If there has ever been a good time to go through the student loan cancellation application process, now is the time.
Thanks to some recent changes announced by the Department of Education, hundreds of thousands of borrowers are expected to be closer to qualifying for a forgiveness loan. But the changes are mostly temporary, and many borrowers will need to submit documents in the coming months to take advantage of the relaxed rules.
At the center of the changes are the complicated eligibility requirements of the Public Service Loan Forgiveness Program (PSLF), which grants full loan forgiveness to borrowers who work at least 10 years in government and nonprofit jobs. often low paid. Known for its low rate of approved applications, borrowers are often confused by the wrong type of loan or repayment plan.
The ministry’s new temporary waiver aims to address this problem. It allows payments from loan types and payment plans that were not previously eligible to count towards the 120 total payments needed to qualify for a discount.
“These temporary fixes are just fair treatment of people who tried to follow the rules, but were turned down due to nuances and technicalities that were difficult to understand,” says Anna Helhoski, student loans expert at NerdWallet. “By virtue of the waiver, some of these borrowers will have their loans canceled or, because some past payments will now count, they will be closer to forgiveness.”
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The ministry estimates that this waiver alone could help nearly 600,000 borrowers get their student debt forgiven. So far, more than 30,000 borrowers have succeeded, with around $ 2 billion in debt relief already approved in the first round.
Still, there might be a few challenges along the way, including just spreading the word to affected borrowers. About a third of 501 (c) (3) and nonprofit employees said they were unaware of these recent changes to the PSLF program, according to a survey by the Student Debt Crisis Center (SDCC ) and Savi. This means that thousands of borrowers could be leaving money on the table.
The waiver will apply until October 31, 2022, so borrowers will need to take action before that date to have previously ineligible payments recognized. If you work in the public sector or in a nonprofit organization and think there is a chance that you may qualify, it is worth a try, even if you have been turned down in the past. Here’s what to do:
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1. Get a grip on your current loan situation
The first step is to determine what types of loans you have. This will dictate your next steps.
The easiest way to do this is to log into the Department of Education’s Federal Student Aid website. Here you will be able to see all the details of your federal loan. If you need advice regarding which loans currently qualify for PSLF and what to do if they don’t, you can use the PSLF Help Tool, which has been updated to reflect the criteria described. in the new waiver.
If you do not yet have an account created with the Ministry of Education, you will need to do so first. Keep in mind that you will need your most recent W-2 or your employer’s Federal Employer Identification Number (EIN) and you need to complete the process in one session. It should take less than 30 minutes.
2. Consolidate your loans, if necessary
Depending on the types of loans you have, you may need to consolidate them before you can move forward with the process.
In the past, some federal loans were not eligible for PSLF, including loans made under the Family Federal Education Loan (FFEL) and Perkins loans. If you have these loans, you need to consolidate. The PSLF program now temporarily allows payments made on these loans to count towards the 120 needed to qualify, but only if borrowers consolidate them into a direct loan before the October deadline.
To consolidate, you will need to complete and submit the Free Federal Direct Consolidation Loan Application and Promissory Note. This can be completed online.
3. Complete your employment certificate form
If you have direct loans, you can go straight to the public service loan forgiveness form, says Savi co-founder Tobin Van Ostern. This is officially known as the Employment Certification Form, and it’s the one you need to file before the October deadline.
This is the form the government uses to update your payment count to include all the payments you made for your loans while you were in the public service. You will need to certify your employment for each year that you have held qualifying employment. This can be straightforward if you’ve stayed with one employer the entire time, but it can take a while if you need to track down contacts from multiple previous jobs. You will need a signature from an authorized person at each location where you worked.
If you have any doubts about your eligibility, Van Ostern recommends that you complete the form anyway.
“If you are rejected, you should get information on why you were rejected and how you can fix it,” he says.
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4. Submit your documents as soon as possible
Van Ostern also recommends borrowers to act as soon as possible.
“One of the main reasons is that the main person responsible for the delivery of civil service loans – FedLoan – is leaving,” he says. Some of these loans are currently being transferred to a new provider, MOHELA. Some accounts will also eventually be transferred to Nelnet, Edfinancial and Navient (which is also exiting the service space and transferring accounts to Maximus). “I would recommend that people try to file now so they can access the FedLoan system before this transition happens,” he said.
Another big reason not to procrastinate: longer wait times for customer service and backlogs of paperwork. Not only are borrowers and their servers going through several transitions, but federal payments are also expected to resume on February 1, after nearly two years of forbearance in response to the pandemic. Add to that the wave of borrowers applying for the PSLF at the same time, and it will certainly be a major headache for anyone trying to get their documents processed or get their questions answered.
“I suspect that January and February will be very busy for service officers and the education ministry, so I really encourage people to try and complete their paperwork before the end of this calendar year,” Van Ostern said. He added that if this is your first time submitting documents related to the PSLF, it might take two to three months to receive a response. If you’ve filed in the past, processing times will likely be much quicker.
5. Don’t assume you are ineligible
One of the reasons so many borrowers are unaware of these changes to the PSLF or think they are ineligible is that they have not been contacted by the Department of Education. But if you’ve never submitted any PSLF related documents to the ministry in the past, chances are they won’t even know you exist as a public servant. This does not mean that you do not qualify for forgiveness.
“Don’t assume that just because you haven’t been contacted you aren’t eligible,” Van Ostern says. “It’s worth a try – it doesn’t take very long and there really is no downside.”
Bonus tip: What if you overpay?
According to the original PSLF rules, it is possible to be refunded if you make more than 120 qualifying payments. This can happen, for example, if you continue to make payments while your documents are being processed for several months. However, if you weren’t eligible for the rebate until the waiver took effect and now have more than 120 eligible payments under the new rules, it is not clear whether you will be reimbursed for the extras.
“The education ministry has not issued very specific guidelines on this,” Van Ostern said. “That said, at this point we understand that it basically depends on the changes that make you newly eligible.” For example, if you are newly eligible for PSLF because you have FFEL loans, you may consolidate and have previous eligible payments around 120, but you will not be eligible to collect overpayments.
But there are other situations where it is not so clear. For example, if you had direct loans but were on the wrong repayment schedule. Van Ostern says you should try to get reimbursed for any overpayments by calling your service agent and asking, but this is not guaranteed to happen.
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