like the Income Based Repayment count (assuming that’s actually affordable). 

But there are a lot of little details to the program that can trip people up, which is part of what the Biden Administration is trying to fix. For example, you have to work at least 30 hours per week (averaged over a year). The loans have to be through the Direct Loan program (consolidation counts). You can’t be in default. The payments have to have been made after 2007. You have to be in the job at the time you ask for the discharge. And there are a whole bunch of other small wrinkles and details.

There’s a Help Tool to help you navigate through it. I’m curious whether it helps you or not–send me your stories!

What’s changing

While it’s a generous program, not enough have been able to qualify for loan forgiveness because of its complexities. In April 2018, according to the National Consumer Law Center, only 55% of applicants received forgiveness. Under later revisions to the program, the rejection rate is 99-98%. That’s an incredibly high number!

The Biden Administration ran on campaign promises to help improve student loans, including possibly outright cancellation of large amounts for many. That hasn’t happened yet. However, they did announce major changes to the Public Service Loan Forgiveness program last week.

It looks like the changes will include:

  • Giving borrowers a one time waiver on the Direct Loan requirement
  • Simplifying what payment plan qualifies 
  • Improve access to the program for military service members
  • Implementing an outreach program so people know about the program
  • Automatically 

If you have questions or would like a clarification of anything, feel free to reach out to me! michael@michaelricelaw.com

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