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Session #22

Session #22. Public Service Loan Forgiveness (PSLF) and Temporary Expanded PSLF (TEPSLF). Ian Foss U.S. Department of Education 2018 FSA Training Conference for Financial Aid Professionals. November 2018. PSLF Basics. 120 Qualifying Payments. …When Applying For & Receiving PSLF.

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Session #22

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  1. Session #22 Public Service Loan Forgiveness (PSLF) and Temporary Expanded PSLF (TEPSLF) Ian Foss U.S. Department of Education 2018 FSA Training Conference for Financial Aid Professionals November 2018

  2. PSLF Basics 120 Qualifying Payments …When Applying For & Receiving PSLF In Qualifying Repayment Plans Per IRS, forgiven amount is not taxable income On Direct Loans While Working For A Qualifying Employer…

  3. PSLF Eligible Loans Perkins Loans - NO Federal Direct Student Loan FFELP Loans - NO Direct Parent PLUS Loans – YES* Direct Consolidation Loan - YES PSLF is only for Direct Loans, but all Direct Loans qualify

  4. PSLF Qualifying Employment It doesn’t matter what your job title is, it matters who employs you… Other not-for-profit organizations providing specific qualifying services as primary purpose 501(c)(3) not-for-profit organization Any government organization

  5. PSLF Full-Time Employment • Full-time is the greater of: • Employer’s definition of full-time • 30 hours per week • May work multiple qualifying part-time jobs that equal full-time • For borrowers at a non-profit organization, hours spent in religious instruction, worship services, or proselytizing do not count

  6. PSLF Qualifying Repayment Plans 10-Year Standard IBR ICR Pay As You Earn REPAYE Others if payment ≥ 10 Year Standard Income-driven plans are most likely to yield a balance for forgiveness

  7. PSLF Qualifying Payments 120 separate monthly payments* Do not need to be consecutive Must be made within 15 days of due date After Oct. 1, 2007 Must be for full amount due under plan *Exception for AmeriCorps, Peace Corp, and Department of Defense

  8. PSLF Payment Amount • Multiple partial payments • Count as one payment • All must be received within 15 days of due date • Payments made when not required • Do not qualify • Lump sum payments • Count as one payment • Exceptions for AmeriCorps, Peace Corp, and Department of Defense borrowers

  9. Modeling PSLF - Billy Borrower • Is single with no dependents and lives in Georgia • Has an AGI of $35,000 that rises at 5% per year • Has $50,000 in Direct Loan debt ($23,000 of which is subsidized), all of which has a 6% interest rate • Borrowed for graduate school

  10. Modeling PSLF Without PSLF REPAYE ICR IBR PAYE Time in Repayment Total Paid $49,021 $7,834 $0 Total Forgiven $0 With PSLF REPAYE ICR IBR PAYE Time in Repayment Total Paid Total Forgiven $71,357 $26,789 $54,922 $67,523

  11. PSLF Employment Certification Borrower submits another Employment Certification Form Borrower submits form to FedLoan Servicing FedLoan determines qualifying payments were made during employed period FedLoan determines qualifying payments were made during employed period FedLoan Servicing determines borrower has Direct Loans FedLoan Servicing determines employment qualifies All federally-held loans transfer to FedLoan Servicing Borrowers who want confirmation that employment and payments qualify should submit the Employment Certification Form (ECF) to FedLoan Servicing

  12. PSLF Application Borrower submits form to FedLoan Servicing FedLoan determines qualifying payments were made during employed period FedLoan Servicing determines borrower has Direct Loans FedLoan Servicing determines employment qualifies All federally-held loans transfer to FedLoan Servicing FSA reviews applications FedLoan wants to approve FedLoan writes off debt Application process is very similar to employment certification process because borrower must be employed in full-time qualifying employer when applying for and receiving forgiveness.

  13. Common Issues • Inaccurate or Missing End Date on ECF Form • Blank end date when the borrower is still employed vs. checking “still employed” • Missing required fields (such as EIN number) • Payment Tracking • Must submit an ECF for an updated qualifying payment count • Payments made to other servicers (not just FedLoan) can be counted toward PSLF

  14. Debunking Common Program Misconceptions Eligible Loan Types All Federal loans can be eligible through Direct Loan Consolidation. Employer Eligibility Qualifying employment for the PSLF Program is not about the specific job a borrower does, but rather, who the employer is. Qualifying Payment Plans Qualifying repayment plans include all income-driven repayment plans and the 10-year Standard Repayment Plan. Consolidation and PSLF Consolidating Direct Loans will erase any qualifying payments made. Appropriate Time to Begin Tracking for PSLF Borrowers shouldn’t wait to submit an ECF until after they have made 10 years of qualifying payments.

  15. Data

  16. PSLF Portfolio Source: FedLoan Servicing as of August 2018

  17. PSLF Portfolio 960,467 as of 8/2018 Source: FedLoan Servicing as of August 2018

  18. PSLF Qualifying Employment Source: FedLoan Servicing as of September 2017

  19. Processed ECFs 1,802,756 (67%) Approved 2,695,188 Processed 892,432 (33%) Denied Source: FedLoan Servicing as of August 2018

  20. PSLF Processed ECFs Missing/Incorrect Information: 47% No Eligible Loans: 32% Employer Not Qualified: 21% Source: FedLoan Servicing

  21. PSLF Qualifying Payments Source: FedLoan Servicing as of August 2018

  22. Other Interesting Facts • Of borrowers who submitted at least one approved ECF: • Nearly 68% have submitted only one form; • 19.4% have submitted two forms; • 7.6% have submitted three forms; and • 5.0% have submitted four or more forms • For borrowers who have submitted only one ECF: • The average period of employment covered by the form is 4 years, 9 months • The entire period of time will not necessarily provide credit towards PSLF • The average period of time since the borrower submitted the form is more than 17 months Source: NSLDS as of January 2017. Includes only borrowers with one approved ECF on file.

  23. Other Interesting Facts • Of borrowers who submitted at least one approved ECF, 71% of them have consolidated their loans • 15.3% of them only consolidated Direct Loans • 25.5% of them only consolidated FFEL Program Loans • 30.4% of them consolidated Direct and FFEL Program Loans • Less than 0.1% of them consolidated Direct Loans, FFEL Program Loans, and Perkins Loans • 76.4% of them have at least one approved employment certification form which documents a period of employment that predates the making of the Direct Consolidation Loan Source: NSLDS as of January 2017. Includes only borrowers with one approved ECF on file.

  24. Other Interesting Facts • Nearly 12% are actively repaying their Direct Loans under a non-qualifying repayment plans • 2% are not only repaying their Direct Loans in a non-qualifying repayment plan but are also in a deferment or forbearance • 8.5%, while on an income-driven repayment plan are nevertheless in a deferment or forbearance on a majority of their Direct Loans • An additional 1% who are repaying their Direct Loans on the 10-Year Standard Repayment Plan are in a deferment or forbearance • 6.3% of borrowers who have submitted at least one approved employment certification forms have no loans that have entered repayment Source: NSLDS as of January 2017. Includes only borrowers with one approved ECF on file.

  25. PSLF Forgiveness So Far • So far, 28,021 borrowers have applied for PSLF • 96 borrowers have been approved to receive $5.52 million in loan forgiveness • Remainder have been denied or are pending • Largest denial reason is for not meeting program requirements (like having a Direct Loan or making 120 qualifying payments) • A significant minority were denied PSLF because their applications were incomplete (for example, the Employer Identification Number was missing) • Attempts to get this information were unsuccessful • Borrower can resubmit, but borrower still may not meet program requirements • Source: FSA Data Center, as of June 2018

  26. Temporary, Expanded PSLF

  27. TEPSLF Basics • A temporary program to provide loan forgiveness to those who do not qualify for PSLF only because some or all of their qualifying payments were made on non-qualifying plans • Congress appropriated $700 million (subsidy cost) to provide loan forgiveness • We cannot forgive more than $1 billion • Program to be administered on a first come, first served basis • TEPSLF was created by the: • Consolidation Appropriations Act, 2018 (Public Law 115-141) and • Department of Education Appropriations Act, 2019 (Public Law 115-245) • Law required us to implement an application process within 60 days of enactment

  28. TEPSLF Requirements • A borrower is eligible if he/she: • Doesn’t qualify for PSLF only because some or all payments were made on a non-qualifying plan, • Funds are available to expend, • Aggregate forgiveness caps have not been hit, and • The following payments were at least as much as the borrower would have paid under an income-driven plan*: • The payment made immediately prior to applying for TEPSLF, and • The payment made 12 months prior to applying for TEPSLF • * An exception is made if the borrower had an unusual fluctuation in income over the prior 5 years

  29. TEPSLF Application Process • To receive TEPSLF, a borrower must: • Have applied for and been denied PSLF or have a PSLF application pending review, • Email FedLoan Servicing (TEPSLF@myfedloan.org) a request for TEPSLF (this holds the borrower’s spot in line), • Be denied PSLF only because of non-qualifying repayment plans, and • Provide any necessary income documentation to determine what the borrower’s payment would have been under an income-driven plan.

  30. TEPSLF So Far… • We have received 33,947 TEPSLF email requests • 7,138 request are being or were reviewed for eligibility: • 26 have been approved ($1.4 million) • 3,824 have been denied: • Nearly two-thirds were denied because the borrower hasn’t been in repayment for 10 years, • Another fifth were denied because they didn’t have any Direct Loans • 3,288 are still being reviewed • 22,872 requests were rejected for not having applied for PSLF or had a PSLF application pending • Source: FedLoan Servicing, October 16, 2018

  31. Resources 31

  32. PSLF Help Tool • In December 2018, FSA plans to launch a PSLF Help Tool • The help tool will: • Help borrowers understand PSLF • Specifically tell them if there are actions they need to or should consider taking to receive PSLF: consolidation and income-driven repayment • Solicit information from the borrower about his or her employer to help self-assess eligibility • Ask the borrower to enter information about his or her employer to pre-populate a PSLF form • Allow the borrower to provide information about multiple employers • Help the borrower decide which PSLF form to submit • The PSLF tool will not, at this time, help a borrower or employer sign or submit the form

  33. PSLF Help Tool Preview: First Step

  34. PSLF Help Tool Preview: Loan Eligibility

  35. PSLF Help Tool Preview: Adding Another Employer

  36. PSLF Help Tool Preview: Form Selection

  37. Resources StudentAid.gov/publicservice – PSLF Info & Forms StudentAid.gov/TEPSLF – TEPSLF Info TEPSLF@myfedloan.org – TEPSLF email address StudentLoans.gov/repay – Find a student loan solution in 5 steps or less https://go.usa.gov/xnCQx– Blog on PSLF

  38. Questions? Ian.Foss@ed.gov

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