• public service loan forgiveness

Public Service Loan Forgiveness

Changes might be coming to student loan repayment plans, including PSLF.

Student loans are increasingly demanding national attention and concern. Similar to the health care debate or social security funding issues, everyone seems to have an opinion. There are many perspectives that are relevant and important regarding how we should move forward with loan forgiveness plans, including Public Service Loan Forgiveness. But one thing is for sure, this is likely to continue to be an emotional topic for many.

What is Public Service Loan Forgiveness (PSLF?)

Public Service Loan Forgiveness (PSLF) is a repayment plan for borrowers who work in the public sector and have Direct Loans or a Direct Consolidation Loan. Currently, the remaining loan balance(s) are forgiven after 120 qualifying payments. Only payments made after October 1, 2007 count towards loan forgiveness.

Who should use Public Service Loan Forgiveness?

Many different types of employment can qualify a borrower for the PSLF plan. Teachers, health care providers (including doctors) and even some lawyers may be eligible. If your student debt load is larger than your annual income, you should definitely look into PSLF. Check out the employment certification form provided by the Direct Loan program. If you aren’t sure whether or not you qualify, try calling their customer service department (1-855-265-4038). I’ve spoken to them many times in the past on behalf of my clients and have found the representatives to be compassionate and helpful. Hopefully you’ll have the same experience.

Should I Worry About Proposed Changes to the Public Service Loan Forgiveness Program?

Student loan debt is stressful, especially for those who struggle to make their monthly payments (which, let’s be honest, most borrowers do). For those who work in the public sector, the PSLF plan has provided a light at the end of the tunnel. As it stands now, the first borrowers to officially have their loans forgiven will not happen until 2017 (ten years after the program began). The new budget for 2015 has proposed some drastic changes to all loan forgiveness plans, including capping the amount forgiven under PSLF at $57,500. That amount is a drop in the bucket for many public service employees, especially those who made the decision to accept a lower paying job with the expectation that after 10 years their student loan balance would be forgiven.

The good news is that as it stands now, the proposed changes are simply that–proposed changes. Nothing has been made official yet, and it’s still possible that nothing will change. Or perhaps some borrowers will be grandfathered in under the old plan, even if a new plan is implemented. For now, it’s still too soon to worry. Though I’d highly recommend paying close attention to news reports this year. And if you’re so inclined, express your concern to your elected officials. You can also sign this online petition to show your support of keeping the policy as is.

What Can I Do Now While We Wait to See if the PSLF Plan Changes?

For now, it’s probably best to stay on the same payment plan you are currently using. With all financial plans (including student loan repayment plans), it’s important to revisit them annually or anytime something substantially changes. This could be when you get married, have a child or when the government suddenly changes the student loan repayment rules on you. In other words, the wisest financial move is to have (and follow) a plan based on the best information you have today. But don’t be afraid to change it when necessary.

I think it’s safe to say that some degree of change is coming to the Public Service Loan Forgiveness plans, but it’s too soon to know for sure. In the mean time, if you’re facing an overwhelming amount of student debt, try to focus on what you can control.  Continue to make your payments on time. Keep your living expenses as low as possible (cheap rent + public transportation + cooking for yourself are good places to start). Establish a pattern of saving, even if it’s a small amount. Achieving financial security means paying down debt, but it also means having cash in the bank.

You have more control than you realize. Don’t let stress, fear or uncertainty about the future paralyze or discourage you. Even if the PSLF terms do change, it won’t be the end of the world. It’ll just be time to create a new repayment plan.