Public Service Loan Forgiveness

The Public Service Loan Forgiveness  (PSLF) Program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments.

 What is forgiven? The remaining interest and principal of the borrowers loans are forgiven.

 How many payments are required? The loan forgiveness occurs after 120 monthly payments made on or after October 1, 2007 on an eligible Federal Direct Loan. Periods of deferment and forbearance are not counted toward the 120 payments. Payments made before October 1, 2007 do not count.

Define public service employment? The borrower must be employed full-time in a public service job for each of the 120 monthly payments. Public service jobs include, among other positions, emergency management, government , military service, public safety and law enforcement (police and fire), public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten), social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization), public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations. Full-time faculty at universities, as well as faculty teaching in high-need subject areas and shortage areas (including nurse faculty, foreign language faculty, and part-time faculty at community colleges), also qualify.

Which loans qualify for the PSLF Program?  Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. Borrowers in the Direct Loan program do not need to consolidate in order to qualify for loan forgiveness. Borrowers in the FFEL program will need to consolidate into Direct Loans.

What should I do now? Submit the Employer Certification Form  to the US Department of Education annually  to ensure that the qualifying public service employment is properly recorded.

How do I erase my loans under the PSLF Program?  File a PSLF application with the US Department of Education after making 120 qualifying payments while working full-time in a qualifying public service job.

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Repayment Strategies for Getting Out Of Student Loan Default

The two primary ways to get out of Student Loan Default are through Consolidation and Rehabilitation.    The first step is to research your student loan online and determine what kind of loans that you have under your account.

Check the following website to research all federal student loans: http://www.nslds.ed.gov/nslds_SA/

 1.     Consolidation:

Borrowers can consolidate their defaulted student loans into a new Direct Consolidation Loan with a repayment plan tied to their income. After obtaining a Consolidation Loan, the borrower gets a fresh start with a new loan.  As of July 1, 2010, Direct Consolidation Loans are the only type of federal consolidation loans available. All federal loan borrowers may obtain Direct Consolidation Loans. However, they must have at least one Federal Family Education Loan (FFEL) or Direct Loan Program Loan (Direct Loan) to qualify for consolidation.

There are drawbacks and limits to consolidation as a way out of default. Borrowers should understand that the balance will increase after consolidation due to the addition of collection fees. One of the most important limits is that defaulted Direct Consolidation Loans may not be reconsolidated. In effect, this means the borrower has only one shot at consolidating as a way out of default.

To obtain a Direct Consolidation Loan, borrowers in default either have to make three (3) consecutive reasonable and affordable payments based on their total financial circumstances or agree to select an income-contingent repayment plan (ICRP) or income based repayment (IBR) plan.

 Payments Are Not Required to Get Out of Default Through Consolidation

Unfortunately, the Department of Education and Collection Agencies often claim inaccurately that all borrowers must make preliminary payments (sometimes three, sometimes six) in order to consolidate out of default.

This misinformation derives from the Department of Education’s monetary incentive system which motivates Collection Agencies to lie, cheat and steal from borrowers with limited means. The monetary incentive system disproportionately rewards Collections Agencies if borrowers make payments prior to consolidation. It is important to know that this is not the law and does not have to be followed in order to be successful at pursuing a consolidation to get out of default.

Furthermore, if a borrower applies directly to the Direct Loan Program for consolidation and does not use the Collection Agency as a middleperson, the agency will generally not earn any fee.

There is no charge to obtain a Direct Consolidation Loan. Borrowers may apply by regular mail, on-line, or by phone under certain circumstances. Borrowers may request an application by calling the current toll-free number, 1-800-557-7392 or, for TDD, 1-800-557-7395. Borrowers can also apply for Direct Consolidation Loans on-line at https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp

Dunne Law Offices, P.C.
1500 John F. Kennedy Boulevard, Suite 200
Philadelphia, PA 19102
(215) 854-6342 (Office)
http://www.thephiladelphiabankruptcyattorney.com

Disability Discharge of Federal Student Loans

The borrower’s permanent and total disability is grounds for a student loan discharge. Borrowers with FFELs, Direct Loans, and Perkins loans are eligible for this discharge.[1] This includes consolidation loans.

The definition of disability changed as of July 1, 2010. The new definition is less restrictive and is more favorable for borrowers because it allows discharges to be granted to borrowers who are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, can be expected to last for a continuous period of 60 months, or has lasted for a continuous period of 60 months.[2]

The borrower applies directly to the loan holder for a disability discharge. If the borrower has different loan holders, the borrower should submit a separate application to each loan holder.

In order to help ensure a more efficient application process, borrowers should follow these guidelines from the Department:

  1. Be sure to sign the application. A photocopy must contain an original signature.
  2. Separate applications must be submitted to each loan holder. Copies may be submitted. However, each copy must have an original borrower signature. Original physician signatures are not required on each copy.
  3. The application must be signed by a doctor of medicine or osteopathy who is licenses to practice in the United States.
  4. The doctor must complete the application.
  5. Doctors should not use medical abbreviations or insurance codes on the application.
  6. The doctor must provide more than a diagnosis. The doctor must also identify the medical condition and clearly and fully explain how the condition prevents the borrower from working and earning money.

The lender may continue collection activity until it receives the certification of disability.  The borrower may request an administrative forbearance to stop collection activity during the review period.

It is important for borrowers to realize that the Department of Education has a very high rate of denials due to “medical review failures.” However, the denial is not tied to an actual medical review. Instead, this is a generic denial category that can mean anything from a missing license number to the physician forgetting to check a box on the application form. The Department of Education often sends a follow-up letter to physicians that require a relatively prompt response and failure of the physician to timely respond may lead to a medical review failure. Borrower should not assume that a denial based on a medical review failure is tied to an actual medical review.

The Department of Education has set up a Disability Discharge Loan Servicing Center. The center can be contacted by phone at 1-888-869-4169, by email at disability_discharge@acs-inc.com, or by regular mail at U.S. Department of Education Disability Discharge Loan Servicing Center, P.O. Box 5200, Greenville, TX 75403-5200. Hearing impaired individuals with access to TDD can call 1-888-636-6401.

If borrower obtains a discharge, the balance of the loan is discharged.[3]

Dunne Law Offices, P.C.
1500 John F. Kennedy Boulevard, Suite 200
Philadelphia, PA 19102
(215) 854-6342 (Office)
http://www.thephiladelphiabankruptcyattorney.com


[1] 20 U.S.C. § 1087(a); 34 C.F.R.  §§ 674.61 (Perkins Loan), 682.402(c) (FFEL), 685.213 (Direct Loan).

[2] 34 C.F.R. § 682.200

[3] 34 C.F.R. § 682.402(c)(3)(ii).

Other Profession-Related Loan Cancellation Programs

The Department of Education administers a loan-forgiveness program for certain child care providers with FFELs or Direct Loans.[1] Under this program, borrowers who have received an associate’s or bachelor’s degree in early childhood education or child care and who are providing full-time child care services that serve certain low-income communities are eligible for forgiveness of up to 100% of their total eligible loans. Only loans made after October 7, 1998, qualify.  In January 2004, the Department of Education published the application for this cancellation program.[2]

The 2008 HEA reauthorization law created a number of new job-related cancellation programs, including loan forgiveness for service in areas of national need and limited loan repayment for civil legal assistance attorneys. Under the civil repayment program, attorneys may be awarded up to $6,000 in repayment assistance in 2010 and may be prioritized to receive assistance in future years if Congress continues to fund the program.[3]


[1] See 67 Fed. Reg. 55385 (Aug. 29, 2002).

[2] U.S. Dep’t of Educ., Dear Colleague Letter GEN-04-01 (Jan. 2004). The form is available on the Department of Education’s website at http://www.ed.gov

[3] For requirements and application procedures, see 75 Fed. Reg. 38999 (July 7, 2010).

Dunne Law Offices, P.C.
1500 John F. Kennedy Boulevard, Suite 200
Philadelphia, PA 19102
(215) 854-6342 (Office)
http://www.thephiladelphiabankruptcyattorney.com

Perkins Loan Forgiveness Program

The Perkins Loan Forgiveness Program was the first to provide for cancellation of loans for teachers in low-income school districts.

A 2005 Second Circuit decision broadened the Perkins Loan Forgiveness Program to include numerous occupations related to teaching, public interest law and social work. Since the Second Circuit decision, the Department of Education has clarified its position in a “Dear Colleague letter” explaining that the program has indeed expanded to include numerous occupations that are considered socially desirable professions.

A short list of covered occupations include:

  • Full-time nurses or medical technicians;
  • Full-time law enforcement or correction officers;
  • Full-time staff members in the education component of Head Start;
  • Military service;
  • VISTA or Peace Corps volunteers;
  • Full-time fire fighters in local, state, or federal fire departments;
  • Full-time speech pathologists with master’s degrees working in certain elementary or secondary schools;
  • Certain librarians working in certain schools;
  • Full-time attorneys employed in public or community defender organizations.
Borrowers must perform uninterrupted service for a specific length of time to qualify for a Perkins loan discharge. However, the Department of Education has waived the continuous service requirement for borrowers who are members of the military reserves or who are regular active duty members of the Armed Forces.
It is important to note that borrowers lose access to Perkins Loan Forgiveness Program if they consolidate their loans with “Direct Loans.”

Check the following website for more information:

De La Mota v. U.S. Dep’t of Educ., 412 F. 3d 71 (2d Cir. 2005)

U.S. Dep’t of Educ., Child or Family Service Loan Cancellation Benefit in the Federal Perkins Loan Program, Dear Colleague Letter GEN-05-15 (Oct. 19, 2005); 34 C.F.R. § 674.56(b).

Dunne Law Offices, P.C.
1500 John F. Kennedy Boulevard, Suite 200
Philadelphia, PA 19102
(215) 854-6342 (Office)
http://www.thephiladelphiabankruptcyattorney.com

Teacher Loan Forgiveness Program

Teachers who are full time and work five (5) consecutive years in certain schools that serve low income families are eligible to erase $5,000.00 of their federal student loans.

Math or Science teachers in eligible secondary schools and special education teachers in eligible elementary or secondary schools are allowed to erase up to $17,500.00 of their student loans in return for five (5) consecutive years of employment in certain schools that serve low income families.

The Teacher Loan Forgiveness Program under the FFEL Program and the Direct Loan Program apply only to borrowers with no outstanding loan balances as of October 1, 1998, or later.

FFEL and Direct Loan borrowers are not eligible for the Teacher Loan Forgiveness Program if their loans are in default status. If a borrower is in default status, it is imperative that they get out of default status by taking advantage of the Income Based Repayment (IBR) Program in order to establish their eligibility to participate in the loan forgiveness program.

It is important to note that teachers can take advantage of multiple loan forgiveness programs simultaneously. For example, teachers can apply for the Teacher Loan Forgiveness Program and the Public Service Forgiveness Program at the same time.

Check the following website for more information:

http://ibrinfo.org/

http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf

http://studentaid.ed.gov/students/attachments/siteresources/PSLF_QAs_final_02%2012%2010.pdf

Dunne Law Offices, P.C.
1500 John F. Kennedy Boulevard, Suite 200
Philadelphia, PA 19102
(215) 854-6342 (Office)
http://www.thephiladelphiabankruptcyattorney.com

Loan Forgiveness Program

This program is available to all borrowers who work in public service jobs for ten (10) years and participate in a eligible repayment plan (IBR or ICR). The remaining balance of the student loan (principal and interest) is forgiven after ten years of public service is completed.

The program applies only to Direct Loans which encompasses Stafford, Plus, and Consolidation loans. Some borrowers may find it advantageous to consolidate their direct loans with their non-direct federal government loans in order to take advantage of this benefit.

Borrowers with non-direct loans should consolidate with direct loans as soon as possible because only payments made through the Direct Loan Program count towards the ten year forgiveness period. Borrowers who have previously consolidated their loans are eligible to reconsolidate their loans (combine direct loans with non-direct loans) to take advantage of this loan forgiveness program.

In order to qualify, borrowers must not be in default and must have made 120 payments on their loans after October 1, 2007. Payments can made through any of the eligible repayment plans (IBR or ICR). Borrowers must be employed in a public service job at the time of the forgiveness.

Jobs with federal, state, local, or tribal government organizations, public child or family service agencies, 501(c)(3) nonprofit organizations or universities should be considered “public service jobs.”

Borrowers who are working for organizations that provide any of the following services should qualify: Law Enforcement, Public Interest, Military service, Public safety, childhood education, public health care occupations, and public education.

It is important to note that the loan forgiveness is based upon the employer’s eligibility, not the type of job. Anyone working full time for a qualifying employer, regardless of his or her job, may qualify. There is no requirement that borrowers must work in the same public service job for the entire ten year period.

Check the following website for more information:
http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf
http://studentaid.ed.gov/students/attachments/siteresources/PSLF_QAs_final_02%2012%2010.pdf