Why Is Public Service Loan Forgiveness So Unforgiving?

By: Janea Hawkins

In the midst of the longest government shutdown in history, there is one integral facet of the federal government that has been partially shutdown for much longer: the Public Service Loan Forgiveness program.  This program is designed to alleviate the federal loan debt of borrowers who work in certain types of public service after 10 years of payments.

Alarmingly, one report has stated that as of mid-last year, roughly 99% of processed applications for forgiveness under a government program aimed at helping public servants manage their federal student-loan debt had their applications rejected.[1] I’m not sure about you, but I went to law school on the condition that I would have a chance at having my enormous, at times paralyzing, amount of student loan debt forgiven. Apparently, I’m not alone. The current student loan debt is astounding, totaling over 1 trillion dollars across the country. Statistics show that millennials, who often minimally obtain a graduate degree to keep pace with our well-educated job market, are the most burdened with an average of $35,000 owed per person.

Many who entered the program when it first started in the Fall of 2007 really had to sort it out in a way that made sense because it was not well-publicized or communicated to borrowers. “It’s obvious that a huge number of people that couldn’t meet the requirements did not understand that they weren’t meeting the requirements,” said Clare McCann, the deputy director for higher education policy in the think tank New America’s education policy program.[2]  Over the years, many loan servicers received conflicting guidance from the Department of Education, which they passed on to thousands of borrowers seeking guidance.  As a result, many faithfully make their payments while they work in the public sector hoping that they will soon see the light at the end of the tunnel, but are disappointed when they discover that they are not eligible.

The first step to ensuring that forgiveness is attainable is to be armed with the basics:

Make 120 qualifying payments while under an income based repayment plan. A “qualifying payment” is one that is (1) made on a Direct federal loan; (2) under an income-driven repayment plan, while (3) working full-time for a public service employer such as government or public entity, or a nonprofit organization.

Also, a “qualifying payment” must be paid on time, or within fourteen days of the due date. That means fourteen days before or after the due date. One funky thing that I personally came across was when I used my Segal Education Award that I earned after my AmeriCorps service while working towards loan forgiveness. However, grants that are used towards loan repayment such as these will only make a lump sum payment on your behalf. So, even if the award amount covers multiple months’ worth of payments, you will only get credit for one payment.

Payments don’t have to be consecutive, so you can switch between qualifying and non-qualifying employers without being reset to zero.  It’s also important to know that under public service loan forgiveness, your debt is forgiven tax-free.

In the DMV, many attorneys work under government-contractor status and not government employee status.  This may not be enough to be considered a qualifying employer. As student loan expert Mark Kantrowitz has stated, “Government contractors must themselves be qualifying organizations for their employees to qualify for public service loan forgiveness.” [3]

Given all of the tricks of this trade, the best thing you can do is to submit the employer certification form to your loan servicer, available at www.myfedloan.org, every year. This will especially become important if one of your previous employers no longer exists. Also, keep records of everything you submit, since it is not uncommon that your submissions become lost. Hopefully when your time for loan forgiveness comes, you will pass with flying colors. If not, roll up your sleeves and get ready for a fight because the challenging fight of getting out of student debt is worth it!

[1] https://www.marketwatch.com/story/this-government-loan-forgiveness-program-has-rejected-99-of-borrowers-so-far-2018-09-20

[2] Id.

[3] https://www.cnbc.com/2018/12/21/1-percent-of-people-were-approved-for-public-service-loan-forgiveness.html