Those with student loans and working in government and nonprofit jobs had a huge opportunity for loan relief in October, when the federal government finally resolved some long-standing issues with the student forgiveness program. public service loans.
However, for more than 550,000 borrowers, action is needed – the application deadline is months away – and even those who are very familiar with the loan process could face uncertainty.
Kristin Bastian was one of those people. She is Director of Operations at Origin SC, a North Charleston nonprofit group that provides financial advice on a variety of topics.
Bastian thought she still had more than two years of payments left until she qualified for the PSLF program to cancel her remaining student loan debt. The 2007 program was created to incentivize workers to take public service jobs, like Bastian’s, by offering to erase remaining student loan debt after 10 years of employment and 120 monthly loan payments.
For years the program was a disaster, marked by byzantine rules, loan servicers who “systematically deceived borrowers” according to the Consumer Financial Protection Bureau, and during the Trump administration, an Education Department that has taken a particularly hard line on student loan relief.
Until last year, less than 2% of those who applied for loan forgiveness were approved.
Naturally, many people have given up hope of getting what they were promised. But in October 2021, the Department of Education announced new procedures and rule changes, a key giving borrowers credit for loan repayments that had not previously been counted.
For Bastian, the result was the startling news that her student loans were forgiven years earlier than she expected, saving her around $10,000 in scheduled monthly payments.
“It can be a very stressful and confusing process,” she said. “I thought I had two or three more years of payments.”
The good news came after she submitted a routine PSLF form certifying her employment with a non-profit organization.
“At first they added to my qualifying payouts, and I was on track to finish in July,” Bastian said. “Then they came back and said I met the conditions and just had to submit one last pardon request.”
When the rules changed in October, around 22,000 borrowers in government jobs immediately had their remaining loan balances wiped out. About 550,000 other people had to apply for waivers to get credit for loan repayments made but not counted.
Here is the official wording:
“Under the new temporary rules, any prior repayment period will count as an eligible payment, regardless of the loan program, repayment plan, or whether the payment was made in full or on time. But you continue to have need qualifying employment.”
“This change will apply to borrowers with Direct Lending, those who have already consolidated into the Direct Lending Program, and those who have consolidated into the Direct Lending Program by October 31, 2022.”
For the average borrower, these rule changes should result in 23 months of additional payments, out of the 120 needed, according to the Department of Education.
If you have student loans and a government job, but find this process confusing, here’s an option. Origin SC (843-628-3000), where Bastian works, offers student loan counseling for a one-time $60 fee.
Information about civil service loan forgiveness is also available online at studentaid.gov.
Reach David Slade at 843-937-5552. Follow him on Twitter @DSladeNews.