Transcript:
1
00:00:03.300 --> 00:00:09.300
Arwen Thoman: Thank you for joining us. I'm Arwen Thoman, and I'm the student loan Ombudsman here in the Massachusetts Attorney General's office.
2
00:00:09.520 --> 00:00:12.820
Erica Harmon: and I am Erica Harmon, the deputy student loan Ombudsman.
3
00:00:13.110 --> 00:00:19.260
Arwen Thoman: We're here today to talk about historic student loan debt relief opportunity for government and nonprofit workers.
4
00:00:19.410 --> 00:00:26.569
Arwen Thoman: 15 years ago Congress created the Public Service Loan Forgiveness Program, also known as PSLF.
5
00:00:26.880 --> 00:00:33.770
Arwen Thoman: The PSLF program was intended to provide public service workers with an affordable path out of Federal student loan debt.
6
00:00:33.950 --> 00:00:49.890
Arwen Thoman: But until recently the program has pretty much been a disaster. We've heard countless stories from public service workers over the years about their inability to access loan forgiveness through PSLF, due to the program’s complex rules and poor administration of the program by loan servicers.
7
00:00:50.480 --> 00:01:02.060
Arwen Thoman: To fix this and to restore borrowers’ credit toward PSLF, the US Department of Education is giving borrowers credit for past repayment periods that would not otherwise count toward forgiveness.
8
00:01:02.430 --> 00:01:12.040
Arwen Thoman: Through this payment count adjustment, thousands of public service workers will have their loans forgiven, and hundreds of thousands more will get closer to loan forgiveness.
9
00:01:12.230 --> 00:01:31.500
Arwen Thoman: But to receive this adjustment, some of you need to consolidate your Federal loans into the Direct Loan program before April 30th of this year. In today's presentation, we're going to provide an overview of the PSLF program and the payment count adjustment and explain the steps you need to take not only to benefit but to maximize forgiveness.
10
00:01:33.180 --> 00:01:38.670
Erica Harmon: So first off, we want to explain how the PSLF program works and provide some background.
11
00:01:38.730 --> 00:01:53.720
Erica Harmon: The program was created in 2007, and it was intended to provide debt relief to Federal loan borrowers who work in public service for at least 10 years under new and improved regulations that took effect back in last July.
12
00:01:53.840 --> 00:01:57.590
Erica Harmon: You can receive forgiveness of your remaining Direct Loan balance
13
00:01:57.630 --> 00:02:06.730
Erica Harmon: after you've made the equivalent of 120 monthly payments in a qualifying repayment plan, that usually entails for paying in an Income Driven Repayment plan,
14
00:02:07.210 --> 00:02:13.590
Erica Harmon: while working at least 30 h per week for the government or certain types of non-profit employers.
15
00:02:15.070 --> 00:02:34.510
Erica Harmon: The PSLF program used to have much more complex rules, and those rules, in combination with deficient loan servicing and poor administration left millions of public service workers unable to access loan forgiveness, often because they had the wrong loan type, or they were making payments in a non-qualifying repayment plan.
16
00:02:34.780 --> 00:02:51.859
Erica Harmon: In fact, in 2017, as the first group of borrowers began reaching 10 years of service, that initial rejection rate was 99%. The payment count adjustment is intended to address these past problems by restoring borrowers credit towards PSLF.
17
00:02:55.490 --> 00:03:06.369
Arwen Thoman: So through the adjustment, you can get credit toward forgiveness for past repayment periods and certain types of forbearances and deferments that would not otherwise count toward forgiveness.
18
00:03:06.480 --> 00:03:10.680
Arwen Thoman: This includes payments you made on ineligible Federal loan types,
19
00:03:11.080 --> 00:03:18.449
Arwen Thoman: payments you made before consolidating your loans, payments you made under non-qualifying repayment plans,
20
00:03:18.700 --> 00:03:21.839
Arwen Thoman: Any late or partial payments you may have made,
21
00:03:21.910 --> 00:03:28.069
Arwen Thoman: and forbearances that were 12 consecutive months long or 36 cumulative months long.
22
00:03:28.530 --> 00:03:35.239
Arwen Thoman: Additionally, all deferments prior to 2013 will count, other than in school deferments
23
00:03:35.370 --> 00:03:40.940
Arwen Thoman: and certain deferments after 2013 will count, including economic hardship deferments.
24
00:03:42.810 --> 00:03:53.720
Arwen Thoman: To benefit from the payment count adjustment, all you really need is qualifying employment at some point after October 1, 2007, while your loans were in repayment status.
25
00:03:54.000 --> 00:04:02.659
Arwen Thoman: and it's important to understand that this qualifying employment doesn't have to be consecutive to count. You can leave public service and come back to it.
26
00:04:02.910 --> 00:04:14.289
Arwen Thoman: It's also important to understand that the PSLF credits that you receive through the adjustment - they're permanent. So even if you don't reach the 120 months that are needed for outright loan forgiveness,
27
00:04:14.370 --> 00:04:21.150
Arwen Thoman: you can continue earning more credit under the new PSLF Rules, adding to those credits that you receive from the adjustment.
28
00:04:23.740 --> 00:04:33.230
Arwen Thoman: Now, some of you may be wondering if your past employer, or your current employer, qualifies for PSLF. Qualifying employers include the government,
29
00:04:33.440 --> 00:04:42.940
Arwen Thoman: 501 c. 3. non-profit organizations, and other nonprofits that provide qualifying services such as public education or public health.
30
00:04:43.230 --> 00:04:57.589
Arwen Thoman: You can check to see if your employer qualifies for PSLF by using the US Department of Education's PSLF employer search tool on studentaid.gov. For-profit companies, labor unions or partisan political organizations -
31
00:04:57.630 --> 00:05:00.260
Arwen Thoman: they do not qualify for PSLF.
32
00:05:02.540 --> 00:05:19.590
Arwen Thoman: The new PSLF regulations that Erica mentioned have new rules about how many hours per week you must work, and under these new rules which will be used to evaluate both your past and your current employment, you have to work for one or more qualifying employers for at least 30 h per week.
33
00:05:19.870 --> 00:05:26.199
Arwen Thoman: Now, this means you can have 2 part time jobs at the same time, so long as those hours add up to 30 h per week.
34
00:05:26.620 --> 00:05:36.609
Arwen Thoman: Teachers, professors, and instructors, only need to work 30 h per week for the 8 months in which they are teaching in order to earn credit for the entire year,
35
00:05:36.710 --> 00:05:42.159
Arwen Thoman: and there are also some new and helpful rules for calculating hours for college adjunct faculty.
36
00:05:45.240 --> 00:06:02.499
Arwen Thoman: Now we do want to take a moment here to just highlight how significant and truly life changing public service loan forgiveness and the payment count adjustment can be. The average borrower who achieves PSLF receives an astounding $97,000 in tax-free debt relief.
37
00:06:02.590 --> 00:06:12.939
Arwen Thoman: Now we know first-hand that many of you have become frustrated or even given up on PSLF. But we want you to understand that the payment adjustment is a game changer.
38
00:06:12.980 --> 00:06:29.480
Arwen Thoman: Through the adjustment we've already seen many public service workers receive forgiveness or get years closer to forgiveness. But there are still hoops that some of you have to jump through, so we urge you to pay close attention as we move into the next part of this presentation, and you may even want to take some notes.
39
00:06:31.470 --> 00:06:36.159
Erica Harmon: So let's get into the steps that you're going to need to take to access the adjustment.
40
00:06:36.480 --> 00:06:48.339
Erica Harmon: First, you're going to need to log in to your studentaid.gov account to identify your Federal loan types to see if you need to switch any of your loans into the Direct Loan program through a process called consolidation.
41
00:06:49.170 --> 00:06:57.630
Erica Harmon: Second, if you have any non-Direct Loans, you'll need to apply to consolidate those loans into the Direct Loan program by April 30.
42
00:06:58.740 --> 00:07:13.740
Erica Harmon: Third, even if you already have Direct Loans, you should evaluate whether consolidating by April 30, could help you get forgiveness faster, and this is going to be a consideration for those of you with loans that have been in repayment for different lengths of time.
43
00:07:14.980 --> 00:07:28.090
Erica Harmon: Fourth, you need to make sure that your employment certifications are up to date by working with your HR Department to certify all the qualifying employment you've held since the October 1, 2007 start date of the PSLF Program.
44
00:07:28.970 --> 00:07:37.650
Erica Harmon: and finally, to keep earning credit towards public service loan forgiveness, you'll need to apply for an Income Driven Repayment plan by July 1.
45
00:07:39.120 --> 00:07:49.219
Erica Harmon: So remember, the adjustment is only available until April 30 of this year. If you need to change your loan type through consolidation, you must do so by April 30.
46
00:07:49.320 --> 00:07:54.700
Erica Harmon: And while we'd recommend certifying your past employment by that date. You can do it later if need be.
47
00:07:56.230 --> 00:08:16.390
Erica Harmon: So this first step is to identify your loan types to see if you need to consolidate. Federal loan borrowers can have several different types of loans, including Direct Loans, Perkins loans, and Federal Family Education Loans known as FFELS. As you can see on this chart, only Direct Loans are eligible for PSLF and the adjustment.
48
00:08:16.450 --> 00:08:26.900
Erica Harmon: You must apply to consolidate any Federal loans that are not Direct Loans, such as FFELs or Perkins loans, into the Direct Loan program by April 30 of this year.
49
00:08:28.400 --> 00:08:33.850
Arwen Thoman: to identify your loan types, you need to go online and navigate to studentaid.gov.
50
00:08:34.320 --> 00:08:54.809
Arwen Thoman: Studentaid.gov is the US Department of Education's main website for Federal student aid, and it's really your portal to access information about all your Federal student loans, and take certain actions with respect to managing your payment. It's worth noting that this account is distinct from the account you may have with the private company that services your Federal student loans.
51
00:08:55.170 --> 00:09:11.699
Arwen Thoman: To get into your studentaid.gov account you're going to need to log in with something called an FSA ID and password. Now, if you don't have an FSA ID, you should go ahead and create one, and it may take a couple of days for your account to be activated while the Social Security Administration confirms your personal information.
52
00:09:11.830 --> 00:09:20.940
Arwen Thoman: And if it's been a long time since you've logged into this account, it's possible you'll have trouble getting back in, if for example, your phone number and your email have changed.
53
00:09:21.190 --> 00:09:30.869
Arwen Thoman: If you find that you need help creating or accessing your account, you can call the US Department of Education at 1-800-433-3243.
54
00:09:32.940 --> 00:09:43.869
Arwen Thoman: After you've logged into studentaid.gov, you'll see your account dashboard, which is what we're looking at right here, and, as you can see, it shows your total Federal loan balance along with any grants that you've received.
55
00:09:44.040 --> 00:09:48.409
Arwen Thoman: To find out what loan types you have click on this view details button.
56
00:09:51.500 --> 00:09:53.329
Arwen Thoman: Alright, so in this view,
57
00:09:53.760 --> 00:10:03.940
Arwen Thoman: we've clicked that view details button and we've scrolled down to the loan type section, which is where you'll see your loans grouped into several different categories.
58
00:10:04.170 --> 00:10:10.929
Arwen Thoman: Now, from this view, you'll be able to see whether you have an outstanding Perkins loan because it's its own loan category.
59
00:10:11.030 --> 00:10:22.129
Arwen Thoman: But to find out if you have any of these FFEL program loans, you'll need to expand each of the other loan type categories to see a breakdown of all the individual loans within each category.
60
00:10:24.130 --> 00:10:28.020
Arwen Thoman: In this picture we've clicked on the subsidized loan category,
61
00:10:28.030 --> 00:10:41.680
Arwen Thoman: and as you can see, there are a bunch of loans within this category. We're looking to see whether there's an outstanding balance on a loan that is not a Direct Loan. In this example, there are 2 loans with outstanding balances.
62
00:10:42.330 --> 00:10:44.409
Arwen Thoman: One is a Direct Loan,
63
00:10:44.510 --> 00:10:50.700
Arwen Thoman: but the other is a FFEL program loan. The FFEL program loan will need to be consolidated.
64
00:10:50.950 --> 00:10:59.260
Arwen Thoman: and keep in mind that you need to carefully review each loan category to see if any of them contain loan types other than Direct Loans.
65
00:11:01.440 --> 00:11:15.509
Arwen Thoman: Now, while we really want everyone to go into their studentaid.gov account and look at their loan types, we are going to just briefly highlight some of the big warning signs that may indicate that you have FFEL program loans or Perkins loans that need to be consolidated by April 30.
66
00:11:15.870 --> 00:11:24.850
Arwen Thoman: First, some of you may have received a letter or an email from our office explicitly warning you that you have privately owned Federal student loans.
67
00:11:25.580 --> 00:11:38.529
Arwen Thoman: Second, if your Federal loans are serviced by Navient or AES, I should say, still being serviced by Navient or AES, this is like a huge red flag that you have FFEL program loans.
68
00:11:38.760 --> 00:11:49.150
Arwen Thoman: Now you can have FFEL program loans if you have another servicer, but at this point nearly all of the Federal student loans serviced by Navient and AES are these FFEL program loans.
69
00:11:49.690 --> 00:12:02.129
Arwen Thoman: Similarly, you could have a Perkins loan if you have Federal student loan serviced by ECSI Heartland, or your school. But once again, there are other services that service Perkins loans.
70
00:12:02.680 --> 00:12:12.920
Arwen Thoman: and just generally you can really only have FFEL program loans if you took out your Federal loans before 2011, and that's because the fell FFEL ended in mid-2010.
71
00:12:13.260 --> 00:12:22.279
Arwen Thoman: So if you took your loans out in or after 2011, you probably don't have FFEL loans, you could have a mix of Perkins and Direct Loans.
72
00:12:23.970 --> 00:12:34.540
Arwen Thoman: Another indication that you have FFEL or Perkins loans that need to be consolidated is if your Federal loan payments weren't automatically paused in March 2020, when the pandemic began.
73
00:12:37.210 --> 00:12:53.099
Arwen Thoman: So if you find out that you have any of these Federal loans that are not Direct Loan, the second step is to consolidate those loans into the Direct Loan program and you can fill out and submit a consolidation application in about 20-30 minutes on studentaid.gov.
74
00:12:53.450 --> 00:12:59.170
Arwen Thoman: Under this loan repayment tab, you're going to need to select consolidate loans from the dropdown menu.
75
00:13:01.460 --> 00:13:09.739
Arwen Thoman: Now, after you fill in some personal information, you will be shown a list of all your Federal student loans, and you'll be asked which ones you're trying to consolidate.
76
00:13:10.190 --> 00:13:17.590
Arwen Thoman: Again, you're going to need to consolidate all your non-Direct Loans. Now, some people may also want to consolidate their Direct Loans,
77
00:13:17.640 --> 00:13:30.729
Arwen Thoman: and we're going to discuss that scenario in a few minutes. But for the purposes of this example, we're just working on our non-Direct Loans, so make sure to select all your FFEL loans for consolidation by checking the box next to each FFEL loan.
78
00:13:30.900 --> 00:13:47.380
Arwen Thoman: and if you want your Perkins loan to receive credit under the payment count adjustment, you'll need to consolidate it to. I will note that if you consolidate your Perkins loan, it won't be eligible anymore for Perkins loan cancellation, which is a completely separate program from PSLF
79
00:13:47.410 --> 00:13:57.930
Arwen Thoman: and is available to borrowers in very specific professions, including teachers, nurses, and public defenders. If you're interested in Perkins loan cancellation, you can learn more about it on studentaid.gov.
80
00:13:58.840 --> 00:14:15.760
Arwen Thoman: I also just want to note here that at the top of the page you're going to see a toggle button that offers to help you to decide which loans to consolidate for public service loan forgiveness. Don't check this toggle button. If you do, it's going to provide a warning that hasn't been updated to account for the payment adjustment.
81
00:14:15.790 --> 00:14:21.800
Arwen Thoman: The warning is going to tell you that consolidating will reset your PSLF qualifying payment count to 0,
82
00:14:21.910 --> 00:14:27.680
Arwen Thoman: but you should disregard this warning as long as you're applying to consolidate by April 30.
83
00:14:31.700 --> 00:14:38.219
Arwen Thoman: On the next screen you'll be asked whether you want to delay processing your application. Go ahead and click “Do not delay processing”.
84
00:14:39.930 --> 00:14:52.200
Arwen Thoman: You'll then be asked whether you're consolidating for public service loan forgiveness. Check “Yes” and Mohela will be automatically assigned as your servicer. Mohela is the designated servicer for the PSLF program.
85
00:14:53.920 --> 00:15:00.780
Arwen Thoman: Now, as part of your consolidation application, you're going to need to choose a repayment plan for your new consolidation loan.
86
00:15:01.060 --> 00:15:14.459
Arwen Thoman: Now keep in mind, if you don't reach the 120 payments required for forgiveness through the payment adjustment, you're going to need to continue earning credit toward PSLF starting in July of 2024, which is when the adjustment is expected to occur.
87
00:15:14.480 --> 00:15:24.920
Arwen Thoman: And for most borrowers, this is going to require making payments under an Income Driven Repayment plan. So you're going to want to select the box here that says “repay based on my income”.
88
00:15:27.510 --> 00:15:43.340
Arwen Thoman: To calculate your income driven payments, the US Department of Education needs access to your income information and there's a nice new feature where you can authorize the Department to just annually access your Federal tax returns so that it can just automatically recalculate your payments each year.
89
00:15:43.340 --> 00:15:57.519
Arwen Thoman: We definitely recommend providing this authorization so that you aren't burdened with providing your income information every single year by the deadline set by your loan servicer – we’ve seen a lot of problems with that in the past, so we'd suggest reviewing the authorization and clicking approve at the bottom of the page.
90
00:16:00.060 --> 00:16:10.770
Arwen Thoman: After you answer a series of questions about your marital status, your family size, and your income, you will be shown your payments under the 4 Income Driven Repayment plans, as you can see right here.
91
00:16:10.930 --> 00:16:34.530
Arwen Thoman: Now, as a rule of thumb SAVE, which is the newest Income Driven Repayment plan, will likely offer the most affordable payments. SAVE is replacing the old REPAYE plan, and it offers a lot of benefits that we'll discuss later in the presentation. But it is possible that if you have a particularly small loan balance, Income Contingent Repayment may offer a lower payment amount.
92
00:16:35.390 --> 00:16:41.809
Arwen Thoman: And we do want to highlight that if you turn on this “public service loan forgiveness” toggle button up here at the top of the page,
93
00:16:41.930 --> 00:16:47.319
Arwen Thoman: it is going to assume that your loans are going to be forgiven 120 months from now.
94
00:16:47.580 --> 00:17:15.490
Arwen Thoman: So unless you're truly just getting started in public service, or you only just graduated from school, and your loans are just entering repayment for the first time, the forgiveness estimates that it puts up on this page are wrong, and you should disregard them. This page for most people is really only useful to get a sense of what your monthly payments will be, but you can't use it to understand how much you're going to pay over the life of the loan, or how much forgiveness you're likely to receive.
95
00:17:18.420 --> 00:17:28.650
Arwen Thoman: And you can actually change your repayment plan once your consolidation is processed, so if for whatever reason you choose the wrong plan in this moment, you can change that later.
96
00:17:31.350 --> 00:17:41.499
Erica Harmon: All right. So we've been stressing the need to consolidate non-Direct Loans because these loans can't benefit from the payment count adjustment unless they're consolidated into the Direct Loan program.
97
00:17:41.650 --> 00:17:59.560
Erica Harmon: But even if some or all of your Federal loans are already Direct Loans, if you worked at least 30 h per week for a qualifying employer between taking out your older and your more recent loans. Forgiveness will come faster on your more recent loans if you consolidate them with your older loans.
98
00:18:00.020 --> 00:18:13.970
Erica Harmon: So, for example, if you had qualifying employment between your undergrad and graduate school studies, consolidating all your loans together, will speed up forgiveness on your more recent graduate school loans.
99
00:18:14.070 --> 00:18:22.050
Erica Harmon: So this third step is to evaluate whether this scenario applies to you, and whether you should consolidate all of your loans together.
100
00:18:23.280 --> 00:18:25.330
Erica Harmon: To demonstrate how this works,
101
00:18:25.410 --> 00:18:46.629
Erica Harmon: If your undergraduate loans were going to receive a hundred qualifying payments through the adjustment, but your graduate school loans were only going to receive 50 qualifying payments, by consolidating them together, the resulting consolidation loan would receive a hundred qualifying payments which would speed up forgiveness on your more recent graduate school loans.
102
00:18:49.410 --> 00:18:57.080
Erica Harmon: We hear from a lot of people who are worried about their interest rates increasing if they consolidate, so we want to explain how this works.
103
00:18:57.180 --> 00:19:10.159
Erica Harmon: The interest rate on your direct consolidation loan will be a fixed rate equal to the weighted average of the interest rates on the loans being consolidated. If that weighted average is between eighths of a percentage point.
104
00:19:10.200 --> 00:19:18.979
Erica Harmon: It will then round up to the nearest eighth. So the effect of this rate increase, if there is one, is quite minimal and not something to be worried about
105
00:19:20.180 --> 00:19:27.050
Erica Harmon: As a reminder, a weighted average takes into account both the loan balances and the interest rates
106
00:19:27.290 --> 00:19:31.519
Erica Harmon: and the weighted average alone is never going to increase your interest rate.
107
00:19:33.380 --> 00:19:43.820
Erica Harmon: So to give an example of how this works, if you had a FFEL consolidation loan, just one loan, a fell consolidation loan with a 4.3% interest rate,
108
00:19:44.130 --> 00:19:51.250
Erica Harmon: The interest rate on your new direct consolidation loan would round up to 4.375%.
109
00:19:51.530 --> 00:19:55.900
Erica Harmon: And that's only a .075% increase.
110
00:19:56.660 --> 00:20:02.189
Erica Harmon: We’ll mention too that enrolling in auto debit on your new direct consolidation loan
111
00:20:02.290 --> 00:20:06.289
Erica Harmon: would give you a .25% interest rate reduction.
112
00:20:06.520 --> 00:20:14.699
Erica Harmon: So if your interest rate does round up by consolidating, by enrolling in auto pay, you would more than offset that increase.
113
00:20:15.510 --> 00:20:24.349
Erica Harmon: You can also see what your interest rate will be ahead of time by logging into studentaid.gov and completing Step 1 of the consolidation application.
114
00:20:25.960 --> 00:20:30.180
Erica Harmon: We do want to mention that there's one exception to this rule.
115
00:20:30.350 --> 00:20:46.410
Erica Harmon: And that is, it's a somewhat rare situation, but some FFELs are subject to special interest rate borrower benefit programs. So to give an example, a 1.5% rate reduction for making 48 months of on time payments,
116
00:20:46.540 --> 00:20:50.790
Erica Harmon: consolidating does end these special interest rate reductions.
117
00:20:53.460 --> 00:21:07.430
Erica Harmon: So there are a couple special circumstances relating to consolidating that could arise for just some borrowers that we're going to run through. The first is if you've made more than 120 payments on an existing Direct Loan,
118
00:21:07.560 --> 00:21:24.359
Erica Harmon: by consolidating, you'll be giving up a refund of any payments you may beyond the 120 required for forgiveness. But with that being said, depending on how much credit you get towards forgiveness on your more recent loans by consolidating, it could be worth giving up this refund.
119
00:21:24.840 --> 00:21:32.560
Erica Harmon: The US Department of Education has made it clear that refunds will not be available for payments made on FFEL or Perkins loans,
120
00:21:32.600 --> 00:21:39.060
Erica Harmon: so this refund consideration only applies to consolidating Direct Loans. Second,
121
00:21:39.300 --> 00:21:51.680
Erica Harmon: if you have Parent PLUS loans, consolidating them with your own student loans will restrict the entire resulting direct consolidation loan to the more expensive Income Contingent Repayment, an ICR plan,
122
00:21:51.810 --> 00:22:02.309
Erica Harmon: unless you're able to take advantage of advantage of a special double consolidation loophole to access the SAVE plan which we're going to discuss just a little later in our presentation.
123
00:22:03.290 --> 00:22:14.109
Erica Harmon: There's one more factor to be aware of. If you've spent significant time in deferment or forbearance that you do not expect to get credit for through the payment count adjustment,
124
00:22:15.090 --> 00:22:28.080
Erica Harmon: there's a new buyback process in the new PSLF regulations we've mentioned that allows Direct Loan borrowers to buy back past qualifying employment periods that they didn't get PSLF credit for
125
00:22:28.150 --> 00:22:30.900
Erica Harmon: due to being in a forbearance or deferment.
126
00:22:31.250 --> 00:22:40.370
Erica Harmon: Through the process, borrowers can obtain credit towards PSLF by paying what they would have been required to pay under an Income Driven Repayment plan.
127
00:22:40.600 --> 00:22:56.710
Erica Harmon: But unfortunately consolidating will prevent you from buying back these past qualifying employment periods. But keep in mind some of these forbearance and deferment periods may automatically receive PSLF credit through the payment count adjustment for free,
128
00:22:56.780 --> 00:23:04.590
Erica Harmon: so you may not actually need to use it at all. You can learn more about this buyback process on the US Department of Education's website.
129
00:23:08.270 --> 00:23:17.120
Erica Harmon: Alright, so at this point, we've talked about how to identify your loan types, which loans to consolidate, and issues to consider when consolidating.
130
00:23:17.420 --> 00:23:26.329
Erica Harmon: The next step to getting the benefits of the adjustment is to ensure that your employment certifications are up to date with Mohela, the current PSLF Servicer.
131
00:23:26.600 --> 00:23:41.729
Erica Harmon: The government can’t give you credit for your public service if it doesn't know about it. So, if you don't have approved employment certifications on file for all of your past qualifying employment periods since that October 1, 2007 start date of the program,
132
00:23:41.980 --> 00:23:52.900
Erica Harmon: you should file a PSLF form to certify your employment for each uncertified period. While we'd recommend getting it done by April 30, you can do it later if you need to.
133
00:23:53.280 --> 00:24:01.310
Erica Harmon: If you're not sure whether you've successfully certified your employment, to be on the safe side, you should file or refile a PSLF form.
134
00:24:03.600 --> 00:24:16.950
Erica Harmon: To certify your employment, you need to work with your employer to fill out a PSLF form. You can download the PSLF form as a PDF and you and your employer can complete all the sections before you submit it to Mohela.
135
00:24:17.390 --> 00:24:24.439
Erica Harmon: Alternatively, you can use the PSLF help tool on studentaid.gov to assist you in starting the PSLF form.
136
00:24:24.610 --> 00:24:33.629
Erica Harmon: If you use the PSLF help tool, it will provide an option to use the US Department of Education's E-signature and electronic Submission process,
137
00:24:33.710 --> 00:24:46.140
Erica Harmon: but you will need to double check with your employer as to what email address to use for that. You can also print the partially completed form that the help tool generates for you and your employer to manually sign.
138
00:24:46.430 --> 00:24:58.400
Erica Harmon: You would then need to submit that form to Mohela. Unfortunately, the PSLF help tool is difficult to use, and shows confusing warnings that don't account for the payment count adjustment,
139
00:24:58.510 --> 00:25:08.730
Erica Harmon: so we often find it simpler to just download a blank PSLF form, fill out and sign page one, and then ask your employer to fill out and sign page 2,
140
00:25:08.800 --> 00:25:11.449
Erica Harmon: and then submit the completed form to Mohela.
141
00:25:13.230 --> 00:25:18.750
Erica Harmon: Here's what the form looks like. Page 1 requests some basic personal information at the top
142
00:25:19.100 --> 00:25:33.870
Erica Harmon: and then immediately after the section, it offers you the option to put your loans in forbearance if you believe you've reached the 120 payments required for forgiveness. If you don't think you have the 120 payments required or you just aren't sure,
143
00:25:33.960 --> 00:25:42.890
Erica Harmon: don't check this box, because if you do, you'll be put in a forbearance while the application is processed and you won't get credit towards forgiveness for those months.
144
00:25:43.790 --> 00:25:48.319
Erica Harmon: Don't forget to sign and date page 1 at the bottom of the page.
145
00:25:50.370 --> 00:25:56.700
Erica Harmon: Here's what Page 2 looks like. We really think it's best for your employer to complete this page.
146
00:25:57.140 --> 00:26:09.019
Erica Harmon: Your HR Department may have already provided instructions on how to how to send your PSLF form to them, but if you're not sure how to get your PSLF form to your HR Department, you should reach out to them.
147
00:26:11.270 --> 00:26:19.369
Erica Harmon: If you're filling out a PDF of the PSLF form, keep in mind that signatures for you and your employer must be hand drawn.
148
00:26:19.980 --> 00:26:28.160
Erica Harmon: Typed signatures, even if made to mimic a hand-drawn signature or security certificate-based signatures are not accepted.
149
00:26:30.900 --> 00:26:36.190
Erica Harmon: Before submitting your PSLF Form, review it carefully for completeness.
150
00:26:36.350 --> 00:26:46.650
Erica Harmon: We've seen a lot of forms rejected for missing signatures or missing dates. You should send the completed form to Mohela, the servicer for the PSLF program.
151
00:26:46.860 --> 00:26:55.150
Erica Harmon: and if Mohela is already your servicer, you can upload your completed form on Mohela's website, but otherwise you can fax or mail it.
152
00:26:55.470 --> 00:27:00.200
Erica Harmon: and we recommend saving a copy of your employment certifications for your records.
153
00:27:04.220 --> 00:27:10.890
Arwen Thoman: So step 5, the final step in all this, is to make payments under an Income Driven Repayment planx.
154
00:27:11.630 --> 00:27:20.050
Arwen Thoman: To continue running credit toward public service loan forgiveness, most borrowers are going to need to apply for an income-driven repayment plan by July 1.
155
00:27:20.320 --> 00:27:30.229
Arwen Thoman: And while some of you will have had the opportunity to apply for IDR at the time you submitted a consolidation application, those of you who are not consolidating will need to apply.
156
00:27:30.910 --> 00:27:42.499
Arwen Thoman: Income Driven Repayment plans or IDR plans base your payments on your income and your family size. And there is good news. There is a new, more affordable Income Driven Repayment plan called SAVE.
157
00:27:44.080 --> 00:27:48.260
Arwen Thoman: The new SAVE plan is the most affordable IDR plan in history.
158
00:27:48.460 --> 00:27:59.869
Arwen Thoman: Rather than protecting income under 150% of the Federal poverty line as past income driven plans did, the SAVE Plan protects income under 225% of the Federal poverty line.
159
00:28:00.010 --> 00:28:10.820
Arwen Thoman: This means it will cut monthly payments to $0 per month if you make less than about $33,000 per year individually, or under $67,500 for a family of 4.
160
00:28:11.290 --> 00:28:18.319
Arwen Thoman: Another great feature of the SAVE plan is that it eliminates any remaining interest after a scheduled payment is made.
161
00:28:18.470 --> 00:28:28.970
Arwen Thoman: So, for example, if your loan accrues $50 in interest each month, and your SAVE payment is only $30, that extra $20 in interest just isn't charged.
162
00:28:29.890 --> 00:28:38.320
Arwen Thoman: Additionally married borrowers who file their taxes separately can exclude their spouse's income from their payments calculation.
163
00:28:38.420 --> 00:28:46.070
Arwen Thoman: So some borrowers may want to give some consideration to changing their future tax filing status in order to lower their monthly payment.
164
00:28:48.330 --> 00:28:57.950
Arwen Thoman: The chart on the left here illustrates how SAVE payments change based on income and family size, and you should be able to use it to ballpark what your SAVE payment should be.
165
00:28:58.550 --> 00:29:05.909
Arwen Thoman: For example, someone with a family size of 3 making $60,000 per year, would have a $34 monthly payment.
166
00:29:06.490 --> 00:29:13.989
Arwen Thoman: And you can see here on the right, the example of Alexander, a single borrower with no dependents who makes $38,000 per year,
167
00:29:14.930 --> 00:29:23.189
Arwen Thoman: he would have had to pay $134 per month under the old REPAYE plan, but only have to pay $43 per month under SAVE.
168
00:29:24.490 --> 00:29:34.829
Arwen Thoman: And it's also important to note that beginning in July 2024, payments on undergraduate loans are going to be cut in half
169
00:29:34.900 --> 00:29:36.299
Arwen Thoman: under the SAVE plan.
170
00:29:39.470 --> 00:29:50.539
Arwen Thoman: So you can apply for SAVE online at studentaid.gov/idr. The online application is more efficient, and it allows you to see your payments before you apply,
171
00:29:50.590 --> 00:30:02.939
Arwen Thoman: but you can also apply for SAVE by downloading a PDF version of the Income Driven Repayment application available at studentaid.gov/forms-library.
172
00:30:03.370 --> 00:30:13.519
Arwen Thoman: Now, since the SAVE plan replaced the old REPAYE plan, if you were in REPAYE before the start of the pandemic in March of 2020, you should have been automatically placed in SAVE.
173
00:30:15.930 --> 00:30:43.750
Arwen Thoman: Alright. We're going to try to talk now about Income Driven Repayment plans for Parent PLUS loans. And before trying to get into this, we do want to just highlight up front that we have some very detailed, step by step, instructions for how to access this double consolidation loophole that we're about to talk about. If you think you could benefit from the loophole, we definitely encourage you to visit this link: mass.gov/parentplus to take a look at our more detailed instructions.
174
00:30:45.160 --> 00:30:54.910
Arwen Thoman: Okay, so, Parent PLUS loans that have never been consolidated, they're not eligible for any Income Driven Repayment plan, including the new SAVE plan.
175
00:30:55.570 --> 00:30:58.660
Arwen Thoman: But until July 1 of 2025
176
00:30:58.740 --> 00:31:06.920
Arwen Thoman: Parent PLUS borrowers, with at least 2 Federal loans, can use a double consolidation loophole to access SAVE.
177
00:31:07.270 --> 00:31:14.519
Arwen Thoman: Now for this loophole to work, you basically have to consolidate any Parent PLUS loan that you have twice.
178
00:31:15.220 --> 00:31:26.049
Arwen Thoman: Now, unfortunately, if you have a single Parent PLUS loan or a single direct consolidation loan that paid off one or more Parent PLUS loans, you're probably not going to be able to use the loophole.
179
00:31:26.160 --> 00:31:35.729
Arwen Thoman: In that circumstance you can instead apply for the Income Contingent Repayment plan once your Parent PLUS loan has been consolidated into a direct consolidation loan.
180
00:31:36.110 --> 00:31:47.559
Arwen Thoman: Although the Income Contingent Repayment plan is a qualifying payment for PSLF purposes, it typically offers higher payments than the SAVE plan, which is why we're promoting this loophole.
181
00:31:49.510 --> 00:32:02.839
Arwen Thoman: To illustrate how the double consolidation loophole works, if you had 2 Parent PLUS loans, and you consolidated each one of those Parent PLUS loans separately into 2 direct consolidation loans,
182
00:32:03.430 --> 00:32:22.270
Arwen Thoman: and then consolidated those 2 consolidation loans together, your final consolidation loan would be eligible for the SAVE plan. But remember, you only have until July 2025 to complete all the necessary consolidations in order for that final direct consolidation loan to be eligible for SAVE
183
00:32:22.360 --> 00:32:30.650
Arwen Thoman: and there may even be advantages to getting the consolidations done before April 30, so that you could fully maximize the payment count adjustment.
184
00:32:34.210 --> 00:32:51.030
Arwen Thoman: For everyone pursuing public service loan forgiveness, be they parent or student borrowers, we need you to be aware that the standard repayment plan for consolidation loans, the graduated repayment plan and the extended repayment plan, these plans do not qualify toward PSLF.
185
00:32:51.190 --> 00:32:53.749
Arwen Thoman: So, although the government is saying, you know
186
00:32:53.850 --> 00:33:15.250
Arwen Thoman: we get it, people didn't understand that they couldn't pay under these plans in the past, and we're willing to give you credit for payments you made through these plans in the past, that's all coming to an end on July 1. So if you're in one of these plans, you need to apply by July 1 to switch to an Income Driven Repayment plan to continue earning credit toward PSLF.
187
00:33:18.260 --> 00:33:29.540
Arwen Thoman: Now we do hear from people who come to us and say, oh, but I can't afford these Income Driven payments. This typically occurs with higher income borrowers, particularly borrowers who are married and filing joint tax returns,
188
00:33:29.650 --> 00:33:39.920
Arwen Thoman: and there are a couple of avenues to explore. If you find yourself in this situation, first, you could try asking your servicer to place you in a 10 Year Standard plan which is
189
00:33:40.410 --> 00:33:54.920
Arwen Thoman: technically a qualifying payment plan for PSLF. Traditionally, people would never pay under a 10 Year plan if they were pursuing PSLF, because inherent in paying in a 10 year plan is the fact that you'll pay off your loans within 10 years.
190
00:33:55.030 --> 00:34:01.680
Arwen Thoman: But depending on how much credit you get through the adjustment on top of any time your loans are paused as a result of the pandemic,
191
00:34:01.860 --> 00:34:05.780
Arwen Thoman: you know, you could actually end up receiving PSLF
192
00:34:06.010 --> 00:34:20.240
Arwen Thoman: forgiveness before paying off your loans, even if you're paying under a 10 year plan. So for example, if you have 7 years towards forgiveness, as a result of the adjustment, you could potentially pay for another 3 years under a 10 year plan, and still have something left to forgive.
193
00:34:21.190 --> 00:34:34.730
Arwen Thoman: Second, if you're married and you file your taxes jointly with your spouse, you could consider changing your tax filing status to married filing separately. If you do this, your IDR payment will be calculated using only your income.
194
00:34:34.860 --> 00:34:42.339
Arwen Thoman: And you'd have to discuss with a tax professional to find out what you'd be giving up on your taxes and weigh this against
195
00:34:42.380 --> 00:34:59.310
Arwen Thoman: how much you'd be saving on your student loan payments. Finally, there is a sort of a high-risk alternative if you can't afford to pay either an Income Driven plan or the 10 Year Plan, and it's called Temporary Expanded Public Service Loan Forgiveness, TEPSLF.
196
00:34:59.750 --> 00:35:09.329
Arwen Thoman: and it does offer more repayment plan flexibility, including allowing for payments made under extended, graduated and consolidation standard repayment plans.
197
00:35:09.540 --> 00:35:20.200
Arwen Thoman: The TEPSLF program was basically an early attempt by Congress to fix at least some of what was wrong with the PSLF program, but the problem with it is that it has limited funding.
198
00:35:20.510 --> 00:35:36.740
Arwen Thoman: So unless you're really close to forgiveness, it may be risky to rely on TEPSLF, and again, that's because it has this finite amount of funding, it's possible that TEPSLF won't exist by the time you reach 120 qualifying payments.
199
00:35:36.840 --> 00:35:51.589
Arwen Thoman: And were this to occur, the payments that you made after July 1 of this year under TEPSLF eligible repayment plans, they would not count for forgiveness under PSLF, and you could find yourself stranded with respect to loan forgiveness.
200
00:35:55.970 --> 00:36:12.810
Erica Harmon: So separate from the payment count adjustment, if your Federal loans were subject to the pandemic payment pause and 0% interest rate beginning in March 2020, you'll receive credit towards PSLF for each month for which you certified qualifying employment, even if you didn't make a payment.
201
00:36:14.560 --> 00:36:19.829
Erica Harmon: We also want to briefly go over what comes next. After you've taken the steps we've outlined today,
202
00:36:20.380 --> 00:36:40.869
Erica Harmon: you're not going to see the results of the payment count adjustment immediately. The adjustment is being run every 2 months through July of 2024, and if you don't receive PSLF through the adjustment, you should plan to regularly recertify your employment so that you can continue to see updates to your qualifying payment count.
203
00:36:41.420 --> 00:36:48.610
Erica Harmon: And remember, the government is only going to give you credit for your public service that it knows about, so we suggest certifying
204
00:36:48.730 --> 00:36:51.860
Erica Harmon: once a year and every time you switch employers.
205
00:36:53.520 --> 00:36:58.890
Erica Harmon: After your loans transfer to Mohela, we recommend registering an account on Mohela’s website.
206
00:36:59.090 --> 00:37:12.510
Erica Harmon: In this way you can keep track of your certified employment periods and be sure that each form is processed. You can also monitor your qualifying payments towards PSLF and identify any issues that could arise right away.
207
00:37:13.950 --> 00:37:21.530
Erica Harmon: Lastly, you may want to consider paying by auto debit, because you'll get that .25% interest rate reduction for using it.
208
00:37:24.050 --> 00:37:25.250
Erica Harmon: So to recap,
209
00:37:26.670 --> 00:37:38.289
Erica Harmon: in order to benefit from the payment count adjustment for PSLF. First, you need to log in to your studentaid.gov account to identify your Federal loan types, to see if you have any non-Direct Loans.
210
00:37:38.800 --> 00:37:46.729
Erica Harmon: Second, if you have any non-Direct Loans, you'll need to apply to consolidate those loans into the Direct Loan program by April 30.
211
00:37:47.460 --> 00:38:03.010
Erica Harmon: Third, even if you already have Direct Loans, you should evaluate whether consolidating by April 30 could help you get forgiveness faster. And again, this is only going to be a consideration for those of you with loans that have been in repayment for different lengths of time.
212
00:38:04.170 --> 00:38:17.750
Erica Harmon: Fourth, you'll need to ensure that your employment certifications are up to date by working with your employer to certify all the qualifying employment you've held since the October 1, 2007 start date of the PSLF program.
213
00:38:18.280 --> 00:38:26.860
Erica Harmon: And finally, to keep earning credit towards public service loan forgiveness, you'll need to apply for an Income Driven Repayment plan by July 1.
214
00:38:27.540 --> 00:38:35.420
Erica Harmon: These are the steps you're going to need to take, and we hope that you feel more confident about what you need to do. Thank you for joining us.