College student loans have become an enormous burden for many Americans. According to the Department of Education, private and federal student loans total an outstanding 1.6 trillion as of March 31, 2021.
Many Americans have found it challenging to pay back the loans as they progress through their careers. So the federal government implemented programs to provide borrowers who qualify with some significant relief.
You have the Income-Driven Repayment (IDR) program plan that sets your monthly student loans payments at an amount based on your income and family size. Four income-driven plans are available.
· Income-Based Repayment Plan (IBR Plan)
· Income-Contingent Repayment Plan (ICR Plan)
· Revised Pay As You Earn Repayment Plan (REPAYE Plan)
· Pay As You Earn Repayment Plan (PAYE Plan)
Once you apply and get approval for the IDR plan that is right for you, you have another option available to qualifying borrowers. The program is called the Public Service Loan Forgiveness (PSLF). The program is for individuals that work in nonprofit and federal, state, local or tribal government positions. With the PSLF program, eligible borrowers who make 120 student-qualified loan payments while working full-time in public service can get a portion of their student loans forgiven tax-free. Under the PSLF program, you will not have to pay federal income tax to the IRS on the forgiven amount like other loan forgiveness programs.
The Department of Education offers assistance to borrowers with the application process. The Public Service Loan Forgiveness Help Tool provides a search engine to see what employers qualify under PSLF, your eligibility, and other important information about PSLF. You will need to complete and submit the Public Service Loan Forgiveness Certification and Application form to start the process.
The program requires you to make 120 qualifying payments before receiving the loan forgiveness. Extra payments are not allowed for this program, so it will take you at least ten years to complete the PSLF process.
Qualified Payments are loan payments made under the PSLF program while working full time for a nonprofit or government agency. Payments made while attending school, a grace period, a loan deferment, or forbearance will not count towards the 120 required payments.
Due to COVID-19, for a limited period of time, borrowers may receive credit for past periods of repayment that would otherwise not qualify for PSLF.
Qualifications for PSLF:
· Ensure employment is full-time with a U.S. federal, state, local, or tribal government or
not-for-profit organization (federal service includes U.S. military service);
· Only the Direct Loan Program qualifies for PSLF. The loans are Subsidized Direct
Loans, Unsubsidized Direct Loans, Direct PLUS Loans, and Direct Consolidation
Loans.
· Repay your loans under an Income-Driven Repayment Plan, and make 120 qualifying
payments.
Some qualified jobs considered as public service:
· Firefighters
· Medical professionals at nonprofit hospitals (CNAs, nurses, doctors, pharmacists, etc.)
· Police Officers
· Public and Early Childhood Education
· Social Worker for family services agency
· Religious Organizations
· Public service for individuals with disabilities
· Public education
· School library services
· Public library services
· Public health
· Public service for the elderly
PSLF is a great option for borrows that qualify. Not everyone will be eligible for the program. 98% of applicants were rejected, according to the Department of Education as of April 2021. You can find more information about PSLF and other opportunities to help manage student loans on www.Studentaid.gov/manage-loans.
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The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA
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