What Is The Public Service Loan Forgiveness Program
If you’ve worked in public service, such as the government, military or nonprofit organizations, for at least 10 years you could be eligible for total student loan debt forgiveness through the Public Service Loan Forgiveness program. Temporary changes to the program, which end Oct. 31, currently make receiving forgiveness easier and more flexible.
If Youre Pursuing Public Service Loan Forgiveness
Make sure you submit a new PSLF Employment Certification form and update your income and family size before the student loan recertification deadline, March 2023. The Education Department is allowing borrowers to self-report their income through July 31, 2022. That means you donât have to submit a tax return or pay stub when you report your income. If you submit the IDR application online, select âIâll report my own incomeâ when you get to Step 2.
Note: Last October, the Education Department announced it would give retroactive credit toward public service forgiveness to borrowers working full-time for the government or an eligible nonprofit who hadnât yet had their loans forgiven. To receive credit, you must apply before the PSLF Waiver ends this year on October 31, 2022.
As of August, over 175 thousand borrowers have received over $10 billion in loan cancellation through the Public Service Loan Forgiveness Program and its waiver. Read more about the student loan waivers.
The U.S. Department of Education is continuing its work to improve PSLF. Last week, it announced proposed changes to the regulations that would allow more payments to qualify for PSLF and allow some deferments and forbearances to count toward PSLF.
Learn More:PSLF Reddit â What Works and Doesnât Work
As Biden Appears Likely To Extend Student Loan Pause Republicans File Bill To Restart Payments
WASHINGTON, DC AUGUST 9: U.S. President Joe Biden speaks before signing the CHIPS and Science Act of 2022 during a ceremony on the South Lawn of the White House on August 9, 2022 in Washington, DC.
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The Biden administration appears to be increasingly likely to extend the student loan pause, which is currently set to end in just 22 days. Meanwhile, congressional Republicans filed a bill to end the student loan relief and restart payments for millions borrowers.
Heres the latest.
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Student Loan Deferment: Whats Happened So Far
Through executive action, President Biden has canceled more than $25 billion in student loan debt for 1.3 million borrowers. The majority of forgiveness has been extended to borrowers who were victims of school closures or have a permanent disability.
For example, the U.S. Department of Education issued $7.9 billion in student loan forgiveness for 690,000 borrowers under the Borrower Defense to Repayment. To qualify for the Borrower Defense, borrowers must be able to show that the school they attended misled them, engaged in misconduct, or violated state law relating to their loans.
The federal government also issued $8.5 billion in loan forgiveness for borrowers who suffer from a permanent disability. And 127,000 borrowers have received forgiveness through Public Service Loan Forgiveness , a program that issues loan forgiveness to borrowers that work in public service jobs.
In addition, the U.S. Department of Education has made changes to income-driven repayment plans to help more borrowers qualify for student loan forgiveness. And President Biden campaigned on providing $10,000 in blanket forgiveness to all federal student loan borrowers.
S To Take Before Payments Resume
Before payments on your student loans resume, you should check the details of your loan account. This way, you can find out how much you owe and what interest rate youre paying. Once you know how much you owe, you can start making your payments. Its also a good idea to update your contact information with the loan servicer. By doing this, you can ensure that payments resume automatically.
Once payments resume, youll have less disposable income and less money for other financial goals. This means that youll need a good emergency fund. Several financial experts disagree on how large an emergency fund should be.
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When Do Student Loan Payments Start Again
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Since March 2020, federal student loan payments have been on pause with no payments required, no interest charged and all collections activities on hold. However, this period of administrative forbearance is set to expire on Dec. 31, 2022, meaning all payments will resume on Jan. 1.
The U.S. Department of Education has extended the payment pause multiple times. Previously, the forbearance period was set to end on Aug. 31, but in late August, President Biden announced his mass student loan forgiveness plan and extended the pause an additional four months.
Student Loan Payments Now Paused Until 202: Everything To Know About The Latest Extension
President Biden says this most recent continuance of the student loan payment pause will be its final extension.
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In addition to forgiving up to $20,000 in student debt for qualified borrowers, President Joe Biden announced he was extending the current moratorium on student loan payments and interest until Jan. 1, 2023.
Student loan payments have been paused since March 2020, when the CARES Act was passed by Congress. They were set to resume in Sept. 2020 but the freeze was extended three times by former President Donald Trump and now a total of four more times by Biden.Here’s what you need to know about federal student loan payments, including which loans are paused, what happens to borrowers who are in default, and whether there will be any further student loan payment pauses.
For more on student debt, find out if you qualify for a public student loan forgiveness waiver, if you should keep paying off your loan during the pause, and the benefits of refinancing your student loan.
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Should You Make Student Loan Payments During Deferment
You can make student loan payments during the deferment period if you wish to, but you should only do so if you can easily afford to. By making payments now, every penny that you pay will go directly to the principal of your balance. This can help you save money on interest later down the line, which can also help you speed up your repayment time line.
Student Loan Payments Expected To Resume In September
Student loan payments have been paused for over two years. Payments are set to resume on September 1. The deadline has been pushed back before, but there’s no word on whether President Biden will extend it again.
About 800,000 Coloradans still owe on their federal student loans.
According to Student Loan Hero, the average balance is around $34,000.
The average borrower’s payment in the state is about $307 every month.
Recent grads like Callie Glidden have appreciated the break from paying, and the financial security that comes with having extra money in her wallet.
“It’s like $250 a month and I’m not used to paying that,” said Glidden. “I just don’t think we’re necessarily through the break of recovering from what Covid took from us, financially, emotionally, physically,” said Glidden.
The payment pause is scheduled to end as inflation blows up the budgets of borrowers.
“Most of us have taken that money and allocated it elsewhere. Some of it’s simply your normal household expenses like food, gas, childcare,” said Mary Jo Terry, managing partner at Yrefy.
In addition to inflation, student loan interest rates increased on July 1.
Interest hasn’t been accruing on accounts since payments were paused in 2020.
Terry says the latest increase won’t impact current borrowers.
There’s an ongoing discussion in the Biden administration about offering some amount of federal student loan forgiveness. Senators like Elizabeth Warren are urging the president to cancel loans up to $50,000.
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If You Want To Pause Payments
You don’t have to do anything to get a forbearance to stop student loan payments. Interest wont continue to accrue, as it normally would.
A forbearance could give you breathing room to address other financial concerns.
If you are jobless or working reduced hours, a forbearance may free up cash to pay the rent and utilities or grocery bills. Even if your pay is unaffected, a forbearance could help you divert some money toward building an emergency fund or help you pay another, more pressing debt.
Usually forbearance is granted at the discretion of the servicer and interest will continue to build. In this case, the Education Department instructed all servicers to automatically place all loans into a forbearance without interest.
Will There Be Any More Student Debt Forgiveness
Judging by the length of time it took Biden to make a decision on widespread student loan debt forgiveness, it’s unlikely that any further forgiveness will be given to all student loan borrowers via executive order. It’s not clear yet if Biden’s current order to cancel $10,000 to $20,000 for all federal student loan borrowers will be challenged in court or if anyone even has the standing to file a lawsuit against it.
The political climate on student loan debt forgiveness is likewise murky: An Ipsos/NPR poll found that a majority of Americans approve of canceling $10,000 of student loans, but support for forgiveness decreased at higher levels of relief. In addition, 59% of Americans are worried that student loan forgiveness will make inflation worse. According to a separate CNBC/Momentive survey from early August, nearly a third of respondents opposed student loan forgiveness for anyone.
While further widespread student loan debt forgiveness is unlikely, the Department of Education continues to discharge loans of specific borrowers — the agency has canceled $32 billion of student loans during Biden’s term. Following temporary changes to the Public Service Loan Forgiveness program in October 2021, more than 175,000 borrowers have had their student loans extinguished, totaling more than $10 billion as of August 2022.
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What Will Student Loan Relief Do For You
There are three key benefits from the Biden plan:
- Debt forgiveness. For people earning $125,000 or less the plan will wipe out part of their debt balance. Most borrowers will have $10,000 in government student loan debt forgiven. For recipients of Pell Grants, the amount will be $20,000.
- Extension of the payment resumption deadline to December 31, 2022. Payments were originally scheduled to begin after August 31, 2022. Now borrowers have another four months.
- Easier income-driven payments. Borrowers can now apply for an income-driven repayment plan that will limit payments to 5% of income.
Heres the catch: you may not get these benefits automatically. Many borrowers will need to apply for them between now and when payments resume early next year. Over that same time, there are other steps you should take to get ready.
Below are 8 steps you can take to benefit fully from the student loan relief plan:
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What To Do Before Federal Student Loan Relief Ends
Since it may have been a while since youve made federal student loan payments, studentaid.gov suggests these steps to take before your repayments start again.
If youve been taking advantage of the student loan relief, you may be out of the habit of making regular payments. Start putting aside money now for when payments resume.
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Are There Other Ways To Get Help Paying Off Student Loans
Yes.
Check with your employer. An Employee Benefit Research Institute survey released last October showed that 17% of employers currently offer student loan debt assistance and another 31% plan to do so.
For example, Aetna matches employees U.S.-based student loan payments up to $2,000 per year for a lifetime maximum of up to $10,000 for qualifying loans, PwC offers associates and senior associates up to $1,200 a year toward student debt, and Google matches up to $2,500 per year.
COMPANY HELP:Move over, 401 plans: Some employers now offer student-loan help as a workplace benefit
Get To Know Your Loan Servicer
Three companies that serviced federal student loans Navient, the Pennsylvania Higher Education Assistance Agency, also known as FedLoan, and Granite State all have announced they’ll be ending their relationship with the Education Department.
As a result, around 16 million borrowers will have a different company to deal with by the time payments resume, or not long after, according to Kantrowitz.
For a smooth transition, double-check that your servicer has your current contact information, so you receive all the notices about the upcoming change, Kantrowitz said.
Affected borrowers should get multiple notices about their new servicer, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
If you mistakenly send a payment to your old servicer, the money should be forwarded to your new one, Buchanan said.
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Others Are Making Extra Payments When They Can
If you can afford to make extra payments, do it. However, dont put yourself in a bind by doing so. If you have other bills to pay and can only afford to pay the minimum monthly payment on your student loans, dont change that unless you want to get behind on one of those other bills. Paying off your debt early is good for your credit score but wont really help if it means less money for food or rent. You also run the risk of having too much debt because there are no penalties for paying back more than required at any time .
Black And African American Borrowers
According to a January 2022 poll conducted by CNBC and Momentive, 68% of surveyed U.S. adults have some form of debt, including student loans. One in four Black adults has federal student loans, compared to 15%, 14%, and 11% for Hispanic, White, and Asian Americans, respectively.
Not only are Black and African American borrowers more likely to have student loan debt, but they also owe more on average. According to the Board of Governors of the Federal Reserve System, Black borrowers took out the largest average amount of federal student loan money in 2019 at $44.88 thousand, compared to $40.17 thousand and $30.89 thousand for their White and Hispanic counterparts, respectively.
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Understand Your Loan Repayment Options
Your financial situation may have changed during Covid, so dont assume your payment plan before the pause will best suit your current situation. The Department of Education offers four plans, called income-driven repayment plans , which are designed to reduce your monthly payment amount and are based on how much money you earn. These include:
- Revised Pay as You Earn Repayment Plan
- Pay as You Earn Repayment Plan
- Income-based Repayment Plan
- Income-contingent Repayment Plan
Savi can help you determine the best repayment plan based on your loan, income and family situation. Surprisingly, a higher monthly payment isnt always the best way to pay off your loan faster or at the lowest total payout. With the loan forgiveness program, it may be wiser to arrange a lower monthly payment plan, because under the loan forgiveness program, with 120 eligible monthly payments, your entire remaining loan balance will be totally erased, if you qualify!
Get On Track For Loan Forgiveness
Whether or not you currently participate in the Public Service Loan Forgiveness program, now is the time to confirm your eligibility and get any needed tasks done before payments resume. Whatever your situation, Savi can help you navigate this complex program and be sure you get all required tasks done correctly and on time. Specifically, Savi can help you:
- Determine if your loan qualify for forgiveness
- Identify the best repayment method for your loan and your estimated monthly payment
- Estimate how much money will be forgiven and when
- Consolidate your loan, if needed, to conform with the PSLF Limited Waiver requirements
- Generate any required forms, help you complete them, check them prior to submission and then submit them on your behalf
- Monitor your submitted applications and forms with loan servicers and your employer
- Track your PSLF credits once you start making loan payments under the program
- Update you on any policy changes
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Will The Student Loan Repayment Pause Be Extended Into 2023
There are many experts who think the USAs student loan repayment pause could be extended past the August 31 end date.
Most of these experts expect it to run until around the end of the year or maybe into January.
Our outlook assumes the federal student-loan payment moratorium will last until January 2023,Anthony Noto, CEO of student-loan lender SoFi, reportedly told investors.
With midterms coming in November of 2022, such an extension could help the Democrats win votes, since this is a very popular policy.
However, an extension through all of 2023 is less certain. Despite some calls for complete student loan forgiveness, that is unlikely to happen, so the freeze will have to end at some point.
Therefore, a likely scenario when it comes to the question of the student loan repayment pause could be for it to be extended into the start of 2023, but to then come to an end at some point midway through next year.
