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Congress Wants to Change the Public Service Loan Forgiveness Program

Written by Steve Rhode

Currently, the Public Service Loan Forgiveness program allows public service and non-profit employees to have their loans 100% forgiven tax-free after making 120 qualifying payments. There is no partial forgiveness along the way.

If a group of Democratic Representatives in Congress get their way, that will drastically change. The bill was co-sponsored by Rep. Meng, Grace [D-NY-6], Rep. Boyle, Brendan F. [D-PA-13], Rep. Kilmer, Derek [D-WA-6], Rep. Jeffries, Hakeem S. [D-NY-8], Rep. Veasey, Marc [D-TX-33], and Rep. Lieu, Ted [D-CA-33].

Under this proposed law titled “Strengthening Forgiveness for Public Servants Act” it actually allows for loans to be forgiven along the way to complete forgiveness and gives public service employees hurdles to get loans forgiven in stages along the way to ten-years of qualifying employment.

According to H.R. 5899, rather than have loans completely forgiven after ten years, federal student loans would be forgiven as follows:

“In the case of a borrower who completes 2 years of employment in a public service job, 15 percent of the total amount due on the eligible Federal Direct Loan on the date the borrower commenced employment in such public service job.

In the case of a borrower who completes 4 years of employment in a public service job, 15 percent of the total amount due on the eligible Federal Direct Loan on the date the borrower commenced employment in such public service job.

In the case of a borrower who completes 6 years of employment in a public service job, 20 percent of the total amount due on the eligible Federal Direct Loan on the date the borrower commenced employment in such public service job.

In the case of a borrower who completes 8 years of employment in a public service job, 20 percent of the total amount due on the eligible Federal Direct Loan on the date the borrower commenced employment in such public service job.

READ  Will Only Full Payments Count Towards Public Service Loan Forgiveness?

In the case of a borrower who completes 10 years of employment in a public service job, 30 percent of the total amount due on the eligible Federal Direct Loan on the date the borrower commenced employment in such public service job.”

This totals up to 100% loan forgiveness.

If a public service employee started and did not take out any new loans, the total amount of federal loans would be forgiven. If new federal student loans are taken out along the way, they can also be forgiven but it depends when those new loans might be taken out to determine if they would be fully forgiven at the end.

You can read the full text of the bill, here.


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About the author

Steve Rhode

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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