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I Was Told I Was Eligible for PSLF and Then Told I Wasn’t. Help!

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Question:

Dear Steve,

I am a teacher/counselor who went to college as a non-trad mother of two. I graduated in 1998 and secured a position as a counselor in FL with a debt of $35,000.

I could not afford student loans with two boys and no child support, so I did forbearances, but then they grew to $80,000.

In 2010 I tried to get the PSLF program but was told I had the wrong type of loan. My dad had died, and I received a $40K inheritance.

Frustrated, I put $30K on the loan. I called back in 2014 to see if anything changed and was told, OF COURSE, I could get PSLF. I just needed to transfer the loan to the US Dept of Education.

I could have been done by now if I had been given the correct information in 2010. I am 62 and have 5 years in on the program, so I have to work another 5 years to get to the 10-year mark.

Will I have to pay taxes on the money that will finally be forgiven? A 1099 form? Between what I have paid so far and what I will pay in another 5 years, I will have tripled the original $35,000 loan.

Thank you for being out there for us!

Marie

Answer:

Dear Marie,

First off, thank you for the kind words at the end.

The Public Service Loan Forgiveness (PSLF) program has been a complete and utter mess. The Trump Department of Education managed to take a flawed program and make it into something worse. It has been a disgrace the way it has been handled.

People structured their lives and educational decisions on a program that the government trashed when people became eligible for forgiveness.

The problems you faced are emblematic of what others have had to deal with as well.

But, this might be a bit of good news if you act fast. IN 2018 someone finally realized how badly students in PSLF were getting handled. Loans that students told would be considered, were rejected. Employment that had every indication was compliant towards forgiveness, was denied.

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There is a Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program that might get you across the finish line here.

To qualify for loan forgiveness under the TEPSLF opportunity, you must have

  • only been ineligible for PSLF because some or all of your payments were not made under a qualifying repayment plan for PSLF;
  • had at least 10 years of full-time employment certified by a qualifying employer;
  • met the TEPSLF requirement for the amount you paid 12 months prior to applying for TEPSLF and the last payment you made before applying for TEPSLF to be at least as much as you would have paid under an income-driven repayment plan; and
  • made 120 qualifying payments under the new requirements for TEPSLF while working full-time for your qualifying employer or employers.

    Note: At a minimum, a qualifying monthly payment is a payment that you made

    • after Oct. 1, 2007
    • for the full amount due as shown on your bill;
    • no later than 15 days after your due date; and
    • while employed full-time by a qualifying employer.

You must submit the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF form) to have your eligibility for PSLF reconsidered. Please be aware that the TEPSLF opportunity is temporary, has limited funding, and must be evaluated on a first-come, first-served basis.

If there was a good time to attempt this solution, now is the time under the Biden Administration. If many applications are approved, available forgiveness funds could be used up.

PSLF loan forgiveness is tax-free.

You can  fill out  the  Public Service Loan Forgiveness  (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF form)  in one of two ways: 

  • You can use the  PSLF Help Tool  to assist you in starting the form. Once you enter your information, you’ll be able to print the partially completed form for you and your employer to sign.  
  • Or, you can  download the form  and complete all sections on your own before submitting it.
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Sincerely,


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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