Amid the debates over rising student loan debt that is undischargeable in bankruptcy, I have not seen a lot of public discussion over provisions of law that provide special forgiveness benefits to those who go to work for government or nonprofits. I’m thinking of the Public Service Loan Forgiveness program (2007), described here at the federal government student aid website. There is also a fact sheet (2009) at the site, as well as a Q&A (2010) on eligibility and other questions.
I have posted some excerpts from these documents below the fold, but am still uncertain as to the status of this program. To start with, has it disappeared or is it about to disappear in the budget bills in Congress – disappearing the way that forgiveness of student loan interest seems to be going?
In the comments, I would be interested in any factual or descriptive comments, links, etc., that directly address how these programs work, current status, eligibility, and so on. (As I would like to be able to refer others, including students, to this post and its comments as a descriptive matter, please no opinions about any of this or off-topic comments; I’d rather learn something about how it actually works and where it is headed as a program before opining or hearing your opinions. VCers are more than capable of opining about the incentives or disincentives created by such programs; at this point, I’d like a better factual grasp of this program.) From the 2009 fact sheet:
What is the Public Service Loan Forgiveness Program?
Through the College Cost Reduction and Access Act of 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers. Since borrowers must make 120 monthly payments on their eligible federal student loans beginning after October 1, 2007 before they qualify for the loan forgiveness, the first cancellations of loan balances will not be granted until October 2017.
This fact sheet summarizes the terms and conditions of the Public Service Loan Forgiveness Program.
What federal student loans are eligible for forgiveness under the Public Service Loan Forgiveness Program?
Any non-defaulted loan made under the William D. Ford Federal Direct Loan Program (Direct Loan Program) is eligible for loan forgiveness. (See below for information on how non-Direct Loans may be eligible.) The Direct Loan Program includes the following types of loans–
Federal Direct Stafford/Ford Loans (Direct Subsidized Loans) Federal Direct Unsubsidized Stafford/Ford Loans (Direct Unsubsidized Loans) Federal Direct PLUS Loans (Direct PLUS Loans) – for parents and graduate or professional students Federal Direct Consolidation Loans (Direct Consolidation Loans)
How can other federal student loans qualify for loan forgiveness?
Although loan forgiveness under this program is available only for loans made and repaid under the Direct Loan Program, loans made under other federal student loan programs may qualify for forgiveness if they are consolidated into a Direct Con- solidation Loan. However, only payments made on the Direct Consolidation Loan will count toward the required 120 monthly payments.
The following types of loans may be consolidated into the Direct Loan Program – Federal Family Education Loan (FFEL) Program loans, which include –
Subsidized Stafford Loans Unsubsidized Stafford Loans Federal PLUS Loans – for parents and graduate or professional students Federal Consolidation Loans (excluding joint spousal consolidation loans)
Federal Perkins Loans Certain Health Professions and Nursing Loans
NOTE: To consolidate a Federal Perkins Loan or Health Professions/Nursing Loan into the Direct Loan Program, you must also consolidate at least one FFEL Program loan or Direct Loan. If you are unsure about what kind of loans you have, you can find information about your federal student loans in the U.S. Department of Education’s National Student Loan Data System at http:// nslds.ed.gov.
What are the borrower eligibility requirements for loan forgiveness under the Public Service Loan Forgiveness Program?
The borrower must not be in default on the loans for which forgiveness is requested. · The borrower must be employed full time by a public service organization –
When making the required 120 monthly loan payments (certain repayment conditions apply – see below); At the time the borrower applies for loan forgiveness; and At the time the remaining balance on the borrower’s eligible loans is forgiven.