Learn about Public Service Loan Forgiveness

Please note that this transcript was auto-generated. We apologize for any minor errors in spelling or grammar.

Julie Shields-Rutyna: [00:00:00] Okay, good afternoon. My name is Julie Shields Rutina, and I'm the Director of College Planning, Education, and Training at MIFA, and I'd like to welcome you to this afternoon's webinar on public service loan forgiveness. I am joined by my colleagues Sean Morrissey and Stephanie Wells. College Relations Directors, and they'll also be assisting behind the scenes and with questions.

I'm going to let our presenter talk with you about the questions, but just know if you have some, you can put them in the Q& A and we will, we will Get to get to those a few other details are that I have. I'm recording this session. And so we will be sending you the recording and the slides tomorrow as well.

If you need to leave early, or you'd like to share them with anyone. [00:01:00] And I'm very, very pleased to be able to present this topic to you. Lots of questions about public service loan forgiveness. And I'm very pleased that we have our, I'll call her non resident expert, uh, Betsy Mayotte to talk. She is, you know, really the expert on this topic.

And I'm going to just tell you a little bit about her before I turn it over to her. So Betsy is the president and founder of the Institute of Student Loan Advisors. She's been working in the student loan industry. doing compliance and advocacy work for over 20 years and has helped thousands of borrowers with their student loans.

She has served as the primary negotiator for several federal title four negotiated rulemaking topic sessions on topics such as the use of student loans at foreign schools, loan rehabilitation, and borrower defense to repayment. [00:02:00] In addition, Betsy frequently conducts regulatory trainings for the higher education financing industry, both in the United States and as far away as the United Kingdom, Canada, Australia, and New Zealand.

She is regularly quoted in the media on student loan issues, including the Washington Post, New York Times, Wall Street Journal, and the Boston Globe. She was recently featured in Money Magazine. As one of the top influential change makers in America's finances, and she was born and raised in Lowell, Massachusetts and currently lives in Plymouth, Massachusetts.

So welcome, Betsy. Thank you for being here with us. And I will turn it over to you.

Betsy Mayotte: Thanks, Julie, and thanks for having me. I love talking about this stuff. Um, so just a couple ground rules. Um, I am sure that people are going to have questions. This stuff can be really confusing. Um, and [00:03:00] I'm, it's my pleasure to answer those questions for you just to keep things.

even and as least chaotic and confusing as possible. I'm going to ask that you hold off on your questions until I cover the topic that your question pertains to. I'm doing my job, right? I'm going to answer that question as part of, of my comments. Um, but if I, if you need more clarity or if I didn't cover it, absolutely throw it up in the Q and a panel.

Um, my fine feathered friends here from MIFA. Are going to be answering some of those questions live in the Q and A, but if it's something that they want me to handle I'm going to take a breath every now and then and ask if there's anything in that Q and A that needs to be addressed but again I do ask that You hold off on your questions until I cover the topic in case I answer it as part of the thing The other thing I want to mention about this As Julie mentioned, this is being recorded and it's going to be sent to everybody and their brother.

So if you have [00:04:00] a really personal question that you need to share some really personal details about your finances to ask the question, this might not be the place to do it because you don't need everybody knowing your business. Um, As Julie mentioned, our organization was created to provide free student loan advice to all consumers.

So if you do still have a question that you might not want to throw out there publicly, I do encourage you to go to our website, which is freestudentloanadvice. org and go to the contact page. And we're happy to answer your questions for free. So with that, I'm going to turn the camera off because my face is going to contribute nothing to this presentation, and I'm going to dive right in.

Okay, so here's the flow of this afternoon. Um, I'm going to define the existing PSLF rules and I'm going to break it up into edible parts. Uh, what's an eligible loan? What's an eligible employer? What's an eligible payment? And then I'm going to talk about, um, [00:05:00] another related program that some people might be able to take advantage of.

Along the way, I'm going to talk about some new rules that have been put into place as well as a temporary waiver that might allow you to gain some extra PSLF payments that might not normally have qualified. And finally, I'm also going to talk about, um, The upcoming pause and PSLF processing. Don't freak out.

It's all for good. Uh, but there is going to be a pause in PSLF processing. And then finally, I'm going to provide you with some resources. All right, listen, I am going to talk about a whole bunch of myths that exist around PSLF along the way. And one of those excuse me. And one of those myths is that it's hard to do.

Um, it really isn't. If you take a step back and look at the PSLF requirements, sort of from not even the 10, 000 foot level, let's call it the 5, 000 foot level. It's actually fairly straightforward. And to that end, [00:06:00] if you're only going to remember one slide, From this whole presentation, this is the slide to remember, because if you remember this slide, you're going to be able to answer for yourself 90 percent of any question you're ever going to have about PSLF.

And here's what it is. In order to get the balance of your federal student loans forgiven, you are required to do three things. You have to make 120 eligible payments. on an eligible loan while working for an eligible employer. And we're going to define all those eligibles in a minute. But the key here is that all three of these things have to happen at exactly the same time in order for that month to count for PSLF.

So for example, you could be making an eligible payment on an eligible loan, but if you're not working for an eligible employer at the time, that month is never going to count for you. Um, you could be working eligible employment and making payments on an eligible loan, but if it's not, [00:07:00] um, under an eligible payment plan, that month is not going to count for you except you'll see under this temporary waiver that's in place.

But in general and going forward. You have to meet all three of these prongs at exactly the same time for that month to count. Um, and that's basically the nuts and bolts of PSLF. So again, if you only remember one slide This is the slide to remember. So let's start defining all of our eligibles. Uh, the first eligible I want to define is what's an eligible loan.

And as you're going to see when we're talking about student loans, oftentimes there's a long answer and there's a short answer. So the short answer is that an eligible loan for the purposes of PSLF is any loan under the federal direct loan program. So, that can be a subsidized or unsubsidized Stafford loan, it can be a graduate plus loan, it can be a parent plus loan, it can be a direct consolidation loan.

It does not matter at all when the loan was made. They made the very first Federal Direct Loan [00:08:00] back in 1994. If you are the proud possessor of a vintage 1994 Federal Direct Loan, it is just as potentially eligible for PSLF as a bright, shiny new 2024, uh, Federal Direct Loan. Where the answer gets longer and a little more complicated is if you have loan, if you have older loans, specifically loans that were taken out prior to July 1st, 2010.

Because prior to that date, there were two primary federal loan programs. There was the Federal Direct Loan Program, and there was the Federal Family Education Loan Program or FFEL program. And both of those programs were exactly the same, except where they were different. They both have Stafford loans.

They both have graduate and parent plus loans, and they both have consolidation loans. The difference is, is that fell loans in and of themselves are not eligible for PSLF. As you'll see in a second, they can be made eligible, but as they stand, and if, if you think about our 1st slide, you have to make an eligible payment on an [00:09:00] eligible loan.

While working eligible employment, a FFEL loan is not an eligible loan. So if you have Stafford or PLUS or consolidation loans and they were taken out on or after July 1st, 2010, you have a direct loan. Don't worry about it. But if it was taken out prior to July 1st of 2010, you need to figure out which it is.

Is it a FFEL or is it a direct? The easiest thing to do is log on to your loan servicer's website or give them a call and ask, is it a FFEL loan or is it a direct loan? You can also log into the Department of Education's website, which is studentaid. gov, and it will also say whether it's a FFEL or a direct loan.

But again, if you have a Stafford or a PLUS or a consolidation, and it was made on or after July 1st, 2010, it 1000 percent is a direct loan and you don't need to worry about it. Now as I alluded to, FFEL loans, while not eligible for PSLF in and of themselves, can be made eligible for PSLF by consolidating them [00:10:00] into the direct loan program.

And you would do that at studentaid. gov. Um, other types of federal loans that aren't eligible for PSLF can also be made eligible for PSLF by consolidating. That includes Perkins loans, which is probably the second most common. Uh, after the direct and fell, uh, federal nursing loans. Uh, there's some older loans that we call HEAL loans that were specifically for medical students, uh, loans for disadvantaged students, nurse faculty loans, and health profession student loans.

All of those are not eligible themselves, but again, can be made eligible by consolidating them into the direct loan program. Now, in the past. Um, any payment made on any of these loan programs would not count towards PSLF, but because of something called the one time account adjustment, payments made on fell loans, if all the other eligibility is there, may be able to count for PSLF, past ones, um, once you [00:11:00] consolidate into the direct loan program, but in order to, um, get that benefit, you have to consolidate by April 30th of this year.

And so any payments made on a fell loan. Loan after, um, after that deadline will still not count for PSLF. And we're going to talk more about the one time account adjustment in a few minutes. All right. So look at that. We've already defined our first eligible, which is what is an eligible loan for PSLF.

And that of course is any direct loan regardless of when that loan was made. So now let's define our second eligible, which is what is an eligible employer. So I mentioned earlier that there's a lot of myths around PSLF and this is probably the biggest one, um, which is it matters what you do for a living for PSLF.

I am here to tell you it does not matter at all. what you do for a living for PSLF purposes. What matters is who you work for. The example I like [00:12:00] to give is the Boston Public School System. If you were to poll all the employees at the Boston Public School System that had student loans and ask them if they thought they might be potentially eligible for PSLF, I can pretty much guarantee you that all the teachers would probably say, Yeah, I think I'm potentially eligible for PSLF.

But I can also pretty much guarantee you that most of the other employees would say that they don't qualify and they'd be wrong. What matters is that you're working for the Boston Public School System because they're an eligible employer. But after that, it doesn't matter what you do, whether you're a teacher or a custodian or the lunch lady or an administrative assistant or the principal or the gym teacher or the groundskeeper, um, or the plumber.

Um, if you're a direct employee of the Boston Public School System, which means that you're a direct employee of the city of Boston, then you are potentially eligible for PSLF. Now, it used to [00:13:00] be, until a couple years ago, that you had to be defined as a full time employee by the employer for that employment to count for PSLF.

They have changed that. Now you have to be working at least 30 hours a week for that employer, and it doesn't matter whether that, whether that employer considers 30 hours a week to be full time or not. You could also work 30 hours a week minimum for multiple eligible employers. It doesn't have to be 30 hours for a single employer, so you could be working 15 hours a week for the City of Boston and 15 hours a week for, say, the Red Cross.

Um, as long as you were working at least 30 hours a week total for eligible employers, that, that would count for PSLF purposes. Now, I'm going to talk more about what an eligible employer is in the next couple slides, but the best way to verify that your employer is eligible is to submit proof of your eligible employment through the form called the Employment Certification Form, or ECF.[00:14:00]

Um, now listen, technically, under the law, you are not required to submit proof of your employment until 120 and it's time to apply for forgiveness. I'm here to tell you that is a terrible, terrible strategy. Anybody that you've ever talked to or read about who said, Oh, I thought I was qualifying for PSLF.

And then at the last minute, they pulled it out from under me. That's someone who most likely did not submit their proof of eligible employee to the employment to the end, submitting your proof of eligible employment. We recommend on an annual basis does a couple of things. Number one, it ensures, it verifies for you your employer's eligible.

Number two, it helps you keep track of how close you are to the 120 eligible payments needed for PSLF. And number three, it's going to let you know early days if you're not meeting one of the criteria. Because if you're not meeting one of the criteria, say you have the wrong type of loan or you're not on the right type of repayment plan, they're not going to count [00:15:00] the month and they're going to tell you why.

So again, while you're not required to submit. this proof, these, these forms until the end, we strongly recommend that you get in the habit of doing it on an annual basis. The easiest way to do it is through what's called the PSLF help tool, which you can find at studentaid. gov. It's all electronic, you fill in your information, you include the email address of whomever at your organization signs off on these forms, which is likely your HR department, and the Department of Education automatically emails it to them and allows them to sign it electronically.

So, done and dusted, super fast, no snail mail, None of that nonsense. Um, and the help tool itself will probably let you know right up front whether your employer is eligible or not. So, let's talk about what an eligible employer is. An eligible employer is any government employer. That includes federal, [00:16:00] state, local, even tribal.

Now to be clear, You need to be a direct employee of that employer, regardless of what kind it is. Contractors do not count. Unless, um, the contractor itself is an eligible employer, which is very rare. Most contractors are for profit organizations or individuals. So, uh, you know, the entity that has the capa that pays you, the entity that has you on their payroll, the entity that has the power to fi hire and fire you, you have to be a direct employee.

So you could walk into a federal building, sit at a federal desk, and answer a federal phone. But if you're not a direct employee of the federal government, then that employment is not going to count for PSLF. The other thing that counts under government employment is full time service in the military, the Peace Corps, or AmeriCorps.

The other type of employer that counts for PSLF are non profits. [00:17:00] Now, if you work for a 501c3 non profit, um, then you work for an eligible employer, full stop, no other boxes to check or hoops to jump through. Where it gets a little squirrely is if you work for a non profit that's not a 501c3. Some of those count, most don't.

Uh, the ones that do are the ones whose primary reason for existence is one of the bullet points that you see in front of you. And that, this is a finite list. That list includes public interest law, public library services, public health, um, school library services, and so on. But again, it has to be their primary reason for being.

So let me give you an example. Um, let's say that you work for an animal shelter and they're not a 501c3. The primary purpose of that animal shelters. reason for being is to rescue and shelter, [00:18:00] uh, animals that need, that need homes. Maybe that animal shelter does some webinars or in person education about how to train your dog or how to do basic first aid on your pet.

Um, it's, it's free education that's provided to the public. So some people might argue that they're providing public education, And therefore they're an eligible employer. They're not. And the reason they're not is because those public education programs are sort of a, for want of a better term, a side hustle.

It's not their primary reason for being. It's not why they were granted, uh, nonprofit status. Now, again, if they were a 501c3, that doesn't matter. 501c3s count no matter what, but if they're not a 501c3, but they are a nonprofit, They do have to, again, their primary reason for being has to be one of those bullet points that you see in front of you.

If you work for [00:19:00] a labor union, a partisan political organization, um, a not, a non profit that's not a 501c3 and whose primary reason for being is not one of the bullet points on the prior slide, you do not work for, uh, a PSLF eligible employment and you can't appeal it. I mean, you can, but you're going to lose.

Now, for profit organizations, 99. 9999 percent of them are also never ever going to count. but there is a new rule that provides a small exception. The exception is as follows. If the state that you're in by state law specifically prohibits the 501c3 non profits from hiring certain people. Um, and so therefore you've been hired by a for profit, but doing all your work for the non profit arm that it could qualify.

So they specifically put [00:20:00] this in place because apparently in Texas and California non profits are not allowed to directly hire physicians. So what the hospitals do is they create a for profit arm of the hospital and the for profit arm is the one that hires the physicians but the physicians do all their work for the non profit portion of the hospital.

I have no idea why that state law exists. Someday I'm gonna, when I have time on my hands, I'm gonna look into it because it's curious to me. But because of that, and in that very limited exception, um, that will count for PSLF employment. Now, I've already had a lot of questions from borrowers that say, you know, I work for, um, I work for a for profit.

We contract out to non profits whose, the non profit themselves policy is to not directly hire. That doesn't count. It has to be state law. My understanding is there may be another couple other examples of this, but this whole physician thing, um, [00:21:00] is, is why this rule was put into place. I also know that here in Massachusetts, there are some hospitals that have the policy that they hire.

certain employees through the for profit arm of the hospital. That would not count here in Massachusetts because at least to my awareness, it is not state law here in the Commonwealth. Um, so it would not count here like it does in Texas and California.

A couple of things to remember about eligible employment. Um, again, if you go back to our first slide, uh, where you have to re, you have to do all three of those things at the same time, make an eligible payment on an eligible loan, While working eligible employment. So not only do you have to be working eligible employment at the time you make every single one of those 120 eligible payments You also have to be working eligible employment at the time you actually apply for forgiveness Now, it used to be the rule that you also had to be working in eligible employment at the time that [00:22:00] they reviewed your account for forgiveness and actually approved it.

And that can take, you know, two, three, sometimes four months to actually do that. So they got rid of that rule. So if you're confident that you're at the 120, once you apply for forgiveness, you can rage quit and apply. public way if you choose to. Um, I usually recommend that just to be on the safe side that people hang out in their PSLF eligible employment until they get the forgiveness letter but you're only required to stay until you actually submit proof of eligible, um, until you actually apply for forgiveness.

Now, you don't have to work for the same employer for all 120 payments. You don't have to even be working consecutive employment. You could work for PSLF eligible employment for four years, and then maybe you go to the for profit sector for a couple years, or maybe you, uh, drop below 30 hours a week or decide to be a stay at home parent or backpack across Switzerland for a certain [00:23:00] period of time.

All of that is fine. Your prior account is going to be waiting for you if and when you ever go back to PSLF eligible employment. Okay, so we've defined what an eligible loan is. It's any direct loan. We've defined what eligible employment is. It's working at least 30 hours a week for any government employer, any 501c3 non profit, or in some cases other non profits.

Who's primary reason for being is something from that list on the prior slide. Before I get into what an eligible payment is, Julie, are there any questions you've received that you think might be a good time to address?

Julie Shields-Rutyna: Someone just asked if I have eight payments before reaching 120 payments, can I pay all eight payments at one time?

Betsy Mayotte: So I'm actually going to talk about that in the next section when we talk about eligible payments.

Julie Shields-Rutyna: Okay.

Betsy Mayotte: But let me, [00:24:00] let me say this. You can never get PSLF forgiveness in less than 10 years. It is going to take you a minimum of 10 years to get PSLF forgiveness.

Julie Shields-Rutyna: That's good. Okay. And then someone just said they were having trouble finding the ECF form on studentaid.

gov.

Betsy Mayotte: That's because they try really hard to point you to the PSLF help tool. They want as many people as possible to use that tool, because frankly, it's easier. Um, but if you do want the form, I believe we have a link to the paper form on our website on the PSLF page. Um, and honestly, if I need it, and I'm not in front of my own website, I just Google, um, PSLF.

ECF form paper, and it comes up.

Julie Shields-Rutyna: Thank you.[00:25:00]

Betsy Mayotte: Okay, let's talk about what an eligible payment is. They've changed the Biden administration has changed a lot of the rules that were on the more bureaucratic side. So a lot more payments are going to count now than used to count. So one of the rules they changed is it used to be. In order to count, the payment had to be made on time, and being on time was defined as within 15 days of the due date.

Payment no longer has to be on time to count for a PSLF. Now the next, uh, sub bullet sort of addresses the question we got asked a minute ago. Do lump sum payments count? They do in a very limited way. Let me give you an example. Let's say your payment was a hundred dollars a month. And in January you made a 1, 200 payment.

They will count that the lesser of the next 12 months, or until it's time for you to recertify your income driven plan. The vast majority of people pursuing public service loan forgiveness, as you'll see in a second, are going to be on an income driven plan. [00:26:00] And those require you to recertify your income once a year.

So any lump sum payment is going to count to no more than 12 payments. Um, so you'll get credit for either 12 or up until when it's time to recertify your, uh, income driven plan, whichever is sooner. So using the same example, my payment's a hundred dollars a month. In January, I send in 1, 200, but I'm due to recertify my IDR plan in June.

In that case, I'll only get credit through June. Now, let's put a period on that, but make sure we read the next sentence, because the next sentence is, you're only going to get those credits once you prove you worked eligible employment for those months. And you can't prove you worked eligible employment that hasn't happened yet.

So if you make a lump sum payment in January, you're still not going to get actual PSLF credit. until the following June or the following December when you submit [00:27:00] proof that you worked eligible employment for those months. Proving employment is always retroactive because even though you intend to stay at your company, things happen.

Maybe you won the lot, maybe you win the lottery. And decide to leave. Of course, you're student loans. You might not care about PSLF at that point. Or maybe you get an offer you just can't refuse in the private sector, um, and decide to leave. So, uh, employment's always certified retroactively. So again, you can make a lump sum, but You're really allowing the government to earn interest on your money by doing that.

The only people that the lump sum payments really benefit are those where other people are making the payments for them. Maybe you have an employer benefit where, you know, quarterly they give you, um, a bucket full of money to send toward your student loans. Or maybe you're getting, um, student loan repayment benefits from the Department of Defense.

Those also usually come in a lump sum amount. Other than that, there's really no [00:28:00] benefit to sending a lump sum payment because, again, the government's earning interest off of your money that's not due yet, and you're not going to get PSLF any faster. Um, moving on from lump sum payments. Only payments made on or after October 1st of 07 will ever count, and that's because PSLF didn't exist until then.

Uh, payments made while in default will never count. Um, payments made while you're not working PSLF eligible employment will never count. Um, again, it has to be made on a federal direct loan, and it doesn't matter who makes the payment. Um, I bring that up because, um, we do get asked that question a lot. Uh, from people that are getting an employer benefit.

Or, more frequently, from borrowers with Parent PLUS Loans, Parent PLUS Loans are eligible for PSLF. Oftentimes, there's a family agreement, sort of a handshake agreement, that even though the parent borrower is the only person who's legally liable [00:29:00] for the loan, it's the student that benefited from the loan who's making the payments.

That's fine. They don't care who's sending the money. Um, but, it has to be the parent borrower. Who's working the eligible employment in order for those months to count. So again, they don't care who's making the payment. They care very much who's working the eligible employment. And it has to be the parent.

It has to be the actual borrower who's working the employment. And just to preempt a question that I almost always get asked in this section. No, you can never. Change who the borrower is on a federal student loan. Uh, I mean, you can, you can do it by refinancing into the private sector, but then PSLF is off the table altogether.

So again, it has to be the actual borrower of the loan who's working the PSLF eligible employment.

Just a reminder, uh, the COVID period, which is when, um, most people were not due for payment and were enjoying a 0 percent interest rate, It ran [00:30:00] from March 13th of 2020 to September 30th of 2023. That does count for PSLF. Um, hopefully you were not making payments because you didn't have to and it still counts.

As long as you were working eligible employment at the time and the loan wasn't in default or you weren't in school. Um, You don't have to do anything special. They're just going to count it once you submit proof of eligible employment. There's also a lot of people right now who are being put in administrative forbearance due to some, uh, I will mildly call them bumps in the road that is happening at the servicers due to the resumption of repayment of 40 million people all at the same time.

Um, I can tell you that those administrative forbearances, uh, most frequently called processing forbearances are also going to count for PSLF. We think they're going to start showing up as counting in the next month or so. Uh, but the Department of Education has said in writing that they will [00:31:00] count. Uh, what doesn't count is periods of if you call your servicer and say, I can't make payments right now, I need a forbearance.

Uh, those are called. Discretionary or voluntary forbearances, those do not count for PSLF. But these administrative forbearances that you sort of have no control over, um, assuming you're working in eligible employment at the time, they do count. Again, it always falls, it, uh, there's always the if you're working at least 30 hours a week for an eligible employer at the time.

Now, borrowers that did pay during COVID, They actually were allowed to ask for a refund, but that window has closed. So if you did pay during COVID, unfortunately, you can no longer ask for a refund for those payments. All right, so under the traditional PSLF rules, only payments made under a certain repayment plan count.

Um, and those plans include the 10 year standard plan, which we're [00:32:00] going to put a little asterisk on that, um, to talk about a little bit more. Any of the income driven plans count. That includes income based repayment called IBR. There's actually two versions of IBR. We call them because we're not very creative in this industry, old IBR and new IBR.

All right. Um, and even though they have the same name, the plans have very, very different terms, but what they do have in common is that they're based on your income and that they count for PSLF. Assuming all other eligibility is there other plans include the pay as you earn plan what used to be called revised page.

You were in a repay. It is now called the safe plan and income contingent repayment. I'm going to put a little asterisk next to ICR to. Um, to talk more about it in a minute, but let's go back to the 10 year standard plan. So yes, the 10 year standard plan, which is the plan you're going to get put on if you don't actively choose another one and you don't consolidate, they're going to put you on the 10 year standard.

Yes, [00:33:00] that counts, but if you make 120 payments under a 10 year standard plan, you will have paid your loan off. So while that plan counts, if you're on it, you probably are going to want to transfer into an IDR plan to benefit, to potentially benefit from PSLF. Now, if you consolidate your loans and don't actively choose a different plan, they are also going to put you on something called the quote unquote standard or level plan.

That does not count for PSLF. And the reason is, is because Um, under consolidation, you're not on a 10 year term. Your term is between 12 and 30 years. And only the 10 year standard or level plan counts for PSLF. Anything with a longer term than that that's called a standard plan is not going to count. So if you have a consolidation loan, you 1, 000 percent need to get on an income driven plan to, for future payments to qualify for public service loan forgiveness.[00:34:00]

Now let's talk about ICR. So I've mentioned a couple times that Parent PLUS loans are eligible for PSLF and they are, but boy do they make it hard for those Parent PLUS borrowers. So while Parent PLUS loans are eligible for PSLF, they're not eligible as they stand for any of the income driven plans. And as I already mentioned, if you're on a 10 year standard plan for 10 years, you will have paid the loan off.

Now Parent PLUS borrowers can consolidate And if they consolidate, they then become eligible for ICR and ICR only. The problem is, is that for most borrowers, ICR is a lot more expensive. Uh per month than the other income driven plans Now there is a loophole. I like to call that loophole the double super secret consolidation loophole Um, it's a little complicated.

I mean, let's let's be fair. It is a loophole But if the bar if the [00:35:00] parent plus loans go through this double consolidation They can then become eligible for the other income driven plans including the save plans Now, I don't have time to go into all the gory details about double consolidation, so I'm going to give you a really quick example, but if you have Parent PLUS loans and you're pursuing PSLF, I strongly advise you to go to the TSLA website, which is freestudentloanadvice.

org, and go to our consolidation page, and about three quarters of the way down, We give step by step instructions on how to do Double Consolidation and get on the safe plan. But just as a quick hit, if you, I'm a big fan of stupid analogies and the stupid analogy I like to use for Double Consolidation is pretend consolidation is a blanket.

Your goal is to put two blankets on every single one of the Parent PLUS loans. So the way to do it, pretend you have four [00:36:00] Parent PLUS loans, uh, loans 1, The first thing you're going to do is you're going to consolidate loans 1 and 2 together to create consolidation A. Then you're going to consolidate loans 3 and 4 together to create consolidation B.

Now at this point, you have put a single blanket over each, all four of those consolidation loans. But you know, they're still a little chilly, so we need to put another blanket on them. So now we're going to consolidate consolidation A and consolidation B together to create consolidation C. Now you've put two blankets on all the Parent PLUS loans.

They're all tucked in nice and cozy together under consolidation C. You've double consolidated and now you can qualify for the SAVE or the other income driven plans.

Julie Shields-Rutyna: So Betsy, can I ask you, someone's asking a question. I think it kind of fits here.

Betsy Mayotte: Okay.

Julie Shields-Rutyna: Someone asked, how do I change from a 10 year standard to the [00:37:00] IBR under the Parent PLUS loan?

So I'm not sure if maybe your question just answered it, but because this says IBR, I just wanted to bring that up.

Betsy Mayotte: Yeah. The only way you can get on IBR is to double for a Parent PLUS loan is to double consolidate. And let me tell you this though, there is zero scenarios. IBR is going to be lower, a lower payment than save zero.

So if you're trying to qualify for IBR, you really should be gunning for save. But again, you have to, you'd have to double consolidate for both. Now, with that said, there are some limited scenarios. where ICR is a lower payment amount than SAFE. Most of the time it's a much higher payment. But in some scenarios, and that scenario is if the borrower's income is a lot higher than their loan balance.

In that scenario, ICR can be lower than SAFE. [00:38:00] So if that's your profile, you have Parent PLUS loans, and your income's a lot higher than your loan balance, You're going to want to run the numbers before going through the double consolidation nonsense because you might not need to. You might just have to do the single consolidation to get on ICR and that might be your best payment plan.

Now, you do not have to be on the same plan for all 120 payments. Um, and you know, these plans, again, remember our first slide, it's only going to count if you make the payment on a direct loan while working eligible employment.

Now, effective, uh, this past July 1st, they're also going to start counting some periods of deferment. Not all deferments, just the ones you see in front of you. That includes cancer treatment deferment, economic hardship, military service, um, if you're in forbearance because you're in AmeriCorps or in the National Guard or the [00:39:00] Department of Defense.

Um, they're also going to count, as I mentioned earlier, Those administrative forbearances that you don't really have any control over like, um, you know, if you submit a application for an income driven plan and it takes the servicer longer than they're allowed to, to process it, they're going to put an administrative forbearance on the account and assuming you have a direct loan and are working eligible employment, they will count those months towards PSLF.

And the same applies to the deferments. You still have to be working eligible employment. For those months, and, um, it has to be on a direct loan. So, if you are in an in school deferment, or an unemployment deferment, or there's actually a bunch of other deferments out there, if it's not on this list, it's still not going to count for PSLF, whether you're working in eligible employment or not.

Alright, so we've covered The traditional [00:40:00] rules for PSLF. And so once these waivers I'm about to talk about are over, these are the rules you have to comply with for any future payments. So we know what an eligible loan is. It's any direct loan. We know what eligible employment is. It's working at least 30 hours a week for any government employer.

Any 501c3 non profit or in limited cases, other non profits, and we know what an eligible payment is. It's one made under either a 10 year standard plan or an income driven plan, uh, while the loan, uh, is, you know, not in default or not in bankruptcy status or not in, uh, not in school. Are there any questions about the traditional PSLF rules before I move on, uh, to the waivers?

Okay,

Julie Shields-Rutyna: only Betsy that step by step that you just went through, which was wonderful on the, um, how to consolidate parent. [00:41:00] Plus, is that listed on your website?

Betsy Mayotte: Oh, yeah, with examples. And I mean, not the exact example I gave with the blankets. I'm sure everybody's devastated by that. Um, but the step by step instructions and you need, listen, I read them, then read them again, then read them a third time, then go to bed, then get up and read them again.

You have to follow them exactly. That's great. So

Julie Shields-Rutyna: we'll post, we'll post the link to the TISLA website in the chat. Okay. Thank you.

Betsy Mayotte: Yeah. Um, when it tells you to use a paper application, use a paper application. When it tells you when and how to apply for the SAVE program, uh, after you finished, do it exactly that way.

Um, you, you need to be meticulous or it might not go through. And there's, by the way, there's a deadline. They, um, they are closing that loophole July of 2025. So if you don't have the double [00:42:00] consolidation completed by July of 2025, you're not going to be able to do it. But if you do get it completed by July of 2025, you'll maintain your eligibility for those programs forever.

Julie Shields-Rutyna: That's great. Thank you.

Betsy Mayotte: Okay, um, there's a one time waiver in place called the one time account adjustment, and this dovetails with PSLF, and for some people will end up giving them additional credits for PSLF they normally wouldn't be eligible for. It's being applied automatically to all federal direct loans.

There is no application for it. There's also no way to find out where you are in the queue. Um, they're doing them in batches. You're just going to see it happen one day. Uh, they hope to get everything done, all 30 or 40 million accounts, uh, by the fall, uh, to be fair and to set expectations because of [00:43:00] a bunch of other Things that are going on I would not be shocked if they weren't done by the fall I think they're trying they are making progress, but There's a bunch of other Projects going on and errors that need to be fixed such as with the FAFSA that might prolong this one time account adjustment so essentially what the adjustment does is It's the Biden administration saying, listen, we think that as an industry, we did a terrible job of educating borrowers about the existence of the income driven plans in the past.

And we think that if it, as an industry, we had done a better job, more people would have been on the income driven plans. So we're going to give people the benefit of the doubt. And so what they're doing with borrowers credit for every month they were in repayment towards the forgiveness that is baked into the income driven plans.

So under the income driven plans, if [00:44:00] you're on the income driven plans for either 20 or 25 years, depending on the plan and depending on what kind of loan you have, they forgive the balance. It doesn't matter who you work for. Um, so they're treating all past payments. As long as they weren't in certain deferments, as long as they weren't, um, in certain forbearances, and as long as they weren't in default, um, they're going to count those months as an income driven plan payment.

Now, what does this have to do with PSLF? Well, any IDR payment is potentially a PSLF payment. If you were working eligible employment at the time, if it was after October 07, um, and it was on a direct loan, it's going to count for PSLF. So people that are pursuing PSLF that might've been on the wrong payment plan in the past, submit proof of employment for those periods because you might get some additional credits once they process the one time account adjustment on your account.

The other benefit [00:45:00] is that for borrowers that have FFEL loans, and remember, FFEL loans usually don't get credit because it's not an eligible loan for payments you made on a FFEL loan, even if you were working eligible employment. If you could solidate those by April 30th of this year, so just a couple weeks, they'll give you credit for those FFEL periods as well, both towards IDR and if you were working eligible employment.

towards PSLF. Now before you panic, for this deadline, as opposed to the double consolidation deadline, all you have to do by April 30th is submit a completed consolidation application at studentaid. gov. And you will, you will get the benefits of the one time account adjustment. The other thing consolidation, um, will do for borrowers is for borrowers who have loans that with different repayment histories.

So the most common scenario there is you went to undergraduate school, you took out [00:46:00] loans, you graduated undergrad, you started making payments for a couple of years, then you went back for your, uh, graduate degree, you took out more loans. And now you're in repayment for those two. So today Your undergraduate loans have credit for say 36 payments Either under idr or pslf or both and your graduate loans only have credit for 12 If you consolidate those by april 30th Uh, they'll initially reset you to zero But once they process the one time account adjustment the whole thing's going to get credit for the 36 now most borrowers Do not need to consolidate to get the, the most benefit from the one time account adjustment.

You only need to consolidate, uh, by April 30th if you have loans with different repayment histories or if you have fell loans or Perkins or other loans that don't qualify by themselves for PSLF. Anybody [00:47:00] who submits a consolidation application after April 30th. Still won't reset to zero. The new rule is they do a weighted average of the underlying loans, um, to figure out what the counts will be for PSLF or the income driven plans.

So if you consolidate after April 30th, And you have 50 grand in loans that have a count of 20 and 50 grand in loans that have a count of zero, uh, the consolidation would get a count of 10. But if you submit that consolidation application by April 30th, the whole consolidation would get the count of 20.

I'm going to show you some more examples. I always get a ton of questions about that, so I have some more examples coming up about that consolidation thing. So, um, once they do the one time account adjustment, um, if you're still trying to recruit payments either towards income driven plan forgiveness or PSLF, You [00:48:00] must be on an income driven plan or the 10 year standard for future payments to qualify.

A couple other deadlines that are coming up. They're sunsetting some of the plans. Um, if you're not actively on the Pay As You Earn plan on July 1st, you can never get on it. Um, and if you are on it on July 1st and then get off, you can't go back on it. It's a one way door. Um, if you've been on the Save plan for at least 60 months, They will not let you switch over to income based repayment.

For borrowers pursuing PSLF, you kind of don't care about that anyway. Um, the reason they're doing that is that IBR has a shorter forgiveness timeframe under the IDR plans than, uh, the SAVE plan does for people with graduate loans. But again, PSLF is 10 years across the board. So you don't, if PSLF is what you're pursuing, you don't care about this.

As I mentioned, the deadline for the [00:49:00] double consolidation loophole is July 1st of 2025. So, a couple more examples of how the IDR adjustment is going to work. The example on the left, we have a borrower that has 50 grand in undergraduate loans that have been in repayment for 27 months. And they have 80 grand in graduate loans that have been in repayment for 3 months.

If they consolidate by April 30th, the whole thing will get credit for 27 months, both PSLF and the income driven plans, again, assuming the borrower is working eligible PSLF employment. Another separate example about how the income driven plan, uh, the one time account adjustment is going to work. Let's say you've been in repayment for 22 years, 264 months, uh, but you've only actually been on an income driven plan for 32 months.

Um, under normal rules, um, you know, if you were pursuing PSLF, you'd only be 32 months in. If you were pursuing the forgiveness that's baked into the income driven [00:50:00] plans, you'd only be 32 months in. Um, but once they apply the one time account adjustment to the account, They're going to treat all 264 of those payments like they were made under an income driven plan.

So, and therefore, they're also potentially PSLF payments. So you'd be that much closer and maybe even get immediate forgiveness if you can prove, uh, PSLF eligible employment for at least 120 of those.

For those of you that are still going, oh, I'm nervous, I still am not clear if I need to consolidate or not. Again, if you have direct loans that all entered repayment at the same time, you do not need to consolidate. But on that same consolidation page on our website, we created an infographic that's sort of a yes, no decision tree.

to help you clarify whether you should consolidate by April 30th or not.

Another new feature of [00:51:00] PSLF is something called buyback. It's pretty limited in how you can use it, but essentially if, if you have some months of certain deferments and forbearances, not all deferments and forbearances, um, that you were working eligible employment at the time and if you were to be able to get those months to count, It would bring you immediately to 120 and forgiveness.

They will let you quote unquote, buy them back in limited circumstances. And basically what they do is they figure out you're, you're required to submit proof of income for those periods. So if it was three years ago, you need to go find your, uh, tax return from three years ago. They figure out what your payment would have been under an income driven plan if you hadn't been in deferment and forbearance.

You pay that amount and they'll give you the credit. You can only do this if [00:52:00] doing the buyback will bring you immediately to 120. So that means you have to have submitted. Proof of eligible employment for at least 120 months already. You also can't use it for periods of grace period when you were in default, when you were in an in school status, or bankruptcy status, or disability status.

You cannot use it for periods, uh, that were prior to a consolidation. So if you were in an unemployment deferment or a forbearance and in 2013, unemployment deferment doesn't make sense because if you were in an unemployment deferment you weren't working eligible. But let's say you were in, um, a forbearance or you were in a rehabilitation deferment, but you were working eligible employment at the time back in 2014.

Um, and you, but you've since, but in 2019, you consolidated, you cannot do buyback, but if you didn't consolidate. And that period in 2014 [00:53:00] would give you immediate forgiveness. Then you can, you should look into buyback.

Now there is something that Congress wrote into law back in 2018 called the T E P S L F. The T stands for temporary. It's temporary because they only awarded a limited amount of funds, um, uh, about 700 million. And for T E P S L F it's first come and first server. Once the money's gone, it's gone, period.

They're not going to give any more. There's no one peeling it. Essentially what the TEPSLF does, it works a little bit like the IDR adjustment in that it will give borrowers credit for payments made under the wrong repayment plan. So graduated repayment, extended repayment, or the standard consolidation plan.

All the other PSLF rules apply. You should not count on this unless you're really close to [00:54:00] forgiveness already. Like you only have a year or at most two years of payments left and those plans will be lower for you than an income driven plan would be. If that's you, if I just described you, keep in mind there is a really, really wonky rule under the TEPSLF that you would also have to comply with.

Um, essentially you have to make sure that you're 12th to last. And last payment are at least as much as what you would have paid if you were on an income driven plan. So payment 109 and 120. now, the easiest way to do that is to just make sure you're on an income driven plan for the last year of payments.

If you're gunning for this, but for some people, that's a lot of extra money. So I just want to make sure that the rule itself. Doesn't require you to be on an IDR. Uh for the last full 12 months just that you make the equivalent payment for the 12th to last and last payment [00:55:00] Um, we again have this all spelled out On our website.

This is not going to be an out for most people Um again, unless you're super close to forgiveness already And you know one of those other payment plans is a lot lower for you.

I already talked about they um They've only budgeted 700 million. I honestly don't know how much is already spent in that 700 million. Okay. We're getting close to our time. Um, I only have a couple more things to mention. The way to apply for PSLF, as I mentioned before, the best strategy is to submit proof of eligible employment once a year via the PSLF help tool.

Regardless, you do have to submit proof of all 120 months of eligible employment. Um, they're going to tell you what your counts are. And once you submit that last employment certification form, you're going to check the box saying, I think I did it. Um, if you check the [00:56:00] box saying, I think I did it, they are going to put your account in forbearance.

So, you won't be accruing any more eligible payments. If you don't check the, I think I did it box, but you are hitting the 120, they're going to forgive you anyway. So, for people that aren't a hundred percent sure and don't want to lose any potential months. They just don't check that box. They continue to make eligible payments.

Um, and then once they're forgiven, they know that they'll get a refund of any extra payments they made over the 120, as long as those extra payments weren't made pre consolidation.

All right, the last thing I want to mention is an announcement that came out last week and we knew this was coming. So right now, Mohila is the only PSLF servicer. If you're pursuing PSLF, your loans get transferred to Mohila. Effect that is transitioning to a more centralized process. And this is something that's been in the [00:57:00] works for years.

Um, so essentially going in the future, starting this summer, PSLF form processing is gonna be handled by a behind the scenes vendor, the man behind the curtain in the Wizard of Oz. Um, and all PSLF counts are not gonna show up on your servicer's website, including mo. They're going to show up at studentaid.

gov. Now to be clear, if you're loans with Mojila right now, you're still going to be making your payments to Mojila. Mojila's still going to be servicing your loan. They're just not going to be doing the PSLF piece of it. This also means that going forward, all PSLF borrowers aren't going to have to be at Mojila.

So you could be with Advantage or Nelnet or Uh, Ed Financial and be pursuing PSLF because all the PSLF numbers are going to just show up, um, on studentaid. [00:58:00] gov. It also means that if you're with Mojila right now because you're pursuing PSLF, after this transition is all done, your loans may transfer to another servicer, um, and that's okay.

But again, your payments are still gonna be made to whomever your servicer is. If you're applying for deferment, you still have to apply for that with the servicer. Uh, if you have questions about your account, you're gonna call that servicer. It's just the PSLF stuff. And incidentally, they're doing it for teach grant processing too.

Uh, is all gonna be centralized@studentaid.gov someday, you know, in the coming years. Everything is going to be done through studentaid. gov. Um, all the servicing is going to be done behind the scenes. It's going to be one phone number, one website, that's it. But that's not going to be, um, that's not, the whole thing's not going to be done anytime soon.

They're just starting with the PSLF and the teach grant stuff. Um, the other [00:59:00] thing that's going to be centralized in probably the next year is total and permanent disability processing. Now, part of this transition means they're going to pause all PSLF processing. So you are not going to see any new forgiveness.

You're not going to see any new employment certification processing beginning May 1st, um, and they hope to be done in July. Now, It probably wouldn't hurt. I don't want to freak anybody out. I'm not anticipating great disasters, but just to be on the safe side, between now and May 1st, I would consider going to the Mojillo website and screenshotting your current PSLF status and counts and just putting it someplace safe.

Again, this is like having a fire extinguisher in the house. You're probably never going to need it. But you're going to be glad you have it in case you do.

So that's what I had for you today. Um, I [01:00:00] know we're at time, but I'm happy to hang out for, uh, additional questions. Here are, uh, in my opinion, the two websites you'll ever need for PSLF, the student aid website, as well as ours. Um, I can't encourage you enough to read all the things about PSLF. The people that are the most successful with this program are the ones that educate themselves about it.

And with that, Julie.

Julie Shields-Rutyna: Sure. Betsy, that was so great. Thank you so much. A couple of questions. Just a couple. One is Someone asked, which is better to use for loans, TLF teacher loan forgiveness or PSLF?

Betsy Mayotte: I love that question. The answer is it depends. Um, so you got to figure out, so the name of the game, I want to back up a little bit.

No matter what, when it comes to student loans, the name of the game is paying the least amount out of pocket [01:01:00] over time. And you know, especially lately, people get so caught up in the word forgiveness. And listen, I am just as guilty of falling for the buy one, get one free stuff at the store. Um, for some people, um, paying your loans off progressively is actually going to be cheaper for you than pursuing a loan forgiveness program.

So now let's transition to the question. What's better PSLF or teacher loan forgiveness? It depends. If you're someone with a fairly low balance, um, Teacher Loan Forgiveness is probably going to be what costs you the least amount over time. If you have a high balance and a low income, PSLF is probably going to be what costs you the least amount over time.

So, And you can't double, the reason people are asking this question is you can't double dip. So you have to be working five consecutive years for a title, at a Title I school to get the five grand or 17, 500, um, for teacher loan forgiveness. You can't then turn around and use [01:02:00] that same five years towards the ten years you need for PSLF.

So you really need to pick One or the other. If I owe 20 grand in loans and I'm eligible for teacher loan forgiveness, getting the 17 5 forgiven is absolutely what's going to cost me the least amount over time rather than making a payment every month for 10 years to get the PSLF. If I owe 150, 000 and my income is 60 grand, PSLF is probably going to be what costs me the least amount over time out of pocket.

Julie Shields-Rutyna: That's great. And then, can people find more information about the buyback on your website?

Betsy Mayotte: I think I, I think I've added buyback to the website. Listen, if it's not there, it will be there shortly, because I'll be horrified that I haven't added it yet. Um, but, the, I can guarantee you, I, it's on the student aid website.

Again, if, if [01:03:00] you just either go to student aid and use the search function and put in buyback or just use our friend Google and do PSLF buyback, it'll bring you to the student aid page. But now I'm now I'm don't I'm now I'm really nervous. I haven't added it to my website.

Julie Shields-Rutyna: And just, you know, I hate to end on this, but, um, there were some news reports about students who received PSLF forgiveness letters are now being told that the forgiveness was incorrectly issued a

Betsy Mayotte: great on for the great unforgiveness.

Julie Shields-Rutyna: Yeah, let's talk about that a little.

Betsy Mayotte: Yeah. So this applied to, I believe, 497 poor borrowers. Um, I had. About two dozen of them reach out to me directly about this. Um, and I've also talked to the department of education about it. Um, every single one that I saw truly was not eligible, like not even close. [01:04:00] For forgiveness.

It was an outright error. Um, the department of education, the vast majority of the people that were mistakenly forgiven what happened was so they submit, let's say they submitted an employment certification form that said, I worked for the, for the Red Cross from January of 2012 till December of 2017.

And it was signed off on by the employer in 2023. Um, Um, they, it was accidentally given an employment end date of the 2023. Um, now the Department of Education does not have to follow the law just like everyone else. And the law says that that borrower wasn't eligible. So they had to, Um, Unforgive those loans.

Now what they did do is they're giving those borrowers PSLF credit for every month between the date they got the letter saying they'd been forgiven and the date their loans were unforgiven. So they're getting credit for [01:05:00] those. Um,

Can I get, Can I get, So PSLF has been around since 2007. This is the first time I've ever seen an error like that made. I know for a fact that anytime an error like that is made they put in a slew of checks and balances to make darn sure it doesn't happen again. Can I tell you with a thousand percent certainty there will never be another mistaken forgiven loan on PSLF?

Of course I can't. When you deal with millions of accounts and millions of transactions and you know however many thousands of agents that are processing this. There, there may be mistakes. Um, should you lose sleep over it? Nope. Um, if you get forgiveness and you're pretty certain you shouldn't have, I would raise the flag because they, they will catch it in an audit.

Julie Shields-Rutyna: Thank you. And I'm just going to ask one final question here. Um, cause this one has been sitting here. Can you just go over again? Um, definition wise, [01:06:00] what did, what do you mean when you talk about different repayment histories?

Betsy Mayotte: So, um, Most borrowers have the, the higher education trajectory where they go to school, they keep going to school without a break until they're done going to school, whether it's because they got a single degree or multiple degrees, most borrowers don't take a break.

Um, therefore all their loans go into repayment at exactly the same time. Um, so those loans all have the same payment history, but there's other borrowers that take a different path in life. Um, they go to undergraduate and they're like, I hate this and they drop out. So the loans they already have start making, they, they have to start making payments on them.

And then five years down the road, they go, you know what? I'm ready to go back to school and I know what I want this time. So they go back to school and they take out more loans. That's an example of someone whose loans have [01:07:00] different repayment histories. Um, a more common example that I used before, but I think it's worth repeating, is someone who goes and gets their undergraduate degree, takes some time off, and then later goes back and gets their graduate degree.

That's someone else where the older undergraduate loans were in repayment for a longer period of time than the graduate loans.

Julie Shields-Rutyna: Well, thank you so much, Betsy. This was super thorough and informative and such good questions from everyone and we will send you the recording. We will send you the slides and you have two great sites there to give you all this information.

And thank you all and have a have a wonderful evening.

Betsy Mayotte: Thank you. Thanks.