These 3 Things Will Kill Your Chances For Student Loan Forgiveness
If you’re planning on student loan forgiveness, it’s not as simple as you may think.
There are complex requirements, rules and forms.
Here are the three things that will kill your chances for student loan forgiveness – and what to do about them so you come out on top.
Student Loan Forgiveness
Student loan forgiveness, most notably Public Service Loan Forgiveness, is not as simple as saying: “I work in public service. Now forgive my loans.”
If only it were that easy.
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) non-profit job who make 120 eligible on-time payments.
However, these are not the only requirements. There are other important rules that you must follow if you plan to receive public service student loan forgiveness. Here are three things that will kill your chances to receive public service loan forgiveness:
1. Focusing on your role, not your employer
“Working at a public service organization” is not enough to qualify for student loan forgiveness. Many people are confused by this statement, since they think if they work with a government or at a non-profit organization, they have satisfied the requirement.
To qualify for public service loan forgiveness, what matters is your employer. For example, if you are a consultant who works for a private consulting firm that advises the federal government and non-profit organizations, you would not qualify for public service loan forgiveness.
Focus on your employer. With public service loan forgiveness, you can change employers over the course of making the 120 payments. Make sure you update your Employer Certification Form when you change jobs and submit the form to the U.S. Department of Education.
2. Not enrolling in an income-driven repayment plan
To qualify for public service loan forgiveness, you must enroll in an income-driven repayment plan. Income-driven repayment plans such as IBR, PAYE or REPAYE are offered through the federal government, and enable you to lower your monthly federal student loan payment based on your income and other factors.
However, it’s not as simple as signing up for income-driven repayment. You also must make a majority of your 120 student loan payments while enrolled in an income-driven repayment plan. While the 10 Year Standard Repayment Plan qualifies for public service loan forgiveness, your federal student loans would be paid off after 10 years so there would be no more student loans to forgive.
How do you know which income-driven student loan repayment plan is best for you? Well, it depends on your specific financial situation.
This public service loan forgiveness calculator shows you which income-driven student loan repayment plan will maximize your student loan forgiveness.
3. Not consolidating your FFEL Loans
This one is so important.
Remember, only Direct student loans qualify for public service loan forgiveness.
So, if you have FFEL Loans, you need to consolidate these federal student loans into a Direct Consolidation Loan to qualify for public service loan forgiveness. FFEL are not considered federal student loans because they were issued by financial institutions, not by the federal government. How do you know if you have Direct student loans? You can check at Federal Student Aid. If you don’t see the word “Direct” next to your student loans, then you may need to consolidate those student loans.
How do you consolidate FFEL Loans? If you decide to consolidate those student loans, you can do so through StudentLoans.gov.
Importantly, if you consolidate FFEL Loans, only your student loan payments made after you consolidate are eligible for public service loan forgiveness. For example, if you made 50 payments on your FFEL Loans, and then consolidated these loans into a Direct Consolidation Loan, you (unfortunately) would need to make 120 additional payments to qualify for public service loan forgiveness.
While the rules for student loan forgiveness can be tricky, you’ll be better prepared if you know avoid these three things.