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So far this year, there have been seven student loan debt relief initiatives implemented by the Federal Government Department of Education, to help millions of federal student loan borrowers get out from underneath their debts.
In this article, we’ll briefly review those seven initiatives. And then go over these thirteen common mistakes federal student loan borrowers make when trying to apply for Public Service Student Loan Forgiveness (PSLF):
- Not Knowing the Difference Between the Targeted Student Loan Debt Relief and the Public Service Loan Forgiveness (PSLF) Limited Waiver
- Not Knowing Where to Find the Public Service Loan Forgiveness Form
- Succumbing to Misinformation
- Not Knowing What Type of Loans You Have or Who Your Loan Servicer Is
- Not Knowing What Type of Repayment Plans Qualify for Public Service Loan Forgiveness
- Not Knowing That You Needed to Consolidate Your Federal Student Loans
- Not Knowing How Long the Process Takes for the PSLF Limited Waiver or PSLF Program
- Focusing on the Occupation Rather Than the Employer
- Only Submitting a Public Service Loan Forgiveness Form One Time
- You’re Concerned That Public Service Loan Forgiveness Will Be Considered Taxable Income
- You Didn’t Know That You Can Request to Ask Them to Review Your Payment Calculations Again
- You’ve Thought About Consolidating Your Student Loans, but You Haven’t Considered All Your Options
The Student Loan Debt Relief Plan Consists of Seven Debt Relief Initiatives:
- The pause on student loan payments has been extended from December 31, 2022, until June 30, 2023 or when the courts either reinstate Biden’s debt relief program and resolve current lawsuits.
- The Targeted Student Loan Debt Relief is offered to low and middle-income families from October 2022 through December 31, 2023
- New rules for the Income-Driven Repayment (IDR) plan to reduce future monthly payments for lower and middle-income borrowers
- Navient Settlement and Student Loan Cancelation
- A complete overhaul of Income-Driven Repayment (IDR) plan and PSLF regulations
- Borrower Defense to Repayment Settlement (A Lawsuit against defrauded schools that were issuing student loans)
- Public Service Loan Forgiveness Limited Waiver. From October 6, 2021 – October 31st, 2022
Mistake #1: Not Knowing the Difference Between the Targeted Student Loan Debt Relief and the Public Service Loan Forgiveness (PSLF) Limited Waiver
Many borrowers will be eligible for both the targeted Student Loan debt relief of up to 20k and the Public Service Loan Forgiveness Limited Waiver.
If your federal income for 2020 or 2021 falls below $125,000 (individual or married filing separately) or $250,000 (married filing jointly), you qualify for the Targeted Student Loan Debt Relief.
You are eligible for up to $20,000 in debt relief if you received a Pell Grant in college and meet the income threshold. If you did not receive a Pell Grant in college and meet the income threshold, you’ll be eligible for up to $10,000 in debt relief.
What does the “up to” in “up to $20,000” or “up to $10,000” mean?
Your relief is capped at the amount of your outstanding debt. Therefore, if you are eligible for $20,000 in debt relief, but have an outstanding balance of $15,000, you will only receive $15,000 in student loan debt relief.
You are eligible for this benefit if you have the following student loans with an outstanding balance:
- William D. Ford Federal Direct Loan (Direct Loan) Program loans
- Subsidized loans
- Unsubsidized loans
- Parent PLUS loans
- Graduate PLUS loans
- Federal Family Education Loan (FFEL) Program loans held by ED, not by a private lender
- Federal Perkins Loan Program loans held by ED and not by a private lender
- Defaulted loans (includes ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and Graduate PLUS; and Perkins loans held by ED)
The Public Service Loan Forgiveness (PSLF) waiver is a time-sensitive alteration to the rules of the public service loan forgiveness program that enables borrowers to receive credit for prior repayment periods. Until October 31, 2022, the department of education will count payments retroactively that were previously rejected.
This temporary adjustment to the PSLF rules helps borrowers who have had challenges meeting the requirements of PSLF because they didn’t know about the repayment plans required, or they could not get information from their private lender on how to qualify for PSLF.
Mistake #2: Not Knowing Where to Find the Public Service Loan Forgiveness Form
Borrowers who don’t know how to access the Public Service Loan Forgiveness form or how to find sensitive information regarding their student loans are easy prey for scammers and hackers. Be aware that applying for federal student loan benefits is free of charge, and no one from the Department of Education will call requesting personal information over the phone or via email.
However, the Department of Education doesn’t make it easy to find this information in the first place. There’s a lot of information on the studentaid.gov website and if you don’t know what you’re looking for, it can be tough to find what you need.
Here is where you can access the Public Service Loan Forgiveness (PSLF) form. You have the option to either download the PDF PSLF application from the website or use the online PSLF Help Tool.
The PSLF Help Tool provides actions you can take to become eligible for PSLF and guides you through the form submission process. However, in order to retrieve full access to features from this tool, you’ll need your FSA ID–the same ID used for the Free Application for Federal Student Aid (FAFSA). If you’re having trouble locating it, go to studentaid.gov so that you can find your information securely.
Mistake #3: Panicking
You did not have to turn in the PSLF Form by October 31, 2022, if you’re applying for the PSLF Limited Waiver. According to studentaid.gov, as long as you take action and use the PSLF Help Tool by that date, your information will be saved until your application is approved.
Mistake #4: Succumbing to Misinformation
The PSLF Limited Waiver ended on October 31, 2022, but that doesn’t mean Public Service Loan Forgiveness end! As of now, there are no plans to get rid of the program any time soon.
The Public Service Loan Forgiveness program was passed with bipartisan support through Congress under the Bush Administration in 2007, as part of the College Cost and Reduction Access Act. Even though there are continuous issues with the program and low success rates, it seems unlikely that steps will be taken to repeal this program. The current administration has, however, taken drastic steps to improve the program such as counting prepayments and lump sum payments as eligible Public Service Loan Forgiveness payments (as long as all other necessary requirements for the program are met).
Keep in mind that when making overpayments, it’s important to factor in your Income-Driven Repayment Plan (IDR) Recertification Deadline. If an overpayment is made during or at the time of your IDR Recertification Deadline, the overpayment may not be counted.
The Department of Education has released several changes to the PSLF limited waiver, which are detailed here. In addition, there are a few requirements that have not changed and still apply regardless of which program you choose.
Mistake #5: Not Knowing What Type of Loans You Have or Who Your Loan Servicer Is
Here are a few ways to find out more information about your student loans:
- See what loans you have by logging into your account on the studentaid.gov website and scroll down to the loan breakdown section.
- Contact your loan servicer directly to get your loan breakdown.
- Call the Federal Student Aid Information Center, and the center’s counselors can help you figure out what student loans you have.
- Visit The National Student Loan Data System to see all the federal student loans you took out while in school. Note: You can’t see private student loans through this system.
- Get an idea of all the loans you have by taking a peek at your credit report. While it will not include a loan breakdown by type, it will show if you have any private student loans outstanding and who services them.
Mistake #6: Not Knowing What Type of Repayment Plans Qualify for Public Service Loan Forgiveness
In addition to not knowing who your servicer is, there’s also confusion around what type of repayment plans qualify for Public Service Loan Forgiveness (PSLF).
For a limited time, the requirements for federal student loan payments to be repaid under a qualified repayment plan were relaxed for applicants applying for the PSLF limited waiver until October 31, 2022.
On November 1, 2022, however, the conditions to qualify for PSLF has gone back into effect. Only student loan payments made under these 4 types of income-driven repayment plans will be accepted credit towards PSLF:
- Revised Pay As You Earn Plan [REPAYE Plan]
- Pay As You Earn Plan [PAYE Plan]
- Income-Based Repayment Plan [IBR Plan]
- Income Contingent Repayment Plan [ICR Plan]
These are monthly payment plans that are based on how much you make annually.
Mistake #7: Not Knowing That You Needed to Consolidate Your Federal Student Loans
All loans from the William D. Ford Federal Direct Loan (Direct Loan) Program are eligible for Public Service Loan Forgiveness (PSLF). If you have other federal loans those will need to be consolidated into a Direct Loan first before applying for PSLF.
What loans are under the William D. Ford Federal Direct Loan (Direct Loan) Program?
Federal Direct Loans Include:
- Federal Direct Subsidized Loan
- Federal Direct Unsubsidized Loan
- Federal Parent PLUS Loan
- Federal Graduate PLUS loans
Loans that do not qualify for public service loan forgiveness, but can qualify as long as they’re consolidated are:
- Perkins Loans
- Loans under the FFEL Program
What is a Perkins Loan?
A Perkins Loan is a type of federal student loan that has been made available to undergraduate and graduate students with exceptional financial need. These loans had low-interest rates and long repayment terms and were issued directly through the borrower’s college or other post-secondary institutions.
What are Loans under the FFEL Program?
The Federal Family Education Loan (FFEL) Program was a federal student loan program that was discontinued in 2010. These types of loans were backed by the Federal Government but held and administered by private lenders.
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
- FFEL PLUS Loans
- Consolidated Loans
Mistake #8: Not Knowing How Long the Process Takes for the PSLF Limited Waiver or PSLF Program
Here are the steps we followed to apply and successfully qualify for PSLF:
✔ Checked to see if any of the above student loans were serviced by a private lender. (We found that my mother still had an FFEL loan with Navient.)
✔ Moved the FFEL loan from Navient to FedLoanServicing (now MOHELA) through the federal student aid loan consolidation process.
✔ Confirmed the FFEL loan under Navient had been officially converted into a direct loan.
✔ Completed the form for Public Service Loan Forgiveness (PSLF), had it signed with employer HR signature, and uploaded it to the FedLoan Servicing portal, then waited to hear back. Note: Repeat this step if you have had multiple employers.
✔ Waited for the PSLF application to go through the PSLF approval process
✔ Waited for the PSLF application to go through the PSLF limited waiver process to recount years of service.
✔ Resubmitted a second PSLF application to qualify for the remaining months of service credit to meet the 120 PSLF payment requirement.
This is a long process that took nearly an entire year to complete. Therefore, you must remain vigilant until you have received confirmation from the Department of Education that your federal student loans have been forgiven.
Mistake #9: Focusing on the Occupation Rather Than the Employer
You’re focusing more on your occupation rather than the employer you work for. The Department of Education isn’t really looking to know what your occupation is; that’s not a question on the public service loan forgiveness form.
Be sure to check that you are working for a qualified employer before you begin the process of applying for public service loan forgiveness. Use the employer search tool on the studentaid.gov website.
Mistake #10: Only Submitting a Public Service Loan Forgiveness Form One Time
A common misconception is that you only need to submit a PSLF form one time. However, it’s best to certify your employment annually, until you either complete 10 years of service in public service or make 120 payments.
Because the average employee only spends a few years at each job, you’ll need to update your employment information with the Department of Education frequently. The best way to stay on top of this is by having your employer’s Human Resources department sign off on your PSLF form and then submit it to your loan servicer whenever you start working for a new employer – and repeat this process every year.
Mistake #11: You’re Concerned That Public Service Loan Forgiveness Will Be Considered Taxable Income
If you reside in one of the thirteen states that view student loan forgiveness as taxable income, you may be subject to taxes. However, for the years 2021 through 2025, this type of debt relief is tax-free at the federal level due to the American Rescue Plan of 2021. It’s important to note that while forgiven student loans aren’t taxed federally, they may still be considered taxable income by your state and counted towards your total annual income.
- New York
- South Carolina
- West Virginia
Initially, the plan was that if you qualified for the one-time Targeted Student Loan Debt Relief but did not want it because you live in a state that will tax the relief as income, you had until November 14 to contact your loan servicer to opt out of the program. However due to the Student Loan debt Relief program being blocked in court, the application has been removed from the student aid.gov website and the Student Loan Debt Relief program has been placed on pause until a decision has been made on the legality of the program.
Here’s a list of states that are already waiving taxes in accordance with the student loan debt relief plan. So if you are a resident of the 13 states that will tax the Targeted Student Loan Debt Relief as income, it’s important to consider all of your options and consult with a qualified tax advisor to determine what your obligations will be this tax season.
However, the good news is that state taxation only applies to the one-time Targeted Student Loan Debt Relief initiative and not to Public Service Loan Forgiveness.
Mistake #12: You Didn’t Know That You Can Request to Ask Them to Review Your Payment Calculations Again
If you feel that there is a discrepancy in the number of qualifying payments towards PSLF after the limited waiver deadline of October 31, 2022, then you can always request that your loan servicer review your repayment count again. You can ask them to send you what is called a History of Qualifying Payments letter, which will provide a breakdown of all your payments and why they did not qualify for PSLF if such information is not provided within your online student loan account.
But first, try checking your student loan account online and going to the payment history. Oftentimes, this will have the answer you’re looking for. Keep in mind that not every student loan servicer is made equal, so if you can’t find the info you need, don’t hesitate to ask your loan servicer’s customer support team directly.
Mistake #13: You’ve Thought About Consolidating Your Student Loans, but You Haven’t Considered All Your Options
If you consolidate your student loans, you may lose out on certain repayment plans and forgiveness programs. So it’s important to consider all of your options before consolidating. You can read more about the pros and cons of consolidation in this post. Each has its own set of benefits and drawbacks, so it’s important to research each option carefully before making a decision.
In one year, I’ve gone from having $100,000.00. Student loan debt to now only having $19,000 in student loan debt remaining! I had one federal loan debt of $60,000 and two separate private loans with Navient, totaling $40,000. In this post, I reviewed how to successfully pay off $20,000 in private loans by picking up a side hustle! If you’re interested in learning more, check out the Side Income Strategy guide.
Important Student Loan Debt Relief Dates to Remember:
- October 31, 2022: Deadline to apply for the Public Service Loan Forgiveness Limited Waiver
- November 3, 2022: Application deadline for the Borrower Defense to Repayment Settlement (Lawsuit against defrauded schools who issued student loans)
- January 1, 2023: Proposed New Manageable Income-Driven Repayment (IDR) Account Adjustments to be announced
- May 1, 2023: Deadline to consolidate your loans into a Direct Loan. The PSLF Limited waiver is still set to expire on October 31, 2022. However, if you have commercially held FFEL, Perkins, Health Education Assistance Loan (HEAL) Program Loans, or other non-Direct Loans that still need to be consolidated, you must consolidate by May 1st, 2023 in order to get the full benefits of the PSLF Limited waiver. Still submit your Public Service Loan Forgiveness form by October 31st, 2022.
- June 30, 2023: Student Loan Moratorium / Student Loan Payment Pause Ends
- July 1, 2023: Proposed New Student Loan Repayment Regulations on Income-Driven Repayment Plans (IDR) and Public Service Loan Forgiveness Program (PSLF) to be announced
- December 31, 2023: Deadline to apply for the Targeted Student Loan Debt Relief of up to 20k
If you’re struggling with your student loan debt, don’t give up! There are options available to help you get out of debt and on track to financial freedom. For more information on paying off your debt, check out the Side Income Strategy guide. With some careful planning and extra income, you’ll be debt-free sooner than you think.
- HEROES ACT HR 6800
- How Biden Plans to Tackle the $1.6 Trillion Student Loan Debt | WSJ
- Navient to Forgive $1.7 Billion in Student Debt: Here’s Why | WSJ
- Biden administration reforms public service student loan forgiveness program
- Borrower Defense Loan Discharge – GUIDE TO THE PROPOSED SWEET SETTLEMENT