Denied Student Loan Forgiveness? Read This

Denied Student Loan Forgiveness? Read This

Finally, some good news for student loan borrowers.

Tucked away in Congress' 2018 spending plan is $350 million to help relieve the debt of certain student loan borrowers — specifically, those who thought they had missed out on student loan forgiveness because they had enrolled in the wrong repayment plan.

The move is a welcome bit of relief in what has otherwise been a rough year for the Public Student Loan Forgiveness program (PSLF). It originally started in 2007 as a way to encourage people to choose public service, government and nonprofit jobs. In exchange, they could have their loan balances forgiven after they'd made 120 qualifying payments.

That meant 2017 was the first year that public-service workers could apply for forgiveness — but when they did, many found out that they didn't qualify after all. In some cases, borrowers were told their employers didn't qualify; in others, it was because they were unknowingly enrolled in the wrong type of repayment plan. Only federal direct loans qualify for PSLF, and only if they are part of an income-driven repayment plan. Those with graduated or extended repayment plans don't qualify.

What to Know If You Apply

The $350 million gives those in the graduated or extended repayment plans a second chance to apply for forgiveness — an acknowledgement that the Department of Education hasn't done a good job of properly communicating the rules around PSLF.

But if you think you fall into this group, act fast - the $350 million fund is a one-time deal, and forgiveness will be doled out on a first come, first served basis. You'll also have to show that what you were paying under the incorrect payment plan is still as much as you would have paid under a correct income-driven repayment plan. To check this, the Department of Education will look at your most recent monthly payment, as well as the one you made a year before applying for PSLF.

Also, remember that there are other steps you need to take to apply for forgiveness, including filing a Public Service Loan Forgiveness Employment Certification Form to prove your employer qualifies (ideally, this would be done every year); and filling out the actual PSLF application after you've made 120 payments. Go here to learn more.

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