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PGPresents’ Statement on Public Service Loan Forgiveness–June, 2017

BACKGROUND

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 the public sector 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). In particular, lawmakers and others have taken notice of the potential substantial forgiveness amounts for graduate and professional students due to their often high levels of borrowing. We respectfully suggest they may forget the often extended period of time these borrowers have been out of the income stream due to lengthy programs, plus the higher potential salaries these borrowers will likely forgo by working in the public sector.

PROPOSED CHANGES

These concerns about PSLF have clearly been exacerbated with a new administration in Washington, D.C., one that many would argue has little to no record on public service and that has proposed the elimination of PSLF entirely in their recently released 2018 Fiscal Year Budget.

While the Budget is simply a marker of sorts, indicating priorities for both spending and cutting expenses, we are pleased that the Budget references proposed changes to PSLF not impacting current borrowers and those in repayment, something that has been confirmed by the U.S. Department of Education who monitors the program.

Congress must ultimately act on the Budget and thus nothing is definitive yet regarding future changes to PSLF. Therefore, there is still no guarantee PSLF as referenced in borrowers’ promissory notes and “Borrower Rights and Responsibilities” will be available with no changes when these eligible and responsible borrowers have met all the eligibility requirements.

Please note that PSLF currently operates like an “entitlement” program, and thus is not currently subject to annual appropriations. This year (2017) will mark the first year any borrowers become eligible for PSLF, 10 years after passage of CCRAA. PGPresents believes the first medical school graduates to see the benefits of PSLF will be in 2019, 10 years after the inception of Income Based Repayment (IBR), as up until 2009, many medical residents postponed repayment through the Economic Hardship Deferment (eligibility for this deferment changed dramatically in 2009 negating the ability of many medical residents to qualify and thus offering IBR as an option for manageable repayment in residency).

ELIGIBILITY REQUIREMENTS

In order to qualify for PSLF, three things must happen, and they must happen AT THE SAME TIME. Borrowers must:

  1. Make 120 timely, scheduled payments with an ELIGIBLE repayment plan such as IBR, PAYE, or REPAYE (these are Income Driven Repayment plans). The payments do not have to be consecutive, but they cannot be accelerated.

  2. Payments must be made on ELIGIBLE loans (only federal Direct Loans are eligible for PSLF).

  3. Eligible payments on eligible loans must be made while the borrower is working full time for an ELIGIBLE PSLF employer.

Borrowers do not apply for PSLF until they have made all 120 requisite payments.

PSLF and YOU

We understand borrowers interested in PSLF often face important decisions regarding whether or not to make minimum 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), under the hope of forgiveness after the requisite number of payments or to take control of their debt by making aggressive payments which would serve to decrease the potential forgiveness amount under PSLF. 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.

However, when medical and other health sciences borrowers entering residency 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 borrowers to start making payments on their Direct Loans with an IDR, as long as their employer is an eligible PSLF employer. This often means their actual decision about pursuing PSLF will come towards the end of residency or fellowship training when they are considering employment possibilities in either the non-profit or for-profit sectors.

PGPresents encourages all borrowers who are using Income-Driven Repayment plans such as IBR, PAYE, or REPAYE as part of their repayment strategy (especially those doing so as part of a repayment strategy tied to PSLF) to reevaluate their strategy on a regular basis, at a minimum when they renew or recertify their payment amounts under these plans.

We also strongly encourage borrowers interested in PSLF to complete and submit the PSLF Employment Certification Form (ECF) available at www.StudentAid.ed.gov/publicservice on an annual basis to ensure help confirming employer eligibility and help 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 and are thus considered “enrolled” in PSLF. Be sure to keep good records regarding any PSLF correspondence, this has never been as important as it is now.

We are aware of concerns about the ECF referenced in the article in the New York Times (“Student Loan Forgiveness Program Approval Letters May Be Invalid, Education Department Says”, New York Times, March 31, 2017) reporting that a number of borrowers who were initially told their employer was a qualifying PSLF employer have now been told that such notifications were a mistake and that they are no longer on track to qualify for PSLF.

Finally, we encourage anyone interested in PSLF to keep their radar up regarding possible changes and to work closely with their local and state representatives, school aid professionals, and any relevant health professions associations to ensure that PSLF is protected and that any changes that may be made to PSLF are done prospectively and thus do not impact current borrowers and those already in repayment.

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.