The Public Service Loan Forgiveness (PSLF) program was established in 2007 to provide federal student loan forgiveness to borrowers employed by local or federal government and certain nonprofit organizations. The loans must be Direct Loans from the federal government, including Direct Consolidation Loans. Eligible borrowers have to enroll in a qualifying repayment plan and make 120 full payments on time to have the balance forgiven at the end of the program, which totals about 10 years.
The first eligible borrowers of the PSLF program began applying for loan forgiveness in October of 2017. But according to the US Department of Education, as of February 2018, less than 13,000 applications had been received. Unfortunately, tens of thousands of borrowers found out they were enrolled in the wrong repayment plans – either they were misled by loan servicers, specifically FedLoan Servicing, or they simply did not receive the clear guidance needed to ensure proper enrollment into the PSLF program. Many borrowers made years of payments just to find out they had to start all over again.
But a glimmer of hope appeared on March 23, 2018. Reluctantly, President Trump signed a $1.3 trillion federal spending bill that will alleviate the disappointment for many of these borrowers. The bill allocates $350 million to the PSLF program and is available on a first-come, first-served basis to cover the cost of canceling more loans. Borrowers who made payments in the last 12 months that are at least equal to their current payment amount under the correct repayment plan, will not lose credit for their previous payments towards the 120 requirement. The bill also set aside $2.3 million to assist in outreach efforts to those borrowers who selected incorrect repayment plans by mistake or were misled by servicers. The US Department of Education will develop an application process for borrowers who meet these qualifications to apply for the additional forgiveness funds.
There have been discussions in the Trump Administration about ending the PSLF program for future borrowers, and the $350 million from the new spending bill is sure to run out quickly. So if you are considering the PSLF program or you think you have already signed up for it, follow up with your student loan servicer as soon as possible to ensure you are properly enrolled.
And if you are one of the millions of Americans with private student loan debt who is looking for relief, get a free consultation from an attorney or paralegal with McCarthy Law PLC to discuss your options.
Kevin Fallon McCarthy
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