Got a student loan forgiveness? How the Federal Civil Service Program Works

Some cheerful professionals are sharing their joy on social media after discovering that a federal program has erased his student debt.

A Kentucky doctor on Twitter said he reapplied for the public service loan forgiveness program after working a decade at a nonprofit and recently received a notice that his loans in medical school had been cancelled.

“In shock,” wrote Dr. Lee Dossett.

Dossett took advantage of a program that originally failed to deliver on its promise to provide student debt relief to thousands of government officials, including teachers, police officers and firefighters.

The administration of President Joe Biden overhauled the civil service loan cancellation program in October. For years, thousands of borrowers had applied for forgiveness under the program, but almost all were rejected by the federal government.

Department data now shows approximately 70,000 borrowers qualified for nearly $5 billion in aid since October.

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The overhaul was designed to allow borrowers to fix errors and count the payments they were trying to make towards the program, as well as consolidate loans or get the right repayment plan to qualify. It is expected to shorten the time over which more than 550,000 borrowers – those who have already consolidated their loans – are required to make payments to qualify for the discount, the government said.

If you have student loans and are wondering if your job qualifies, here are the steps you can take to consider getting relief.

What is Public Service Debt Forgiveness? How was he born?

The Public Service Loan Forgiveness program was launched in 2007 with the aim of guiding more college graduates into public service. As long as they made 10 years of payments on their federal student loans, the program promised to wipe out the rest.

The program, however, proved anything but forgiving.

Before the October changes, only 16,000 borrowers had had their debt canceled or cancelled, according to the Ministry of Education. About 1.3 million people are trying to get their debts canceled through the program.

One of the most problematic parts of civil service loan forgiveness: Many borrowers had the wrong type of loan and didn’t realize they weren’t eligible for relief.

When the loan forgiveness program was first introduced, many of the loans offered by the federal government were Federal Family Education Loans (FFEL), or loans made by private entities but insured by the federal government.

The government stopped offering these loans in 2010 and now relies on direct loans – the kind eligible for forgiveness. The Ministry of Education said around 60% of borrowers with an approved employer hold FFEL loans.

Who is eligible for student loan forgiveness?

The government previously limited eligibility for the Civil Service Loan Forgiveness Program to certain types of federal student loans and specific repayment plans.

However, through October 2022, borrowers who have made 10 years of payments while working in eligible employment – ​​such as federal, state or local government positions, a non-profit organization or the US military – will now be eligible for loan relief no matter what. type of federal loan or repayment plan they have.

Previous loan payments that were previously ineligible will now count, bringing some borrowers closer to forgiveness, also known as “release” from your loan. This should especially help borrowers with federal home education loans.

Among other changes, the department will allow service members to count active duty time toward 10 years, even if they pause their payments during that time.

How do I know if my past or current employer is eligible for the PSLF?

Use this help tool from the Federal Student Aid website to check if you work for an eligible employer: https://studentaid.gov/pslf/

It provides information on employers who meet the requirements of the Civil Service Loan Forgiveness Program.

How can I check which federal loans I have?

If borrowers are unsure of the type of loan they have, they can ask their loan officer for this information or they can check the federal government’s website for financial assistance, according to Betsy Mayotte, president of the Institute. student loan advisers.

If you are unsure what type of federal loans you have, you can see which loans by logging into your account at StudentAid.govgo to the My Help page and scroll down to the Loan Breakdown section.

If I am eligible, what steps should I follow?

The changes to the Loan Forgiveness Program will take place in two parts.

The agency will first relax some of the rules that had prevented eligible borrowers from paying their loans, via a limited waiver. The government, for example, will allow payments on one of a person’s loans to count toward the total number required for forgiveness.

The civil service loan forgiveness waiver will be available to borrowers who have direct loans, federal home education loans and Perkins loans.

Parent PLUS Loans are not eligible under the Limited Waiver.

The ministry said it will automatically credit borrowers who already have direct loans and have proven they work in an eligible field. Others who did not enroll in the program or have ineligible federal loans will need to apply for forgiveness, which may require them to consolidate their loans. Borrowers will have until October 2022 to apply.

To learn more about credit consolidation, go to StudentAid.gov/Manage-Loans/Consolidation.

The Department of Education also plans to review all denied civil service loan forgiveness applications and provide federal employees with automatic credit for the forgiveness.

Other changes will happen more slowly via regulations established by “regulation”, a long and complicated bureaucratic back and forth between government and other stakeholders.

For more information, visit StudentAid.gov/PSLFWaiver.

How do you receive credit for past payments under the new rules?

For a limited time, borrowers can get credit for past payments made on loans that would otherwise not qualify for the Public Service Loan Forgiveness Program.

There are two requirements for receiving additional qualifying payments: full-time employment and loan consolidation.

For example, you must have worked full-time for an eligible employer when previous payments were made, according to Federal Student Aid.

Some part-time workers may qualify under certain circumstances. Suppose you hold more than one qualifying part-time job at the same time. You would be considered full-time if you worked an average of at least 30 hours per week.

It can take several months for a borrower’s account information to reflect the new payment count, according to Federal Student Aid.

Until when can I get credit for payments?

To be on the safe side, you can only receive credit for payments made after October 1, 2007, as that is when the Civil Service Loan Forgiveness Program began.

For any period during which you may receive additional qualifying payments, you must file a claim. Public service loan forgiveness and temporary expanded PSLF certification and application.

Who may need to consolidate their loans?

If you have Federal Family Education Loans Program loans, Federal Perkins Loans, or other types of Federal Student Loans that are not direct loans, you must group them in the direct loan program by Oct. 31, 2022, according to Federal Student Aid.

Borrowers cannot receive credit for payments if they consolidate after this date. Once the consolidation process is complete, submit a PSLF form to your loan manager.

Ryan H. Bowman