If you have a federal student loan balance and have not looked at the potential to have that debt erased in the last year, you could be missing out, big time.
Temporary rule changes made a whole lot of previously ineligible loan types now eligible for Public Service Loan Forgiveness (PSLF). It’s easier than ever to qualify, but you must take certain steps depending on the type of loans you’ve got.
This isn’t something to put off until later. You may need to consolidate various loans, which takes time, and at the end of October, the relaxed rules expire.
Taking the right steps today could save you tens of thousands or hundreds of thousands of dollars. I thank Dan Rooker with Student Loan Planner for the guest post below.
On October 6, 2021, the Biden administration announced a temporary change (expires October 31, 2022) to the existing Public Service Loan Forgiveness program that made it possible for an estimated 550,000 federal loan borrowers to fast-track their path to getting their loans discharged tax-free.
Here’s the problem: A large number of those same federal loan borrowers are physicians who won’t benefit from this waiver. Why?
Because they don’t know it applies to them.
Below are a few thoughts we’ve put together to raise awareness in these few remaining weeks before the PSLF waiver expires.
The Education Department typically publishes a monthly update on the number of federal borrowers who have been awarded PSLF. The update started to include the number of borrowers who have had their loans forgiven tax-free under the PSLF Waiver in the November 2021 report.
According to that monthly update, under the PSLF Waiver, 25,495 borrowers had applied for and had their loans forgiven tax-free as of 11/30/2021. The total amount discharged under the waiver in those first 8 weeks at the time was about $1.74B.
At the time, for PSLF in general, about 1,309,552 borrowers had submitted the PSLF form to get a payment count update on their progress towards PSLF.
Fast forward to the most recent report published June 30, 2022 and 146,728 borrowers for a total of $9.01B have had their loans discharged. The number of federal borrowers that had indicated they are pursuing PSLF through submitting their employment certification form has increased to 1,344,626 borrowers.
While a July report hasn’t been published yet, the Education Department has indicated that as of mid-July 2022, about 175,000 borrowers have been awarded PSLF through the PSLF Waiver.
Seeing an increase in the number of federal borrowers who have had their loans discharged tax-free may look encouraging, but these results represent a tiny fraction of the federal borrowers who could fast-track their repayment time-frame through the PSLF waiver and time is running out. The PSLF Waiver expires 10/31/2022.
Consolidate FFEL, Perkins, and HPSL loans Now
- As of the end of the 2nd Quarter in 2022, there were about $218B in Federal Family Education Loan Program loans (FFEL) between 9.6 million borrowers.
- According to the Bureau of Labor Statistics, there are about 12.3 million jobs in the nonprofit sector alone. Add in the number of jobs in federal, state, and local government, all of which are qualifying employers for the PSLF program, and you get to about 22% of the workforce.
- According to the American Hospital Association, of the 6,093 hospitals in the U.S., 4,118 are not-for-profit, state or local government, or Federal Government hospitals. So in student-loans-speak, there are 4,118 qualifying employers within the hospitals and hospital systems for the PSLF program.
- There are about 330 million people in the U.S., over 92 million people have student loans, and 160 million people in the U.S. workforce.
In short, a lot of federal borrowers (Physicians and workplace colleagues) are going to miss out on this opportunity to better their financial situation.
We have a large segment of the Healthcare sector that have federal loans, are unaware their employment qualifies them for PSLF or are unaware the PSLF waiver applies to their current non-qualifying loans.
The PSLF Waiver makes it so that loans that previously did not qualify for the PSLF program (FFEL loans, Perkins Loans, Health Professional Student Loans, to name a few) could qualify and have their payment history counted towards PSLF if the borrower took action by 10/31/2022 to pay those non-qualifying loans off with a Direct Consolidated loan.
The overview of the Normal PSLF requirements and the changes that are around until October 31, 2022 can be found on the PSLF Waiver page.
Three Time-Sensitive Action Items
In case that page is too long, here are three time-sensitive things that need to be submitted by October 31, 2022 for a physician who is working full-time for a qualified employer or has worked in the past for a qualified employer (including residency or fellowship):
- Any loans pursuing PSLF have to be DIRECT loans or made to become DIRECT loans through a consolidation application on studentaid.gov/
- DIRECT Loans need to be on an Income-Driven Repayment (IDR) plan for borrowers intending to continue pursuing PSLF post-waiver.
- A PSLF form signed by each qualifying employer from the past needs to be submitted by 10/31/2022.
If you are certain you do not qualify for PSLF, even under the relaxed rules, you may be able to save money by refinancing your remaining student loans. You can also earn a cash back bonus when doing so via our referral links below.
The Chase Sapphire Preferred is an excellent first (or only) rewards card. $50 annual hotel credit for bookings via the Chase UR tavel portal & 5x points for all travel via the portal. 3x points on dining, 2x on other travel. Flexible rewards good for cash, travel, or transfer to travel partners, great travel protection & new Peloton, Lyft & DoorDash perks! $95 Annual Fee
The Chase Sapphire Reserve offers great travel perks including Priority Pass lounge access, a credit for Global Entry or TSA Pre✓ and a $300 annual travel credit. When using Chase Ultimate Rewards travel portal, get 10x points on hotels and car rental & 5x points on air travel. 3x points on other travel & dining. Elevated Peloton, Lyft and DoorDash benefits. $550 Annual Fee