The Public Service Loan Forgiveness (PSLF) program was passed by Congress and signed into law by President George W. Bush in 2007. This program allows borrowers with specific types of federal student loans and public service jobs to receive tax-free loan forgiveness after 10 years of consecutive payments.
Many of the first borrowers who enrolled in PSLF after its creation are nearing the point where their loans could be forgiven. However, the Department of Education has signaled many people who have made these payments will not qualify for forgiveness.
When PSLF was created, many borrowers who enrolled did not have the type of federal student loans that are eligible for forgiveness. Before 2010, many borrowers were still using FFEL Loans, which are not eligible for forgiveness under PSLF. For the past ten years, these borrowers made payments towards PSLF under the assumption that they were eligible. Unfortunately, they may be in for a rude awakening.
CNN recently published an article discussing an Oklahoma public school teacher’s plight with the PSLF program. The teacher had accumulated $37,000 in student loans after graduating. However, due to compound interest, her current balance has ballooned to $75,000. For the past ten years, she had made payments towards the PSLF program. She expected to have the remaining balance forgiven. Only very recently did she find out that her loans were never eligible for PSLF in the first place. The teacher consolidated her student loans into a Direct Consolidation Loan, which are eligible. Unfortunately, the teacher will have to restart the 10-year repayment period. Many other early PSLF enrollees are about to experience the same scenario.
What Student Loans Are Eligible for PSLF?
You must have Direct Loans to be eligible for PSLF. These are loans that originate from the Direct Loan program. If you do not have Direct Loans but want to enroll in PSLF, then you should consider consolidating your loans into a Direct Consolidation Loan. This type of loan is part of the Direct Loan program.
You must also meet the strict employment criteria required to stay eligible for PSLF. The Department of Education has reiterated that only they can determine eligibility. Several borrowers enrolled in PSLF were told by their loans servicer that they were eligible. In these cases, the Department of Education retroactively revoked their eligibility.
If you are having problems paying back your student loans, then our attorneys could meet with you to discuss your situation. The Kansas City student loan lawyers at The Sader Law Firm can discuss options to help you manage repayment.