Public service employees with student loan debt received some very exciting news recently. On Oct. 6, the U.S. Department of Education announced a temporary change to the Public Service Loan Forgiveness Program. The temporary change is appropriately named the Temporary Expanded Public Service Loan Forgiveness Program.
To give temporary initiative context, it is important to understand the original PSLF program. Congress created the PSLF program in 2007 to incentivize people to work in government or for nonprofits by promising people student loan forgiveness. In general terms, if an individual took out federal student loans and subsequently worked full time in public service for
10 years, that individual would have his or her student loans forgiven.
However, prior to the recent temporary expansion, the program was only available to borrowers who have a specific type of federal government student loan, known as direct loans. Payments made under extended repayment plans, graduated repayment plans and other fixed or level plans with terms greater than 10 years were excluded. Moreover, the U.S. Department of Education has previously allowed public service employee borrowers to consolidate their debt into direct loans but refused to count repayments made before the consolidation.
This recent expansion of the PSLF program, allows student borrowers to count all payments made on loans from the Federal Family Education Loan program or Perkins Loan Program. The temporary expansion also waives restrictions on the type of repayment plan and the requirement that payments be made in the full amount and on time for all borrowers In other words, any prior payments made while working for a qualifying employer will count as a qualifying payment, regardless of loan type or repayment plan. Even better, the changes are retroactive to the creation of the PSLF program in October 2007 and student loan amounts forgiven under the PSLF Program and the TEPSLF opportunity are not considered income for federal tax purposes.
To receive these benefits under the TEPSLF program, public service employees must consolidate their student debt by Oct. 31, 2022, into direct loans. But which public service employees borrowers qualify?
According to the U.S. Department of Education, full-time employment with the following types of organizations qualifies for PSLF: Government organizations at any level (U.S. federal, state, local or tribal) – this includes the U.S. military; and not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code. In addition, serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF program.
A public service employee is considered to work full time if they meet their employer’s definition of full time or work at least an annual average of 30 hours per week. Those employed in more than one qualifying part-time job at the same time are considered full-time if he or she works a combined average of at least 30 hours.
It is important to note that only federal loans taken out by students qualify under both the PSLF and TEPSLF programs. For instance, Parent PLUS loans are not eligible under the program. In addition, most periods of non-payment including in-school deferments, hardship forbearances, and periods of default will still not count towards either program and, payments made on private student loans do not qualify.
To find out if you qualify for loan forgiveness under the PSLF program or the TEPSLF program or if you have questions about either program, visit studentaid.gov.
Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.