Approximately 86,000 Virginians who owe about $3.3 billion in federal student loans are eligible to get those loans forgiven for their public service, according to the State Council of Higher Education for Virginia. Only a fraction of those borrowers have received debt relief through the Public Service Loan Forgiveness program so far. But the federal government is currently waiving some prior requirements through Oct. 31.
VPM News’ education reporter Megan Pauly spoke with Scott Kemp, student loan advocate for the SCHEV, about the program.
The following has been edited for length and clarity.
Pauly: What are the requirements for Public Service Loan Forgiveness, and which of these requirements is the federal government waiving under this new program?
Kemp: The Public Service Loan Forgiveness Program has four main components. One, you have to have an eligible loan. And that's a direct loan, a direct plus or direct consolidation loan. Second is you have to work for an eligible employer. And that's either government at the local, state or federal level, or work for a nonprofit, a 501(c)(3). The third thing is you have to be on the right kind of repayment plan. And that’s an income-driven repayment plan. And the fourth thing is that all three of those have to happen consecutively in 120 months.
What this waiver is doing is waiving all those above requirements except for working for an eligible employer.
Why is the federal government doing this now?
The Public Service Loan Program forgiveness program was created about 15 years ago in an effort to encourage people to go into public service. It gave those working in public service an opportunity to pay less over time, and then whatever loans were left over after 10 years, or 120 months of eligible employment, would be forgiven.
As you've heard over the last couple of years, very few people were approved for the program. People had the wrong loans, the wrong repayment plans, and they've been trying all these different fixes. In October of last year, they made the decision that for one year, they were going to give people an opportunity to have their accounts looked at again, and to waive all requirements, except for eligible employment and in-school deferment. And so, what it's done, it's gone from having borrowers who found out in year 10 that they've had the wrong loans all the time, and they have to restart, to having borrowers that automatically, instantly get their loans forgiven.
What is in-school deferment, and how is this program looking at that differently from other deferment or forbearance?
The periods of forbearance in the past didn't count because you weren't making a payment that month, and they're essentially waiving those months and giving borrowers credit for that. There are borrowers who had taken three months off, six months off here and there. But there was a lot of forbearance steering that was done by the loan servicers. When borrowers were having trouble making payments and called the loan servicer and asked for help with it, the quick and easy conversation was to put somebody into forbearance for three months or longer. A more appropriate conversation should have been, let's look at what's happened to your income, let's look at what your income-driven payment would be, and see if that's manageable to keep the borrower on the path to repayment.
And so, this is just kind of a way to correct some of the wrongs in the past without analyzing every single case and looking at call records to say whether you were pushed into forbearance or not. They've just decided that this has been a systemic enough of a problem. We're gonna give everybody a free pass on that and have those months count and hopefully moving forward, won’t have issues like this.
They’re not waiving in-school deferment because that was a choice. When people go back to school full-time, they have the option to put loans in in-school deferment or continue paying on their loan. So, they figured people made a conscious choice at that point. Those months that the loan was in in-school deferment won't count, but those other months of forbearance, they're counting those.
Is it all forbearance that they’re counting?
Any kind of forbearance under certain parameters. Any forbearance that happened before 2012, before they were really aware that the loan servicers were doing it, they're saying doesn't matter. One month here, six months here, they're just automatically giving credit for it. After 2012, if you had a year or more of consecutive forbearance, or about 36 months of cumulative forbearance, they're counting those.
We've also heard from federal student aid that, basically, it's just too hard for them to go through and count.
If someone is unclear about how many months their loans have been in forbearance, would you still encourage them to apply?
The advice that we're giving is that if you worked for an eligible employer anytime since October 2007 and you have student loans, go ahead and fill out the application. It doesn't take that long to fill out. It's a two-page application. The more difficult part is the second part, where you have to get your employer to certify your employment. In some cases, for school division employees who have worked for three or four different school divisions in their 15 years, it takes a little time. But honestly, it's gonna be worth it for people who were told back in 2013 or 2014, ‘You've got the wrong kind of loans, you're not eligible.’
And we encourage them not just to look at the last 10 years but go all the way back to 2007. Because we've had borrowers that when they did the review, not only did they have the 120 eligible payments, but they found out that they made payments past the 120th. And they're getting refunds as well.
It might even be a new borrower, somebody who got their loan three, four years ago, who already had the right kind of loan, right kind of repayment plan, but maybe they had a couple months of forbearance here and there. Go ahead and apply now, let the government know that you're applying for this program, so that they can look and see if there are any hiccups in your history that can be corrected moving forward.
Once repayment restarts in January, all borrowers are going to have to be on an income-driven repayment plan to continue to qualify. So, even if by December they’ve made 100 payments, they're still going to have to make another 20 payments starting in January moving forward. But if they're not on an income-driven repayment plan, those months won't count. So, that's what we're hoping, that not only is it kind of correcting some errors in the past, but also setting borrowers on the right path and doing the kind of outreach and information sharing that should have happened when the program started in October 2007.
Anything else those considering applying for this waiver should know?
If borrowers have a particular type of loan, the Federal Family Education Loan Program, they're going to have to consolidate their loans before they can be discharged. The law doesn't allow them to discharge FFEL loans under this program. But it's a fairly simple process. It really behooves them to consolidate their loans into a direct loan, so that they become eligible for this limited waiver.
I will say that that consolidation needs to occur before the October 31 deadline. It’s one of the reasons that we're hoping they extend the deadline past October 31. Because right now, there is a backlog of applications. And my suspicion is that there's a lot of applications in that pile that haven't been looked at that had the wrong kind of loans. And it may be even after October 31, before somebody even sets eyes on it, and realizes, 'Oh, this person needs to consolidate.'
