Podcast Episode 48 | What’s Changing with Public Service Loan Forgiveness

In this special episode of the Prosperous Doc^® Podcast, Will Koster, a CERTIFIED FINANCIAL PLANNER™ at Spaugh Dameron Tenny, is here to walk you through student loans and recent updates to the Public Service Loan Forgiveness program. 

He helps make sense of how the recent changes might apply to you, this is an episode you don’t want to miss if you have outstanding student loans.

The announcement from the Department of Education in early October that they will be easing some of the requirements for Public Service Loan Forgiveness likely left many people feeling a mix of emotions. From confusion over how this affects them, the excitement that they may now qualify, and stress over missing a crucial detail that might mean money spent unnecessarily. 

Throughout this episode, Will reviews how the new special waiver allows Federal Family Education Loans (FFEL) to be consolidated into the Direct Loan Program and become eligible for Public Service Loan Forgiveness and the changes to what repayment plans are qualified as part of the program. 

Will also addresses next steps if you believe you qualify for the Student Loan Forgiveness program, including:

Step 1: Verify your employment. To verify that you have worked for a qualifying employer for the duration of your 120 payments, you need to submit an Employment Certification Form for each of your employers over the 10 years. 

Step 2: Consolidate your FFEL and Perkins Loans. After confirming that your employment is eligible, request a Direct Consolidation Loan before the October 31, 2022 deadline. This only needs to be done if your loans are not direct loans. You can complete this step for free by visiting Gov Federal Student Aid. You do not need to pay for assistance in consolidating your loans. 

Step 3: You’re now ready to apply for PSLF & TEPSLF (Temporary Expanded PSLF). You can complete this by using the online PSLF Help Tool found at studentaid.gov. 

“Depending on if you have FFEL loans, depending on if you've certified your employer before, depending on who your servicer is, all of those factors will maybe change your path just a little bit,” explains Will. “But the same rules, the same criteria, and the same application process pretty much apply to everyone. Whether you've completed them or not is probably personal or unique to your situation.”

➜For further reading, Will shares more about this topic in this blog post: Federal Student Loan News: Temporary Public Service Loan Forgiveness. 

➜If you’re a physician or a dentist and you need help navigating the Public Service Loan Forgiveness programs, Will Koster’s firm is here to help, you can find them online at www.sdtplanning.com.

Company: Spaugh Dameron Tenny

Words of wisdom: “One of the most amazing facts about this announcement is that the federal government's saying they will give money back to borrowers who have made more than 120 qualifying payments. If a borrower has made 140 payments now toward the Public Service Loan Forgiveness, those 20 extra payments that have occurred in the last two or so years can be refunded, which is amazing.”

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• Be aware of key dates for student loan forgiveness. Only payments made after October 1st, 2007, will count towards the loan forgiveness. This is the date when the PSLF program was passed into law. The second date you need to know is October 31st, 2022, this is when the temporary Public Service Loan Forgiveness Waiver expires. To benefit from the waiver, you need to have all paperwork, consolidation, and administrative work completed by this date. 
  
• Public Service Loan Forgiveness applies to public sector workers. This is a federal program that applies to federal student loans when the borrowers opt to work in a public sector job after graduation. This could apply to a wide range of professionals including teachers, military service members, physicians, or dentists who work for a not-for-profit or 501(c)(3) organization. These individuals can apply for loan forgiveness after making 120 qualifying payments. The definition of a qualifying employer did not change with this announcement. 
  
• Apply for loan consolidation if you have Federal Family Education Loans. These loans are now eligible for Public Service Loan Forgiveness and consolidating them no longer resets your progress towards the required 120 payments. 
  
• Qualifying repayment plans have been expanded. Under the special waiver, any payment under any repayment plan, including graduated repayment plans, the extended repayment plan, and the standard 10-year repayment plan now count towards the required payments.

[04:15] The 120 payment requirement: Will Koster explains that the 120 payments over essentially 10 years are still a requirement of the program. 

[07:15] FFEL loans are now eligible: Due to the low interest rates on FFEL loans, many borrowers have been making minimum payments on the loans for years and years. Will explains how this special waiver has lifted their status into possible eligibility for forgiveness.

[10:11] The effect of administrative forbearance: Federal student loans have been under administrative forbearance since March of 2020 which has basically suspended all required payments on federal student loans. All of the payments, or non-payments for those months do still count towards the 120 payments necessary for Public Service Loan Forgiveness.

[11:33] Refund potential: The federal government says it will give money back to borrowers who have made more than 120 qualifying payments. If a borrower has made 140 payments toward the Public Service Loan Forgiveness, those 20 extra payments that have occurred can be refunded.

[19:03] Private loans — not eligible: Private loans that are not backed by or serviced by the federal government do not qualify, explains Will. Consolidation can often be confused with refinancing. He clarifies that we are not talking about taking federal loans and making them private. To clarify, the temporary waiver of Public Service Loan Forgiveness does not apply to any refinanced, private student loans.

[07:15] “Many of these [FFEL loans] still exist. Many borrowers and public servants still have these loans on their balance sheets because they carried low-interest rates at the time and still do given our current environment. Many borrowers are just making minimum payments on the loans and have been for years and years and years. This special waiver now has lifted their status into possible eligibility for forgiveness, which is a very, very big deal.”

[08:35] “The change has now allowed any payment under any repayment plan, whether that be the graduated repayment plan, the extended repayment plan, even the standard repayment plan, which is the 10-year standard repayment plan, all of those payments under any repayment plan now count.”

​​[11:33] “One of the most amazing facts about this announcement is that the federal government's saying they will give money back to borrowers who have made more than 120 qualifying payments ... And if a borrower has made 140 payments now toward the Public Service Loan Forgiveness that count, those 20 extra payments can be refunded, which is amazing.”

[14:40] “A couple of key dates that I want to make sure borrowers are aware of is that the only payments that are going to count still, given the change in the rules, are payments that have been made after October the 1st, 2007. The reason for that date — it's not arbitrary — that's when the Public Service Loan Forgiveness program was first passed into law. So, they're still requiring payments, your 120 payments, to have been made after October 1st, 2007.”