Student loan borrowers working for nonprofits or the government were elated at the start of the Public Service Loan Forgiveness (PSLF) program in 2007 at the prospect of their college debt being discharged. But optimism quickly shifted to disappointment when many borrowers came to find out they were ineligible for forgiveness even after 10 years of public service.
The primary reason their applications were denied boiled down to poor communication and misunderstandings about PSLF requirements. These include:
- You must work for a qualifying government organization or 501(c)3
nonprofit, and you must certify your employer annually.
- You must make 120 monthly qualifying payments on your Federal Direct Loans.
- Your payments must be made on an Income Driven Repayment Plan, and you must recertify your income annually.
The majority of the issues arose from the second and third requirements not being met. Some people were on a standard repayment plan, while others were on nonqualifying plans like the Federal Family Education Loan Program (FFEL) or other types of loans during their nonprofit work and thought they were making qualifying payments.
How to get past payments counted toward forgiveness
But now a window of opportunity has opened for reconsideration. Due to these misunderstandings, the Public Service Loan Forgiveness Limited Waiver Opportunity offers a temporary opportunity to get past payments on your federal loans counted towards PSLF as long as they were made while working at a qualifying government or nonprofit. They qualify even if the payments weren’t made on an Income Driven Repayment Plan and/or your loans were a different type of federal loan other than Federal Direct.
To take advantage of this waiver, if you already have Federal Direct loans, you will need to submit the same form that would be submitted for annual employer certification for each qualifying government or nonprofit employer you worked for while you were making payments on your federal loans. The form takes your information and the information about your employer, including the dates you started and ended employment with them.
If your federal loans aren’t Federal Direct, you will need to consolidate them to a Federal Direct loan and, after that is completed, submit the employer certification form for each of your past qualifying government or nonprofit employers you worked for while you were making payments on your federal loans.
Action must be taken prior to October 31, 2022, so that all prior payments made on your federal student loans while working for a qualifying government or nonprofit employer can count toward the 120 payments needed for tax-free forgiveness on your remaining federal student loan balance.
Note that the waiver will not affect private loans, as those aren’t eligible for PSLF.
We have already seen people who normally would not have qualified for forgiveness receive the news that some, if not all, prior payments will count toward PSLF. We have also seen people qualify for immediate forgiveness after submitting the waiver.
Now is a crucial time to review your student loan planning. This waiver presents a rare opportunity for many people with student loans to qualify for tax-free loan forgiveness.
Learn more about loan forgiveness
If you want to find out whether you qualify for the waiver, or learn more about maximizing the benefits available through loan forgiveness programs, email firstname.lastname@example.org
Read more about student loan programs from Wipfli Financial Advisors: