The average student who graduated in 2016 was sent home with more than just a degree. He or she was also saddled with more than $37,000 in student loan debt.
If you’re one of the 70% of Americans who graduated with student loans, we understand how challenging the payoff can seem.
If “loan” and “forgiveness” aren’t exactly two words you’re used to seeing together, keep reading. If you qualify, and if the plan is implemented as promised, you could stand to see a majority, if not all, of your debt absolved.
The key to making the process quicker and easier? Getting the ball rolling now. Read on for a few tips to help you get ready for your Public Service Loan Forgiveness application.
Public Service Loan Forgiveness 101
Before we dig into how to start your application, let’s go over a quick review about what this program actually entails.
Under the Public Service Loan Forgiveness program, you may be eligible to have the balance of your student loan debt forgiven if you:
- Have made 120 qualifying monthly payments on your qualifying loan
- Made these payments under a qualifying repayment plan
- Have worked full-time for a qualifying employer during the repayment period
Notice a keyword here? Qualifying.
At this point, you might be asking: How can I make sure I qualify? And, what if I’m just starting out on my loan repayments, and have the whole 120 months ahead of me?
While this timeline might seem daunting, there are indeed some key steps you can put into place now to make your application that much easier down the road. Let’s take a look!
Getting Started Now: Key Things to Consider When You’re at the Beginning
Even if you’re just starting out on your 120 months of payments, you’re still in an excellent position to begin preparing for your application.
To make sure you’re all set to apply when your time comes, ensure you’re meeting all the criteria now, including:
Working for a Qualified Employer
To receive the benefits, you must work in public service. What does this mean, exactly? The U.S. Department of Education defines “public service” as:
- A Government organization (federal, state, local, or tribal)
- A 501(c)(3) tax-exempt not-for-profit organization
- Other not-for-profit organizations that provide qualifying public services
You must be working full-time at one of the qualified employer types listed above while you make your repayments. Again, the Department of Education has guidelines around what qualifies as “full-time” including:
- Meeting your employer’s definition of “full-time”
- Working 30 hours or more per week
An important note: To receive your benefits, you must still be working full-time at a qualifying employer all the way up until you receive confirmation of your forgiveness and the balance is paid off.
Making Payments on a Qualifying Loan
This is arguably the most important step, and the one that most people miss when assessing their eligibility.
As a rule of thumb, only loans labeled as “direct loans” are eligible for Public Service Loan Forgiveness. These are those provided under the William D. Ford Federal Direct Loan (Direct Loan) Program.
If you’re paying off loans provided under other federal programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program, you’re not entirely excluded.
You can merge these loans into a Direct Consolidation Loan, but keep in mind your 120-month payment period will begin all over again with consolidation.
So if you’re just beginning your payments, make sure all the loans you’re paying on are Direct Loans. If they’re not, consolidate them as soon as you can. Then, you’ll be on the right track!
Not sure which type of loan(s) you’re working with? You can easily check them here.
Working Within a Qualified Repayment Plan
All loans paid back through income-driven repayment plans are eligible for Public Service Loan Forgiveness.
You also qualify if you’re paying through a 10-Year Standard Repayment Plan, but take note: If you’re currently paying on this plan, or are set to begin making payments on it, it’s in your best interest to switch your plan to an income-driven repayment one as soon as possible.
Why make the switch? If you don’t, you’ll risk paying the bulk of your loan back over the 10 years it takes to make your 120 payments, and as such, your amount forgiven will be much less.
If you’re consolidating your loans into a Direct Consolidation Loan, you can opt for an income-driven repayment plan when you complete the application for consolidation.
Be sure to take note of that option, however, because by default those loans are placed into Standard Repayment Plans.
Paying for the Required Timeline
With 120 loan payments required, that’s at least 10 years of work before you’re eligible. So that said, only qualifying payments made after October 1, 2007 will be considered eligible.
So what exactly is a “qualifying payment”?
Put simply, it’s receiving a monthly bill for your student loan, and paying it off by the required due date (or within the 15-day grace period).
If you temporarily halt your loan payments (via deferment or forbearance), they won’t count toward eligibility.
However, if you begin again with regular monthly payments, you can pick back up where you left off. This is because you don’t “lose” the qualifying payments you made in the past, even if you temporarily postpone them for a period of time.
In a nutshell, as long as you make 120 monthly payments, those months don’t need to be back-to-back.
Think you fit the bill? Great! Here is an important way to start prepping your application now.
This way, when submittal time rolls around, your workload will be much lighter and you’ll be that many steps closer to financial freedom!
Get Your Employer Certification Forms Ready Now
While you technically won’t be able to submit your Public Service Loan Forgiveness application until your 120 months of payment are complete (and not before October 2, 2017), you can take care of one important part right now.
In addition to the formal application, you’ll be required to submit Employer Certification Forms (ECFs) to the Department of Education.
Put simply, ECFs are forms that verify you’ve worked in public service for 10 years. They’ll need to be signed by a representative of each employer and will play a vital role in your approval process.
After the Department of Education reviews each form, they’ll send you a determination letter. This letter will outline how many qualifying payments you made at each job, so the government can verify your eligibility.
While this sounds like an easy enough process, it could actually take a few months between the time you submit your ECFs, and when you hear back from the government.
That said, you don’t have to wait until you’re preparing your application to start submitting the ECFs.
Go ahead and send them in now for current and past employers, and submit them on a yearly basis after that, noting every time you changed employers during the repayment period. Then, keep and file the determination letters as you receive them!
That way, you should have all required determination letters in hand when you sit down to prepare your Public Service Loan Forgiveness application. You’ll, of course, need to resubmit them with your actual application, but they’ll already be approved.
Pay Attention to the Fine Print
When assessing eligibility, keep in mind: While your application is being processed, you’ll receive forbearance, and will be temporarily relieved of your regular payment duties.
However, while this sounds like a great plan, there is one catch:
If the government deems you ineligible for loan forgiveness under the new plan, you may be required to pay the outstanding loan principal plus any interest it racked up while sitting in limbo.
If you’re unsure about whether or not you qualify, the Department of Education put together an informative blog post covering all the bases.
The Next Steps: Your Journey to a Debt-Free Tomorrow
If you’re paying student loans and need resources on forgiveness, including the Public Service Loan Forgiveness program, we’re here to help.
We can help you see if you qualify, assist you with all documentation preparation, and provide valuable support and guidance every step of the way.
Even if you don’t pursue this specific program, we’ve got plenty of loan resources to help you out. From student loan consolidation services to repayment programs to help you lower your expense, there’s something for everyone.