Limited PSLF Waiver
In 2015 my wife and I moved to the San Francisco Bay Area for work. We were excited to live the life of a young couple with two incomes and no kids. After we both completed bachelor and master’s degrees prior to living in the bay area, we’d amassed a substantial amount of student debt, just over $100,000. For my wife and I, we knew that this amount of debt would hinder us from our achieving other goals we had like having children and saving for retirement. After contemplating a variety of alternatives, we decided to consolidate our debt with our bank. They had a special offer where if we paid off the debt in less than 3 years, they would give us back 2% of the original loan amount. We decided to be aggressive about paying off the debt and ended up paying $4,000 a month on our debt until it was gone! It took us just over two years, but we did it. We sacrificed a lot to make that happen. For us it was worth the effort as it resulted in being able to start having children without any debt.
Are you facing a similar crossroads? Are you wondering what’s the right next step for you regarding paying off your student loans?
I’m helping a few of my clients walk through this exact situation right now.
Public Service Loan Forgiveness (PSLF) started in 2007 and the basics of the program were that if you worked for a qualifying employer (a non-profit company or a government entity) and made 120 payments on your direct student loans, you would receive debt forgiveness on the remaining balance. This sounded like a great program, however very few people actually received debt forgiveness. The government disqualified people if they missed a payment, made a partial payment, or for a handful of other reasons. This led to frustrations for tens of thousands of people who were hoping their debt would be forgiven. The whole program seemed so cumbersome and difficult that most people didn’t even pursue this as an option.
In October of 2021, President Biden signed a one-year executive order called the Limited Public Service Loan Forgiveness Waiver (PSLF waiver). President Biden wants to forgive all student debt; however, the House and the Senate will never vote on this. To forgive as much debt as possible, President Biden took a preexisting debt forgiveness program, and through an executive order, greatly increased the number of people who are eligible to receive debt forgiveness. Billions of dollars of student loans have been forgiven in the last six months.
If you work full-time for a non-profit, a government entity (including a public school), or a religious employer, you have six more months to take advantage of this amazing opportunity to have your student loans forgiven. Religious employees were previously excluded from the PSLF program but are included in the PSLF waiver. As of now, after October 2022, the PSLF waiver ends.
Here’s what’s changed and what’s unchanged as of Oct. 6, 2021.
Source: studentaid.gov/announcements-events/pslf-limited-waiver
What does the waiver mean for you?
In the past, you did not qualify for loan forgiveness if you made a partial payment or made a late payment, even if it was only one month out of 120. With the limited time waiver, those partial or missed payments now count towards the 120 payments.
If you are a religious employee, as of 2021, you are now eligible for debt forgiveness. These individuals will continue to be eligible once the waiver ends in October.
Perhaps the most exciting thing about this waiver regards direct loan consolidation. Before the waiver, if you consolidated student loans, the government would reset your qualifying payments to zero. With the waiver, if you consolidate all your loans together, the government will give you the highest number of qualifying payments, instead of resetting it to zero.
Say you graduated undergrad in 2007 and made 36 months of qualifying payments. Then you went to graduate school in 2010 and finished in 2013. If you consolidated your undergrad and grad school loans together, they will both have the high count of 36, instead of your grad school loans having a count of zero. Effectively, consolidating the loans can reduce the amount of time needed to reach 120 qualifying payments and the remainder of the debt forgiven.
You might have 10 or 15 different loans that you are paying off, which is standard. For varying reasons, each of them may have different qualifying payment amounts on them. I have seen some people apply for the waiver without consolidating and receive forgiveness on only a couple of their loans. If they had consolidated, all of their loans would have been changed to 120 qualifying payments and they would have no more student debt!
Prior to the waiver, consolidation was considered a new loan and you had to start the clock all over from zero. Now consolidation through the waiver gives you the highest count possible!
So how does PSLF work?
Here’s a brief overview and step by step process:
Go to https://studentaid.gov/pslf/ and fill out the PSLF Help Tool. It will help you determine if your employment qualifies for loan forgiveness.
Do you know what loan types you have? Only Direct Loans, FFEL and Perkins Loans qualify for the limited waiver. If you already did a private consolidation of your student debt, those loans do not qualify.
Consider consolidating your direct student loans with FedLoan at https://studentaid.gov/app/launchConsolidation.action. This process takes 30 – 45 days to complete. Only certain income driven repayment options will be considered eligible for forgiveness.
Once your loans are consolidated, now you go back to https://studentaid.gov/pslf/ and start to certify your employment. You’ll have to have someone from your workplace sign off on you being a full time employee and the dates that you worked. Once this form is completed it will take some time for the government to add the correct payments to the new consolidated loan and apply the limited waiver to your loan, but once they do you may receive debt forgiveness and potentially a refund for payments made beyond 120 months.
The PSLF limited waiver ends on October 31, 2022. Some of the steps take a few months to process. If you think you qualify or are on track for PSLF in the future, don’t miss out on this once in a lifetime opportunity to purse federal debt forgiveness. Get started by visiting the websites above to learn more about the waiver to might be a good strategy for eliminating your student debt.
The day my wife and I finished paying off our debt was incredible. It felt like a huge weight was lifted off our shoulders. If you have student debt, I hope you can experience that sense of freedom as well. Everyone has particulars and specifics with their student debt journey. After reading this blog post if you are curious if the limited PSLF waiver can help you with your particular situation, I’d be happy to talk to you about it, schedule a meeting with me or send me a message.
