What you need to know about the overhaul of the civil service loan forgiveness


US Secretary of Education Miguel Cardona.

Bloomberg | Bloomberg | Getty Images

After paying off her student loans since 2005, Karen Tongson is finally free from her debt.

In November, Tongson, an English and Gender Studies teacher, logged into her loan account and discovered that her balance had dropped from $ 47,000 to $ 0, thanks to the loan cancellation program at public service.

This program, enacted in 2007 by then-President George W. Bush, allows nonprofit and government employees to cancel their remaining federal student loans after 10 years, or 120 payments.

However, the program has been defined by problems and rejections, with borrowers often believing that they are paying their share for loan cancellation only to learn at some point in the process that they are not eligible, often for loans. eccentric and unclear reasons. Lenders have been accused of misleading borrowers and mis-counting their eligible payments.

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“I noticed a lot of the payments I made were not being counted,” said Tongson, 48. “And I never understood why.”

Tongson’s surprise last fall came as a result of corrections made by the Biden administration to the loan program. He reassessed borrowers’ demands and recounted their payments, and estimates that more than 500,000 people could now be closer to their loan cancellation.

The US Department of Education also reimbursed Tongson $ 20,000 for his years of overpayments, and many other borrowers are also expected to be repaid, experts say.

Here’s what borrowers need to know about the updated program rules.

How are payments recorded now?

To get your PSLF student loans canceled, you must have made 120 payments over 10 years while working in the public service.

The problem the Biden administration is working to solve is that many borrowers are being told by their lenders that they have made less payments than they actually have, or that some of their payments go unaccounted for. for technical reasons, such as the type of loan they hold or overdue by a month.

To give people the proper credit for their payments, the administration now looks not at the number of your eligible payments, but the months of repayment, said Elaine Griffin Rubin, senior contributor and communications specialist at Edvisors.

Even if you haven’t made payments throughout the government’s pandemic student loan hiatus, those months still count toward civil service loan cancellation, added Griffin Rubin.

“Payments made under any federal student loan program under any repayment plan can count,” said Mark Kantrowitz, a higher education expert. “This includes partial payments and late payments. “

How can I be sure to benefit from the new rules?

You want to act as quickly as possible, Kantrowitz said. That’s because the Biden administration’s new rules for canceling civil service loans are set to expire on October 31, 2022.

If you have a Federal Family Education Loan (FFEL) or Federal Perkins Loan, which does not normally count towards the Public Service Loan Cancellation but now does so temporarily, you will need to consolidate them into direct loans with your service agent.

“It typically takes 30 to 45 days for consolidation to occur,” Kantrowitz said.

“Borrowers should do this even if they don’t expect to receive 120 payments by the deadline, as previously ineligible payments will only count if they do,” he added.

In addition, borrowers will also need to prove that their work has been viewed as a public service for the entire period of time that they are trying to get for forgiveness. To do this, you will need to file with your service agent an employer certification form for each employer that you have had throughout your schedule.

Borrowers who are currently unemployed or not working in the public service can still be granted a pardon now, provided they have made 120 qualifying payments in the past, Kantrowitz added.

Some borrowers seem to get forgiveness automatically after the government audits these accounts, but following these steps will ensure you benefit from the new rules.

Will I be reimbursed?

“Any payments made beyond 120 will be automatically refunded as long as these additional payments have taken place after consolidation,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit organization.

If some of your payments were ineligible for some reason other than an unreadable loan type, you should still get a refund as long as you hit those 120 payments.

Refunds are not expected to have any tax implications, Mayotte said.

“However, some states tax the amount remitted under the PSLF,” she added.

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