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Game Changer For Student Loan Forgiveness

If you’re applying for student loan forgiveness, this new tool could be a game changer.

Here’s what you need to know.

Student Loan Forgiveness

The U.S. Department of Education, led by Betsy DeVos, made an important change that can make it easier to understand whether you can get student loan forgiveness through the Public Service Loan Forgiveness program. The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) nonprofit job who make 120 eligible on-time monthly payments.

The new change relates to which employers qualify for student loan forgiveness, which has been a confusing issue for many student loan borrowers. Among other requirements for public service loan forgiveness, you must work for a qualified public service or non-profit employer. Remember: it’s your employer, not your role that counts. It’s not enough to say that you “work in public service.” You must work for an approved employer to qualify for student loan forgiveness. Previously, the Education Department provided an online tool to help borrowers determine whether their employer “likely qualifies” for public service loan forgiveness by selecting one of five employer types. However, the tool had limitations because it didn’t contain any employer-specific information. Now, the Education Department has updated the tool to create more transparency and help student loan borrowers. Currently, the employer database contains more than 1 million eligible employers.

Student loans: what’s the update?

The Public Service Loan Forgiveness (PSLF) Help Tool on the Federal Student Aid (FSA) website has been updated as follows:

  • There is now an enhanced employer search feature that enables you to determine if your employer is eligible for you to receive student loan forgiveness.
  • Once logged in with your FSA ID, you can use your employer’s Federal Employer Identification Number (FEIN or EIN) and dates of employment to search a new employer database for specific eligibility information about the employer.
  • Next, identify your employer in the employer database.
  • Then, you will receive an immediate notification of your employer’s eligibility status as “eligible,” “ineligible” or “likely ineligible” for public service loan forgiveness.

The term “likely ineligible” primarily refers to non-profit organizations that are not 501(c)(3). If you work at one of these non-profits, you are unlikely to be approved for student loan forgiveness.

Why is this a game changer?

This may seem like a small change, but it’s not. If you or anyone you know has gone through the public service loan forgiveness program, understanding whether your employer qualifies is a major issue. This change to the employer database will increase transparency and help ensure upfront that you meet at least one requirement for student loan forgiveness. As of April, approximately 147,000 borrowers have been rejected for public student loan forgiveness. Why? There are several reasons, but here are the most popular:

  • Qualifying Payments: 58%
  • Missing Information: 23%
  • No Eligible Loans: 14%

The second category – Missing Information – pertains directly to the Employer Certification Form that borrowers submit for public service loan forgiveness. Why? When you start the process for public service loan forgiveness, you must complete an Employment Certification Form. You should submit an Employment Certification Form to the U.S. Department of Education when you begin a job in public service or at a non-profit, when you switch employers and annually to ensure you’re on track. Approximately 44% of Employment Certification Forms have been deemed ineligible. The number one reason is missing information (80% of the ineligible forms). Hopefully, this enhanced tool will limit confusion and increase approval rates for public service loan forgiveness.

Student loan forgiveness: more tips

Here are some more tips for student loan forgiveness:

1. Choose the best income-driven student loan repayment plan

It’s important to select the best income-driven repayment plan for you and then make a majority of your qualifying monthly payments while enrolled in an income-driven repayment plan. There are four major income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). Approximately 58% of borrowers have been rejected for making non-qualifying payments.

2. Consolidate federal student loans

Remember, only Direct student loans qualify for public service loan forgiveness. If you have Perkins Loans, FFELP Loans or you borrowed student loans before 2011, you may need to consolidate these federal student loans into a Direct Consolidation Loan. Approximately 14% of borrowers have been rejected for having ineligible student loans.

3. Refinance student loans

Remember this: public service loan forgiveness is only for federal student loans. So, you need a game plan for your private student loans. What should you do? Refinance private student loans and get a lower interest rate. Student loan refinancing rates now are incredibly low and start at 1.99%.

This student loan refinancing calculator helps show you much money you can save through student loan refinancing.

How to pay off student loans faster

Student loan forgiveness may or may not be the best fit for you, given the number of requirements and time it takes to receive student loan forgiveness. What’s the best way to pay off student loans? Start with these four options, all of which have no fees:

Resources: Student Loans

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