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Public Service Loan Forgiveness Update–January, 2018

The Public Service Loan Forgiveness Program (PSLF) was established in 2007 as part of the College Cost Reduction and Access Act (CCRAA) and was designed to encourage student loan borrowers to both enter and remain in public service as a means for helping them manage their student loan debt (for details see www.StudentAid.ed.gov/publicservice). The program as written is neither discipline nor degree specific, and thus applies to all eligible borrowers, including those from graduate and professional degree programs.

Since its inception, there has been considerable concern and resulting discussion regarding the long term viability of the program, especially in light of how long it takes borrowers to qualify (at least 10 years). These concerns have been exacerbated with a new administration in Washington that many, including PGPresents, argue have little to no record on public service and do not look favorably on this program. In addition, having both the House and Senate with GOP majorities has not helped.

The House Committee on Education and the Workforce recently approved a bill (the PROSPER Act) reauthorizing the Higher Education Act of 1965 which governs student financial assistance programs. The bill contains a provision eliminating the government’s Direct Loan program, effectively eliminating Public Service Loan Forgiveness since only Direct Loans may be forgiven through PSLF, assuming borrowers meet other eligibility requirements.

While we have anticipated changes to, and the possible elimination of, PSLF for some time, the good news is that the changes involving the elimination of Direct Loans and thus PSLF are prospective and should not impact borrowers who already have Direct Loans, most certainly including Direct Loan borrowers in repayment and already making scheduled payments towards PSLF.

Borrowers interested in PSLF often face important decisions regarding their payments with Income-Driven Repayment (IDR) plans such as Income Based Repayment (IBR), Pay As You Earn (PAYE), or Revised Pay As You Earn (REPAYE), as they can either a) only make the minimum payment to help maximize their potential forgiveness amount under PSLF or b) simply use an IDR for a manageable payment then overpay whenever possible to take control of their debt with aggressive repayment. There are also important decisions for married borrowers or those about to be married regarding how to file taxes, since the inclusion of spousal income can impact repayment under these plans. Please see our IDR comparison chart on our home page for more information on IBR, PAYE, and REPAYE, including the impact of marital status on them.

When borrowers entering a residency program are not sure of their long term career plans (which is often the case), we support the idea of “preserving the option” for PSLF by encouraging them to start making payments on their Direct Loans with an IDR, as long as their employer is an eligible PSLF employer (which most teaching hospitals are). This often means their actual decision about pursuing PSLF will come towards the end of residency or fellowship when they are considering employment possibilities in either the non-profit or for-profit sectors.

PGPresents encourages all borrowers who are using income plans to reevaluate their strategy on a regular basis, at a minimum when they renew or recertify their payment amounts under these plans, and especially if they are trying to qualify for PSLF.

We also encourage borrowers interested in PSLF to complete and submit the PSLF Employment Certification Form (ECF) available at www.StudentAid.ed.gov/publicservice to ensure help with tracking eligible payments. There has been some discussion that borrowers may be protected from any future changes if they already have payments being tracked for PSLF eligibility. Finally, while the Public Service Loan Forgiveness program will clearly help some borrowers, we encourage borrowers not to let PSLF drive their ultimate career decisions.

Please note that the PROSPER Act has to be approved by the full House, then the Senate, and then a joint committee must settle any differences in their respective versions before the final bill is signed into law. We will update this statement if and when that happens.

Should you have additional questions about PSLF, please see www.StudentAid.ed.gov/publicservice referenced above or contact PGPresents at paul@PGPresents.com for a consultation to see if PSLF should be part of your repayment strategy.