The government has granted a temporary reprieve to student loan borrowers paying back federal loans. But while it’s nice to not have to pay your loans for a few months, it’s a confusing situation for one group of borrowers in particular: those looking to get their remaining loans wiped out by the Public Service Loan Forgiveness program.
Announcements by the Department of Education and President Trump, later backed up by the CARES Act relief legislation, keep it pretty simple: For most federal loan borrowers, you aren’t required to make payments between mid-March 2020 and September 2020. During that time, no new interest will accrue on your loans. Not paying will not negatively impact your payment history or credit score; if you pay any amount, it’ll go toward your loan principal.
But PSLF borrowers have strict rules for eligibility, including 120 monthly payments and a yearly certification that they’re employed in a public service role. The CARES Act says the six-month relief period will count toward PSLF, but the program has an abysmal approval rate. It makes sense that public servants want to be absolutely sure they’re making the right moves to preserve their status.
I asked Adam Minsky, an attorney specializing in student loans, what the CARES Act really means for PSLF hopefuls.
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First things first: The suspended months still count as “qualifying payments” toward PSLF, Minsky said. But you do have to hold up your part of the bargain: working full time for a qualifying PSLF employer.
If you experience any changes to your employment status during this period—like reduced hours or a furlough period—make sure you get and keep documentation of those fluctuations in case there’s a question about your eligibility later on.
One aspect of the payment suspension period we’ve discussed before is that it may make sense to work on paying down the balance of your loan during this time, while no interest is building on that balance. But for PSLF hopefuls, the goal is forgiveness, right?
“Borrowers on track for PSLF can continue to make progress towards loan forgiveness without making any payments, provided all other PSLF eligibility criteria are met,” Minsky said. “So some PSLF borrowers may conclude that it does not make sense to make any payments.”
If you’re trying to get loan forgiveness and feel fairly confident you’ll meet the criteria over your 10-year period, it probably makes more sense to put any extra money you have right now toward your emergency fund or retirement savings. Getting ahead on your loans won’t matter as much if your goal is to put in 10 years of work to get the remainder wiped out.
Minsky stressed that if you have questions about your eligibility right now, you should contact your loan servicer, “as different loan servicers are handling the current climate differently.”
During this time when your loans have a little extra breathing room, it’s a good idea to get into the habit of checking your PSLF status. You should submit the employment certification form annually, even if you haven’t changed jobs, and ask your servicer regularly—we’ve previously recommended twice yearly—to make sure you’re on track.
“If a borrower believes a servicer made an error or an undercount of qualifying PSLF payments, they should dispute that with their servicer right away and request an audit or re-evaluation,” Minsky said.
Are you a PSLF hopeful who has talked to your loan servicer? If you learned any helpful tips for managing your forgiveness eligibility during this time, share them in the comments.
