Public Service Loan Forgiveness Program

[hina234]

 

Not sure if this has been discussed before, but does anyone have any experience or know of people that are doing the public service loan forgiveness program?

I assume a lot of people on this forum are looking to enter government service after they graduate, so wanted to know if anyone was considering taking on the extra debt with the intention of applying for this program? I know that you have to make 120 monthly payments, which would commit you to 10 years in that career field, which is a long time. Let me know your thoughts!

[Neist]

50 minutes ago, hina234 said:

Not sure if this has been discussed before, but does anyone have any experience or know of people that are doing the public service loan forgiveness program?

I assume a lot of people on this forum are looking to enter government service after they graduate, so wanted to know if anyone was considering taking on the extra debt with the intention of applying for this program? I know that you have to make 120 monthly payments, which would commit you to 10 years in that career field, which is a long time. Let me know your thoughts!

I know that it's pretty common in the library world to resort to it. Library jobs don't tend to pay very much, so often qualifying payments aren't all that much.

Will I take more loans because of it? Well, no, but I'm certainly not sweating my loans, either.  

[RCtheSS]

Some of my colleagues are utilizing PSLF. I haven't heard them complain about the program structure in particular. Some of them have changed jobs since graduating (federal gov't to nonprofit, one nonprofit to another).

[Neist]

I should also note that there isn't a large number of people who've actually utilized the program yet. The program's 'qualifying payments' only began perhaps 10-12 years ago? Only a few people have experienced the process, but a number of the librarians I work with haven't had complaints of any kind.

Edited March 24, 2016 by Neist

[coffeeandtravel]

I'm also very interested in this program, but I'm hesitant to assume that it's the answer to my worries with loans, if that makes sense. I would love to hear from someone who has utilized the program or who knows of someone who has for nonprofit work (I'm not really interested right now in government work). I'd also be interested in the rate of people who don't complete the 10 years in such a position...do they have to pay back all of their loans, or is it prorated for the years of work in one of those fields that qualify? I also read that the future of the program is uncertain so I'm trying to learn more before deciding it would work for me

[hina234]

2 minutes ago, coffeeandtravel said:

I'm also very interested in this program, but I'm hesitant to assume that it's the answer to my worries with loans, if that makes sense. I would love to hear from someone who has utilized the program or who knows of someone who has for nonprofit work (I'm not really interested right now in government work). I'd also be interested in the rate of people who don't complete the 10 years in such a position...do they have to pay back all of their loans, or is it prorated for the years of work in one of those fields that qualify? I also read that the future of the program is uncertain so I'm trying to learn more before deciding it would work for me

this is the only thing I could find about the future of the program: http://www.usnews.com/education/blogs/student-loan-ranger/2015/08/19/public-service-loan-forgiveness-common-questions-answered

That was written in 2015, so I'm not sure if there is more up to date info out there.

[coffeeandtravel]

2 minutes ago, hina234 said:

this is the only thing I could find about the future of the program: http://www.usnews.com/education/blogs/student-loan-ranger/2015/08/19/public-service-loan-forgiveness-common-questions-answered

That was written in 2015, so I'm not sure if there is more up to date info out there.

Thanks for the info! My question is...if it is in fact cut from the budget, who is getting grandfathered into the system? Is it people who are IN school and planning on taking advantage or just those have already started with the program? I'm not sure why they make information on this topic so difficult to find  

[coffeeandtravel]

Just FYI for anyone, here is an official FAQ sheet for PSLF: https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pdf

It answered some of my questions, but not all haha

[MaxwellAlum]

2017 will be the first year anyone receives forgiveness through PSLF.  Some of us have begun tracking our PSLF qualifying payments by submitting an employment certification form showing we are working for a public service organization.  Doing so transfers your loans to FedLoan Servicing, the official PSLF servicer.  Additionally, FedLoan will send you a written confirmations of your qualifying payments every time you certify your qualifying employment (recommended annually).  In my experience, Fedloan is very slow in tracking payments you made previously with other servicers, and it does sometimes take a bit of wrangling to make sure they get it right.  But it is not horrible.

I am currently having my PSLF payments tracked by FedLoan.  I am also making payments through Pay As You Earn (similar to income-based repayment), which keeps my monthly payments low based on my income, and maximizes the amount of forgiveness I would get.  Doing so has been great, as it allows me to actually save money for retirement instead of throwing it all into my loans.  There is always a risk that Congress will eliminate PSLF and not grandfather people like me in.  In that case, I'll have to keep making payments, but at least I'll still have my retirement fund.  

For folks applying for grad school right now, I will caution that both Democrats and Republicans have proposed significantly limiting (up to $57k total) or eliminating PSLF altogether.  While they might grandfather folks like me in, if you are applying to grad school now you might find the program gone by the time you graduate.

Another item to consider is that a lot of employers that you might want to work for don't qualify for PSLF, such as government contractors and consulting firms as well as international organizations such as the UN and the World Bank.  You may think now you definitely want to work in government. However, it very well may be that the dream job you get offered is with a contractor, and in that case you are out of luck with PSLF.

Finally, I'd be very cautious about taking on six-figure debt.  I know people who do, and their $500 monthly payments don't even cover the interest that accrues on the loans every month.  As such, their balance is growing over time despite all of the money they are throwing at it.  If they don't get forgiveness through PSLF, they will need to wait to get forgiveness after 25 years through the income-based repayment/pay as you earn programs.  In that case (unlike PSLF), the amount forgiven is taxed as income.  Imagine having to file a tax return with $100,000 additional income - that's a big hit (though I suppose you can take out a loan to pay the taxes). 

Edited March 24, 2016 by MaxwellAlum

[aslabchu]

I wouldn't bet on it being around in the 12-ish years you'd need. Republicans are already taking shots at it.

[MaxwellAlum]

20 minutes ago, aslabchu said:

I wouldn't bet on it being around in the 12-ish years you'd need. Republicans are already taking shots at it.

Not just Republicans.  Policymakers on both sides of the aisle are right to consider changing a program that currently provides the largest benefits to higher earners.

[Neist]

2 minutes ago, MaxwellAlum said:

Not just Republicans.  Policymakers on both sides of the aisle are right to consider changing a program that currently provides the largest benefits to higher earners.

Higher earners?

My assumption is that the program is designed to alleviate the financial burden of public servants (which often get paid quite little). Is it being abused some how?

[MaxwellAlum]

1 hour ago, Neist said:

Higher earners?

My assumption is that the program is designed to alleviate the financial burden of public servants (which often get paid quite little). Is it being abused some how?

Anyone who works in a qualifying public service organization may be eligible.  This includes nonprofits, which include hospitals.  So doctors, for example, can make low payments during their residency and then get their loans forgiven while they are earning $200k+.

More generally, people with large amounts of student debt, who tend to be people who went to grad school, especially private grad school, will have the largest amounts of debt forgiven.  Many of these will alao have relatively high incomes (not all public servants have low salaries, certainly not compared with the general population).

[Neist]

Just now, MaxwellAlum said:

Anyone who works in a qualifying public service organization may be eligible.  This includes nonprofits, which include hospitals.  So doctors, for example, can make low payments during their residency and then get their loans forgiven while they are earning $200k+.

More generally, people with large amounts of student debt, who tend to be people who went to grad school, especially private grad school, will have the largest amounts of debt forgiven.  Many of these will alao have relatively high incomes (not all public servants have low salaries, certainly not compared with the general population).

Well, that's unfortunate.

Let's hope that they revise it (or make a different plan) in order to maintain support for lower income spectrum professions. I'd probably be okay in my career path, but I can't imagine that professions in high demand with low potential earnings, like social workers, will ever make enough to outweigh the cost of their education.

[MaxwellAlum]

I am all for ways to help folks in professions like social work, where there is a high need and pay is low.  I question whether PSLF specifically is really a good way to allocate funds.

Programs like IBR and PAYE already offer debt relief for everyone, you just have to make income-based payments for more years in order to qualify for forgiveness.  Is the PSLF definition of "public service" the best way to target a more generous program?  I'm not too sure.

[coasts]

I know a fairly large number of people who are counting on PSLF. I feel like the positives are obvious, so there's no need to detail them. 

However:

-Income-based repayment can still be a tough pill to swallow, especially over a decade. When you're making $50,000 a year and paying $450 that might not feel so terrible, but my coworkers have told me how frustrating it is where every raise they get ends up getting largely eaten up by the increase in their loan payment.

-You will probably feel it weigh on many aspects on your life, including even marriage. If you marry a partner who makes a substantial income, and you begin to file taxes together jointly, you may find that your combined income causes the IBR payment amount to be so large that there actually you would no longer quality for PSLF. You could file separately to get around the issue, I think, but then you'd lose marriage tax benefits, so you're getting hit financially either way. And anyway, bringing a large amount of debt into a marriage is just a difficult thing. 

-Having to work in public service as the program defines it can be restrictive. It automatically narrows the field of jobs. For example, while I work at a nonprofit, many of my organization's competitors are actually for-profit even though we're doing the same work. 

[Lynne]

I haven't heard much about the program outside of reading these posts, but I had been meaning to take a look at it. I had a professor (at another university) recommend the program to me after talking to him about my career path. Seeing as I want to be an emergency manager through city governments or work jobs of the sort through FEMA (IE all government jobs), he recommended that I look into the program. 

I am interested to take a deeper look into it now, and of course pray that the government doesn't vote to take away a program that seems so beneficial to public servants.