Many student loan borrowers will be quite happy after their student loans are forgiven through the one-time expansion of the program.
Thousands of borrowers who work in public service jobs have the opportunity to have their loans forgiven thanks to the one-time expansion of a federal program. On March 23, President Trump signed a $1.3 trillion federal spending bill that allocates $350 million for the Public Service Loan Forgiveness (PSLF) program.
PSLF was started in 2007 and gives student loan forgiveness to public servants who make 120 qualifying loan payments. Borrowers have to make all of their federal loan payments on time and they must be employed by either a local or federal government agency or eligible nonprofit. Borrowers also have to enroll in a qualifying loan repayment program and it is up to the borrower to ensure they are in the right program.
The first borrowers began applying for loan forgiveness in October 2017. The Department of Education reported that just fewer than 13,000 applications have been received as of February.
However, many borrowers believed they were enrolled in PSLF only to find out at a later date that they were enrolled in the wrong repayment plan and would have to start over. It has been estimated that tens of thousands of borrowers could have enrolled in the wrong repayment plan, due to the complex enrollment process, USA Today reported.
And many borrowers claim they were misled by their student loan servicers. One borrower claimed they were misled by their servicer and made four years of payments that won’t count toward loan forgiveness.
The new federal budget includes a first come, first served deal to help borrowers who discovered they enrolled in the wrong repayment plan. If borrowers have made payments that are equal to what they would have paid in a qualified repayment plan, those payments will be credited toward loan forgiveness. However, if their payments are less than what they would have paid in a qualifying repayment plan they won’t be eligible for loan forgiveness.
The Trump Administration has proposed eliminating PSLF for future borrowers so many consumer advocates were surprised by the additional funding. Betsy Mayotte, the president of the Institute of Student Loan Advisors, told CNN she believes the funding was included because: "Congress is recognizing that communication was poor when it was first rolled out.”
To qualify, borrowers have to be enrolled in one of four qualified federal repayment plans. Borrowers will most likely be required to go through another application process; the Department of Education is required to come up with that process within 60 days of the bill becoming law.
Still, industry experts say the funding could run out relatively quickly. If you think you’re signed up for PSLF, double-check your eligibility and be sure you’re properly enrolled. If you need this program, be sure to take advantage of it while the funds still exist.