Federal Student Loan Forgiveness Is Changing This Month!
Were You Previously Denied or Did Not Apply? Find Out if You and Your Federal Loans Qualify for the New Public Service Loan Forgiveness Program.
The Biden Administration announced last week that they are changing the eligibility rules to the Public Service Loan Forgiveness program in an effort to qualify more Federal student loan borrowers that would be eligible to have their student loan debt cancelled.
The changes announced by the Secretary of the U.S. Department of Education www.ed.gov are effective this month.
The Public Service Loan Forgiveness program is available to those former students (the program is not available to parents who took out Federal Parent Loans for Undergraduate Students, PLUS, for their children) that work fulltime (at least 30 hours per week) for the government (Federal/State or Local), a 501(c)3, an Internal Revenue Service qualified non-profit, or serve in the military. It requires filling out an application for the Public Service Loan Forgiveness program, 10 years of employment by the government, a qualified non-profit, the military, or a combination of the aforementioned employers, and 120 on time monthly payments.
To check your employer qualification be sure go to www.StudentAid.gov/pslf.
“The reason for the changes announced last week is that the number of Federal student loan borrowers who were getting approved for the Public Service Loan Forgiveness program was de minimis” according to Don Fenstemaker, CEO of Yrefy. “Borrowers were either not being given the proper information by their Federal student loan Servicers to enroll in the Public Service Loan Forgiveness program or they were enrolled and were being denied by the U.S. Department of Education and not having their debt cancelled due to bad information provided by their Servicers, or for technical reasons after having made the 120 on time payments”.
Reasons for denial have included too few qualifying payments (59%), and missing information (29%).
Since the Public Service Loan Forgiveness program was passed by Congress and signed into law by President George W. Bush in 2007, only 2.1% of the borrowers who applied for the Public Service Loan Forgiveness program have been approved to have their Federal student loan debt forgiven.
According to Education Data (www.educationdata.org) there are approximately three (3) million Federal student loan borrowers who are eligible to apply for the program and have their student loan debt cancelled.
They owe $115.9 billion to the U.S. government. With the changes that were announced last week, the U.S. Department of Education expects some 600,000 Federal student loan borrowers will be eligible for the cancellation of their debt by October 31, 2022.
Within this group, 22,000 borrowers will be eligible immediately which will cancel $1.7 billion in Federal student loans; 27,000 borrowers will be eligible if they submit paperwork that proves that they worked for a Public Service Loan Forgiveness eligible employer which will cancel $2.8 billion in Federal student loans; and 550,000 borrowers will be credited with 23 eligible payments which will shorten the remaining time period to qualify for their Federal student loans to be forgiven.
How to Qualify: In addition to filling out the Public Service Loan Forgiveness application, you need to check your Federal student loan account information for your loan types (FFELP loans and Perkins loans now qualify), and which Income-Driven Repayment program you are enrolled in. You also need to contact your current Servicer.
Please note that the current Servicer for the Public Service Loan Forgiveness program, FedLoan Servicing, in Harrisburg, PA, announced last July that they are not renewing their contract with the U.S. Department of Education to service the Federal student loans of borrowers participating in the Public Service Loan Forgiveness program effective December 14, 2021.
For additional information, contact FedLoan Servicing toll free at 1-800-699-2908 or go to their website at accountaccess.myfedloan.org. A total of three (2) of the eight (8) Federal loan Servicers have announced that they are not renewing their contacts, including Granite State Resources and Management.
How to see if you qualify for the new Public Service Loan Forgiveness program.
- Go to the U.S. Department of Education website www.StudentAid.gov. Make sure you have an account.
- Check to see that your contact information is up to date. If you do not have an account, sign up for one.
- Check your loans. If you have more than one loan, make sure you have consolidated the loans into one Direct Consolidation loan. If not go to www.studentaid.gov and complete a Direct Consolidation Loan application.
- File the new Public Service Loan Forgiveness program waiver form. In order to participate in the revised Public Service Loan Forgiveness program you must file a waiver application form with the U. S. Department of Education.
- You can get the Public Service Loan Forgiveness Limited Waiver application form at www.studentaid.gov. If you file the waiver before October 31, 2022, you will get credit for twenty-three (23) past payments made on loans that would otherwise not qualify.
You will get a tax savings windfall between 2022-2026 when your Federal student loans are forgiven.
This will happen when you file your Federal tax return after your Federal student loans are cancelled.
Normally with the cancellation of a debt, the Internal Revenue Service requires you to pay taxes on the amount of the debt that is cancelled.
However, earlier this year the Congress passed, and President Joseph Biden signed into law, the American Rescue Plan. There was a provision in that law that permits Federal student loan borrowers that have their student loan debt cancelled before the end of 2025 to be exempt from paying taxes on the amount of the debt cancelled.
Currently there are 43.2 million student loan borrowers in the United States owing approximately $1.73 trillion in student loan debt. Of the 43.2 million borrowers, 42.9 million, or 99.3%, owe Federal student loans totaling $1.59 trillion to the U. S. Department of Education. That is an average student loan debt of $39,351 per borrower.
As a result of the C.A.R.E.S Act passed by Congress and signed into law by President Donald Trump in March 2020, 35 million of the 42.9 million Federal student loan borrowers qualified for Administrative Forbearance, which means they have not had to make a payment since March 2020 and do not have to make a payment until February 2021.
Being in Administrative Forbearance deems the Federal student loan borrowers’ loans to be “current and in good standing,” therefore qualifying as payments to qualify for the Public Service Loan Forgiveness program.
Apply now: With three (2) of the Servicers having announced that they are terminating their contracts with the U.S. Department of Education this coming December, 2021, and with 35 million Federal student loan borrowers required to start making payments on their Federal student loans starting February, 2022, it in imperative that those wanting to benefit from the Public Service Forgiveness program file their paperwork as soon as possible, but no later than November 15, 2021. This will permit the processing of the necessary paperwork prior to the effective date of the Servicer resignations.
Next week we will provide additional information on the Public Service Loan Forgiveness program.
Yrefy is a Phoenix, AZ based education finance company that specializes in refinancing distressed private student loans. For additional information call Yrefy at 888-224-4450 or email Support@yrefy.com.