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Extra Relief for Public Servants with Federal Student Loans

As we try to emphasize on this blog, federal student loans have a number of benefits over private ones. You’ll have access to plenty of relief options, including income-based repayment and total forgiveness for public servants. Private loans have fewer options for borrowers who fall on hard times, if anything at all. The government is a much more lenient lender than private firms, and they’re about to get even more generous. President Trump signed a $3.1 trillion spending bill last month containing relief for Public Service Loan Forgiveness borrowers. But this $350 million package comes with a special requirement – you  need to have received bad information from the government.

Public Service Loan Forgiveness (PSLF)

Developed in 2007, this program helps public workers like teachers, nurses, social workers, and police officers. Public servants in the PSLF program are eligible for debt forgiveness after 10 years of full, on-time payments. Borrowers must have direct federal loans and be enrolled in an eligible repayment plan to qualify. While the program is generous, it’s also confusing and many borrowers don’t know if they’re in an eligible plan or not. There’s eight different repayment plans and only half of them qualify for forgiveness. I’m sure you’re stunned to find out a government program is needlessly complicated, but this one has a solution.

The $350 million relief bonus is specifically for borrowers enrolled in an eligible repayment plan, but not the right plan. Many graduates who expected to have their loans forgiven after 10 years were rejected because they weren’t in the right program. Many public servants enrolled into graduated repayment plans mistakenly believed they’d be getting loan forgiveness. If you’ve been expecting loan forgiveness for 10 years and get denied, the consequences can be devastating. Not only do borrowers suffer mental anguish, but their future plans get drastically altered. 

Imagine you’ve been saving for a down payment on a house. You’ve made budget sheets on Excel and know exactly what you can afford after finishing off your student loans. But when the time comes, you’re denied and that $500 monthly student loan payment goes back on the sheet. Many borrowers saddled with extra years of payments come up short on personal finance goals. Saving for a house down payment or retirement becomes extremely difficult in these situations. Before this bill, borrowers denied loan forgiveness had no where to turn. 

 

So How Can Public Servants Get Some Extra Money?

The Department of Education is distributing this $350 million on a first come, first serve basis. You must be in a government-sponsored repayment plan that wasn’t initially eligible for public service loan forgiveness. Borrowers already enrolled in a qualified repayment plan aren’t eligible for this cash. You can only get relief if you expected forgiveness and didn’t get it. Here’s a few steps to check your eligibility

  • Are you in a public service career? – Government workers and employees of 501(c)(3) organizations qualify here.
  • Do you have Direct Federal Loans? –  Private loans, Perkins loans, and Federal Family Education loans don’t apply.
  • Are you on a proper federal repayment plan? – You must be enrolled in an income-driven repayment plan. In the past, public servants in extended payment programs weren’t eligible for forgiveness. The $350 million bonus is so those in extended payment programs can have their payment history count towards forgiveness. But you’ll need to switch to an income-driven plan if you want future payments to count.

If you meet these requirements, act now before the money is gone. Visit MyFedLoan for more information and be sure to fill out the Federal Debt Subsidy Questionnaire if you think your direct loans are now eligible for forgiveness.

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