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Financial Planning


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August 21, 2023

What Is Public Service Loan Forgiveness?

For the last few months, the concept of college education loan forgiveness has been in the news quite a bit. Not always for the right reasons–the Biden administration’s executive order to forgive a large proportion of college debt met with opposition almost at once, and in a closely watched decision, the Supreme Court ruled in June that the order was un constitutional. 

Did this decision put loan forgiveness outside the realm of possibility for all students with college debt? Things are never simple in politics, law, or finance, and this issue includes features of all three. The answer is no–over the summer the Biden administration has been continuing to look at ways to fulfill its commitment to students across the nation to forgive billions of dollars in college loans. 

But there are other programs already set up to forgive debt for certain subsets of recent college graduates, and they don’t come with the uncertainty of the most visible program endorsed by the White House. One of the most important of those programs is the Public Service Loan Forgiveness program. 

Usually known by its acronym, PSLF is an incredibly valuable program for people who have college debt and who are in full-time employment at any of a wide range of government entities. If you fall into this category, you could be eligible for having a large percentage of your student loans forgiven. Here’s what you need to know about PSLF. 

Loan Eligibility 

There are two main components to eligibility for loan forgiveness under PSLF. The first is the nature of your student loans. To qualify for forgiveness under this program, your loan must be a direct loan. These include subsidized and unsubsidized loans, PLUS loans, and direct consolidation loans. Some common loans that are not eligible are Federal Family Education Loans and loans from private lenders, such as banks and credit unions.  

If you aren’t sure whether your loan qualifies or not, a financial advisor in Charleston, SC at TwentyFifty Capital can help. A great way to turn a non-qualifying loan into a qualifying loan is to consolidate debt under a direct consolidation loan. If your employment qualifies you for PSLF, restructuring your debt can make it possible for you to take advantage of this great program. 

Employment Eligibility 

The PSLF is not available to all college graduates. It is directed toward those who enter the public service sector, which includes national, state, and local government agencies as well as many non-profits. The military is also included, as are law enforcement and public education. Your financial advisor can review the requirements with you if you’re not sure whether your employer falls into one of the qualifying categories. 

There’s one other major component to your employment eligibility: you must be a full-time employee. If you’re hired on apart-time basis, you are not eligible for the program for the period that you are only part-time. For the purposes of PSLF, full-time is considered 30 hours a week of paid work.  

Details of PSLF 

If you’re a college graduate with student debt under a qualifying loan and you are employed full-time with a qualified employer, you most likely qualify for loan forgiveness under PSLF. But that’s not the whole story! Once you’re determined to be eligible, you must show that you have paid the equivalent of 120 monthly payments on your loan while employed full-time by a qualified employer before the remainder of your loan can be forgiven. 

That’s a lot of payments, and verifying all of them can be quite a tedious process. That’s why it is important to file with the Department of Education every year to make sure that your payments on your direct loan or direct consolidation loan are being accepted and recorded. Once the “magic number” of 120 payments (or the equivalent amount of money) is reached, whatever is left on your loan is eligible for forgiveness under the program. 

This is a great benefit for qualifying borrowers, and having an experienced, knowledgeable Charleston financial advisor on your side makes it much easier to navigate the some what complex requirements that must be met in order to take advantage of it. Contact Twenty FiftyCapital to speak with a Certified Financial PlannerTM about this and other important educational loan topics.

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