The College Cost Reduction and Access Act was signed by the Bush Administration in 2007. It was designed to reduce the student loan interest rates of borrowers, ease financial hardship for students with low incomes, support historically black colleges and universities, and ensure that borrowers who have worked in public service were eligible to receive loan forgiveness.
Many would argue that the U.S. government did not provide sufficient and accurate information regarding the eligibility requirements for forgiveness when the program was first established. This confusion led to further confusion for borrowers who applied for public loan discharge.
The U.S. Department of Education started accepting applications from the initial cohort in 2017. It found that 99% of applicants were not granted forgiveness. From November 2020 to April 20,21, 98% were turned down.
To address the problem of thousands of borrowers not being forgiven, Congress created the Temporary Expanded Public Service loan forgiveness (TEPSLF). TEPSLF expanded the range of repayment plans that were not eligible for forgiveness under the original PSFL program.
The PSFL and TEPSL are basically the same except that the latter offers additional qualifying repayment plans. These are five things that you should know in order to get your loans forgiven through the PSFL/TEPSL program.
Work must be done full-time for a qualified employer.
If you wish to be granted forgiveness, you cannot work at all times or part-time.
Your title and profession do not affect your qualifications. However, the sector does (private or public), hence the term “public service”. Public service can be defined as law enforcement, education and non-profit government. If you were an auditor at a “Big Four” accounting company, you wouldn’t be eligible, but you could work full-time with a government agency, non-profit, or as an auditor.
Your qualifying employer can define full-time employment. This is either 30 hours per week or your qualifying employer. If you work part time for two qualified employers, and the requirement of 30 hours per week, it would be considered full-time employment. The Education Department now includes full-time employees of religious 501(3) nonprofit organizations such as clergy to be eligible for the PSLF.
You must pay within a qualified repayment plan.
Repayment plans that are eligible for forgiveness for PSFL members include income-driven repayment plans like Pay As You Earn (PAYE), Revised PaYE (REPAE Plan), Income Based Repayment Plan IBR and Income Contingent Repayment Plan ICR Plan. The repayment options available in the TEPSFL include the Extended Repayment Plan (Graduated Repayment Plan), Graduated Repayment Plan; Consolidation Standard Repayment Plan; and Consolidation Graduated Repayment Plan.
These plans are not eligible for either the Standard Repayment Plan or Standard Repayment Plan to Debt Consolidation.
All loans must be direct loans
Simply put, direct loans are loans issued directly by the U.S. government.
There are several federal loans that can be forgiven under PSFL, including Direct Subsidized Loans and Direct Unsubsidized Loans.
Consolidating loans once you have made qualifying payments towards forgiveness should be avoided. It will result in the need to restart the forgiveness process. You will not be able to participate in the PSFL and TEPSFL programs if you have loan types like the Federal Family Educational Loan (FFEL), Perkins Loans, or the Federal Family Educational Loan (FFEL).
120 payments are required – but there is a catch.
Reports have indicated that thousands of borrowers weren’t approved for forgiveness due to misunderstanding the payment frequency. You must make 120 payments as part of one of the requirements. However, there are three other things you need to know.
#1 Monthly payments must be made over a period of 10 years. Three payments per month are not considered three towards forgiveness. Instead, it is one payment.
#2. The monthly payment must be paid within 15 days of its due date to make it count. If your monthly due date falls on the 10th of each month, you must make the payment before the 25th.
#3 You are eligible for forgiveness if the 120 payments are not consecutive. However, missing months can delay your eligibility.
An Employer Certification Form must be submitted.
The only way your loan servicer will verify that you work for a qualified employer is by accurately completing and submitting an Employer Certification form. The Employer Certification Form will provide information about how to verify your forgiveness eligibility. You, the borrower, should complete the first three sections. The employer must sign the final section.
You can track your forgiveness by submitting the form annually so that you can monitor your progress and make payments. I suggest that you submit it in January.