Let’s face it – the Public Service Loan Forgiveness (PSFL) program can be a pain in the rear. Does my employer qualify? Will the program exist after I’ve made 120 payments? Which repayment plan is right for me? All these questions can make your head spin and searching for answers will send you down the rabbit hole.
Although this list could not possibly consider all the facts to know, the following are lesser known facts about the Public Service Loan Forgiveness program:
The U.S. Department of Education’s dedicated federal loan servicer for the PSLF program is FedLoan Servicing (Pennsylvania Higher Education Assistance Agency). Although servicers such as Nelnet, Great Lakes, etc. may service borrowers who are making qualifying payments toward the PSLF program, FedLoan servicing is ultimately responsible for recording the number of qualifying payments and eventually approving or denying the forgiveness of your federal loans.
While FedLoan servicing is responsible for the Public Service Loan Forgiveness program, they still service other loans outside of the
program. For this reason, not every representative at FedLoan is familiar with the nuances of PSLF. If you have ever spoken to a representative of a servicer, you know this can be a frustrating phone call. After many conversations with
FedLoan Servicing myself, I have learned there is a separate department specifically for PSLF questions. Even then the conversation can leave you scratching your head, but typically the representatives are slightly more informed on topics such as income drive repayment plans. When calling your servicer, be sure to ask specifically for a representative familiar with PSLF.
Many readers will know that submitting an Employer Certification Form (ECF) is the best way to find out whether your employment qualifies you for PSLF. The form is submitted to FedLoan Servicing. There is abundance of conflicting information available about what happens next. In my experience, clients who are approved for the PSLF program by FedLoan Servicing have their loans transferred from their current servicer over to FedLoan. This is important because, as I discussed earlier, FedLoan Servicing is the authority on PSLF. This also eliminates any breakdown between the servicers when it comes to recording your qualifying payments.
If you are already with FedLoan, don’t skip this section, because the Employer Certification Form serves a much larger purpose than
simply transferring your loans. An ECF is required to be submitted for each employer you work for during the time your 120 payments are made. It is best to submit an ECF annually but no less than each time you change employers. After a decision is made by FedLoan Servicing as to whether your loans and employment qualify, they will also report how many qualifying payments you have made
toward the PSLF program. If this number is less than you believe to be accurate, you may need to submit another EFC for a previous employer or challenge FedLoan Servicing’s count.
No, standard repayment and 10-year standard repayment are not the same thing. One of these repayment plans counts toward the PSLF, the other does not. Why does the Department of Education have to make things so difficult? Ask your Congressman!
The 10-Year Standard Repayment counts as a qualifying repayment plan toward PSLF while the Standard Repayment plan does not. However, the 10-Year Standard Repayment is not going to benefit anyone attempting to have their loans forgiven under PSLF, because the balance will be paid off in the 120 periods.
If you do not specify which repayment plan you would like to enroll in when you begin paying on your loans, your servicer will default to the Standard Repayment. For this reason, it is important to choose the Income Driven Repayment plan that is right for you. An income driven repayment plan could allow you to pay less than the 10-Year Standard Repayment. It is important to know the details of your Income Driven Repayment plan. Make sure that as your income increases, your IDR payment will never increase to more than the 10-Year Standard Repayment.
Will Koster is a financial planner with Spaugh Dameron Tenny. The experience of losing his father as a teenager helped Will find his calling in financial planning. He has a passion for working with dentists and physicians, helping them navigate their unique wealth creation journeys. In addition, Will has become the in-house expert on student loans after completing the Certified Student Loan Professional® training.
For over 50 years, Spaugh Dameron Tenny has provided comprehensive financial planning for physicians and dentists across the U.S. In addition to providing personalized advice, we walk our clients through their options to help maximize finances and maintain financial security.
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