Guide to Public Service Loan Forgiveness (PSLF)

Jonathan Hughes: [00:00:00] One of the most discussed topics in higher education policy right now is the federal public student loan forgiveness program. Recently the Biden administration announced temporary changes to the program, making it easier for borrowers to take advantage of its provisions. Here to help us make sense of those changes and walk us through the program itself is Betsy Mayotte.
She's the founder and president of the Institute of student loan advisors or TISLA, and has 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 served as a primary negotiator in several federal title, four negotiated rule making sessions on topics, such as the use of student loans at foreign schools, loan rehabilitation, and borrower defense to repayment.
And she's regularly quoted in the media on student loan issues, including the [00:01:00] Washington post, the New York Times, the Wall Street Journal and the Boston Globe. And if you're not getting the picture yet, I'll just say that Betsy knows more about student loans than anyone we know. So Betsy, thank you for being on the show.
Betsy Mayotte: Well thank you for having me and, thank you for that wonderful introduction.
Jonathan Hughes: So let's talk about public service loan, forgiveness. What is it? How did it originate. And, and what was the program designed to do and, and who was it designed to help
Betsy Mayotte: Public service loan forgiveness was designed to ensure that people that had a passion for public service we were able to work in their chosen field without having student debt being a barrier to that. And you know, if you look at the narrative, from the session where PSLF was voted on, you can see that who they had in mind were. Public defenders, social workers, teachers, what those professions all have in common is they all, [00:02:00] almost always require a degree beyond an undergraduate degree and graduate and professional degrees are where the debt tends to, to add up, what those professions also have in common unfortunately is they tend not to pay very well. So you might be, you know, if you wanna be a social worker, you might be required to take on six figures in student debt for $45,000 a year salary, public defenders in particular, you were hearing, you know, I got into law because I wanted to defend the vulnerable and because of the cost of law school, the debt I had to take on, I can't afford to do it.
So it was never intended to forgive. Anybody that worked in public service for 10 years and it was never intended to forgive everybody, student debt the way they crafted it, what the law says is that you need to work, for a public service employer. And I'll explain a little bit more about what that is in a second, while making eligible payments, on the loan.
So , an eligible employer. [00:03:00] Any government employer, federal state, local tribal. If you work full-time for an employer like that, then you're working for eligible employment. You could also work for a 5 0 1 C 3 nonprofit. If you work full-time for one of those, you absolutely work eligible employment.
And then there are some other non 5 0 1 C 3 nonprofits that also can be eligible, but you have to check a, a few more boxes. In an eligible payment plan. Now you can be on a 10 year repayment plan, but if you make now, I I'm better at words than math, but I do know that if you make 120 payments on a 10 year payment plan, you're gonna pay the loan off, those so, but those payments do count, but ideally, to, to benefit from PSL F you need to be on an income driven plan.
And again, Congress set it up that way because again, their intention wasn't. To pay everybody's loans off that worked in public service. Just the ones that whose student debt compared to their income made it, [00:04:00] difficult for them to stay in, in public service work. So once you make your 120 eligible payments while working for the eligible employer, at the end of that, the, the balance of the loan, including any outstanding interest is forgiven, and that is forgiven, tax without any tax implications to it.
Now you don't have to be work consecutive eligible employment. You don't have to make consecutive eligible payments. I mean, it could take you, you know, 15 years to get the, the 120 eligible payments, because maybe you take time off to go back to school or go into private practice for a time and so on.
That's all. Okay. But it, you can't do it in less than 10 years. That's the minimum amount of time it's ever gonna take you to, to get. You do need to be working directly for the eligible employer. Now, it doesn't matter what you do. That's one of the big mess of PSLF that's out there. People think, well, I'm a teacher, so I'm automatically eligible. Not necessarily, if, if you're a teacher [00:05:00] at a for-profit institution, that's not eligible employment on the flip side, anybody who works for say the Boston public school system is potentially eligible for PSL F regardless of what their actual job title is, you could be cafeteria worker, custodian, administrative assistant, the principal. And of course the teachers, but again, it doesn't matter what you do. It matters who you work for, who actually is issuing your paycheck.
Jonathan Hughes: And then I think what we were actually talking about, and I apologize was the, the, the repayment term. So if you, if you are into, if you're using your standard repayment term of 10 years, you're gonna pay them loan off in 10 years. So you'd need to be on another type of repayment plan. Is that correct?
Betsy Mayotte: Right. You need to be on to really benefit from it. You need to be on one of the income driven repayment plans, such as income based repayment pay as you earn revise pay as you earn income contingent repayment. Now if you have parent plus loans, now, parent plus loans are loans [00:06:00] that are eligible for PSLF but it's kind of a catch 22 because, parent plus loans aren't in and of themselves eligible for any of the income driven plan. And so, as you know, as we mentioned, If you make 120 payments under a 10 year standard plan, you're, you're, you're paying the loan off. So parent plus bars, there is a little bit of a loophole. If they consolidate their loans, which they can do at studentaid.gov, then they get access to the income contingent repayment plan. So parent plus borrower who, where the borrower themselves. Is working for eligible employment. They need to consolidate to get access to income contingent in order to really benefit.
Jonathan Hughes: This is why I'm glad I have you on, I didn't know that.
Betsy Mayotte: There's a lot of parent plus bars that aren't necessarily aware that they are just as potentially eligible for it as a student loan borrower is. Now it's important that borrowers have the right kind of loan. The only loans that are eligible for PS L F are the federal direct loans. Now that can be a [00:07:00] Stafford loan. Parent. Plus, as we mentioned, graduate plus consolidation, where it gets confusing is that people with older loans. So if they took their loans out prior to 2010. They could very well have another type of federal loan called a federal family education loan program loan, or a fell loan. Now that's confusing cuz under the fell program, they had Stafford loans, they had graduate and parent plus and they had consolidation. So, and that's one of the reasons that borrowers, a lot of borrowers tripped up, over the past few years and it's one of the things they're trying to rectify with this temporary waiver is that a lot of borrowers thought that they were progressing towards PS L F because they had federal Stafford loans for example, and they were working for an eligible employer and they were on IBR only to find out that payments made on a fell loan, were not eligible for public service loan forgiveness.
And as a general rule [00:08:00] and outside of this temporary waiver that I'm gonna talk about in a minute. , they're not, you know, public service, loan, forgiveness. Isn't hard. If you take a step back and look at at the primary rules, it's not a difficult program. You have to have a direct loan and make 120 payments essentially on an income driven plan while working full time for eligible employment. But where it does get tricky is understanding what all the eligibles. What all the eligibles mean, but there were a lot of borrowers that, like I said, had the right employment were on an IBR, but they were making payments on a, a fell Stafford loan. And that does not count under traditional public service loan forgiveness rules.
Jonathan Hughes: This program began in 2007. That means that people were first eligible to start. Applying for this forgiveness back in 2017. And so can you talk about a little bit about what happened at that point.
Betsy Mayotte: The headlines about PSLF data for years [00:09:00] have been only 1% of people that apply get it, but if you dug down on the data the fact of the matter is, is that a, a lot of people that were denied hadn't even been in repayment long enough to have made 120 payments.
There were, there was unfortunately, a lot of people, as I mentioned, that were making payments on the wrong loan type. There were people that were making payments under the wrong repayment plan. There were program issues as well. We know that at least for the first couple years, There was at least one servicer that was inaccurately telling borrowers that the standard plan on a consolidation loan was an eligible PSL F plan, which it isn't. So Congress addressed that by creating what's called the T E P S L F or the temporary expansion of PSLF back in 2018.
Jonathan Hughes: Let's talk about them. What the most recent changes are to the program, this temporary alterations of the program that was. Back in, I think it was October by the, by an [00:10:00] administration.
Betsy Mayotte: The white house would not have had the authority to do this temporary waiver if it wasn't for the fact that we're in a national emergency because the white house does not as a rule. Acceptance, except in some exceptional circumstances, such as a national emergency, have the ability to do anything or make any rule that's contrary to federal law. And the vast majority of, the PSL F rules are written into federal law. So it would take an act of Congress to change them. But because of this. National emergency. the white house is taking the opportunity to try to rectify, some of the past issues with PSLF, but because they can only do it under the national emergency, there is a hard stop. And temporary is not a joke. But there is a hard stop to this of October of the end of October, of this year. So October 31st, 2022, and any borrower that stands to benefit from this [00:11:00] waiver, has to make sure their ducks are a row. And I will explain who those ducks are and what type of role they should be in. You know, before we get off this podcast, but. Essentially what the temporary waiver does is it allows so it does not change the definition of eligible employment. So you still have to be working full time for a government employer, 5 0 1C3 nonprofit, maybe some other type of nonprofit, by the way, you can also work part-time for multiple eligible employers. As long as you're working at least 30 hours a week between the two. So it doesn't change the definition of eligible employment. Essentially. It changes the definition of eligible payment under the temporary waiver any month that the borrower was in a repayment status. While working for eligible employment is gonna count.
It doesn't matter what payment plan they were on. It doesn't matter if the payment was late. It doesn't matter if you made the payment [00:12:00] on a fell loan or a Perkins loan. They're gonna count. It doesn't matter if the payment was made before you consolidated, they're gonna count that month. So if you are someone who either has fell loans now, or you had fell loans before and consolidated a few years ago, you need to get in submit your proof of eligible employment for all your periods of eligible employment back to October, 2007. And you need to do it before October of this year. And they'll credit you those months under the waiver. They're also getting rid of, so PSL F you, you not only have to be working eligible employment, when you make your payments, you have to be working eligible employment while when you submit your application for forgiveness. And when they actually review your account for forgiveness, they're waving those last two prongs for this temporary waiver as well. So for example, I have a borrower that reached out to TISLA. [00:13:00] Who is retired. They're not working at all anymore, but before they retired, they had clocked in 10 years of eligible employment. They just weren't, they didn't have the right type of loans. They had fell and they were on the wrong payment plan. So now that person was able to consolidate and get their loans forgiven.
Jonathan Hughes: Wow. That seems like a, a big deal.
Betsy Mayotte: It's a really big deal. it's, we've seen so far, so to put it in perspective, Prior to the announcement of the waiver. I think there was 12 or 13,000 borrowers that had their loans forgiven under PSLF. The last data I saw that was released last week, which was as of February, there was I forget if it was 60 or 80,000 borrowers who had gotten forgiveness.
Jonathan Hughes: Wow.
Betsy Mayotte: To, to be clear in order to get credit for these normally ineligible payment. Under the waiver. You don't have to be at one 20 by October. You just have to make sure that you've done what needs to be done to get credited for those payments before October. [00:14:00] So let's say you, let's say in 2012, you consolidated and you had 20 payments that you made under the fell program before that, and even with those 20 payments today, you'd be at 80 that's okay. They'll clock those 80, as long as. Have a direct loan now and submitted proof of eligible employment. And whenever you get to the 120, you get to the 120.
Jonathan Hughes: So people should really take advantage of that while they can.
Betsy Mayotte: Yeah. And you know, I'm giving a lot of the rules here on this podcast, but I cannot, you know, anyone within the sound of my voice, I can't encourage you enough to read all the things to make sure that you're doing what needs to be done. So there's a lot of great information and some FAQs at studentaid.gov shameless plug. We have all the details in plain English and a very extensive FAQ document with including some case studies for some of the more complex issues [00:15:00] on our website, which is freestudentloanadvice.org. If you have questions beyond that, you can ask your servicer or. We offer free one-on-one counseling via email through the contact page of our website. You can reach out to us as well. There's a lot of scams out there that are taking advantage of what's going on. So if someone just off the bat offers, you know, says, oh, we can get your loans forgiven. It's probably a scam. All of these programs are free to access. And despite what you might hear. They're actually not particularly difficult to access. So you should never have to pay for help with your student loans.
Jonathan Hughes: Can you just tell folks a little bit about TISLA?
Betsy Mayotte: The Institute of student loan advisors I founded it in 2017 and our mission, our reason for being the reason I left my job to start this organization is to provide free. Neutral, plain English expert, student loan advice and dispute resolution to all consumers. So anybody can utilize our website. We don't [00:16:00] require people to log in or give us any information. We don't allow any advertisements for student loan products or refinancing, and that's to ensure our neutrality. Anybody can email us, you know, we answer 99% of our questions within a business day and we'll do our best to answer them and help you, whether it's coming up with a strategy for repaying, your loans, answering forgiveness questions, we even help people with disputes. I started the organization for a couple reasons. I partly started it because I was getting really frustrated seeing how many people were getting taken advantage of by these student loan scams and it made me realize that one of the reasons that people were becoming victims of these scams is cuz they were looking for a third party neutral entity to help them with their student loans. One of the other reasons I started Tesla was cuz of Reddit, believe it or not. I [00:17:00] discovered, I discovered Reddit about, I don't know, 10 years ago or so. And I saw that they had a student loan sub, which they still do. And at the time now it's, it's much better now. But at the time, there was a lot of really incorrect information being given, but I just remember being stunned that for something so important and that can have such a financial impact for such a long time in someone's life. That peop that so many people were reaching out to anonymous strangers on a social media platform for help with their student loans. So we are. We, we, I started to get heavily involved in that sub still am. There's now also a public service loan forgiveness sub that we're a moderator of. But again, that was, that made me realize that people were looking for a neutral third party to get expert advice from.
Jonathan Hughes: All right. Well, Betsy, is there anything else that you think people need to know?
Betsy Mayotte: Yeah, so I, You know, as I've mentioned a [00:18:00] couple times, this is a temporary waiver. If people don't make sure their ducks are in a row, which is making sure you have a direct loan and have submitted proof of at least one period of eligible employment before October if you, if you don't do it until November 1st, there isn't gonna be a person on the planet that can help you. Because most these rules are embedded into the law and even the white house in most cases does not have the ability to contradict the law. So I, I am not looking, I'm actually thinking about going off the grid on November 1st, because I guarantee you as early as November 1st, I will get my first email from someone who just found out about the waiver and there isn't gonna be anybody including me that can help them so I can encourage. Employers that are PSL F eligible employers enough to. Help educate their employees about PS L F in general, but in particular about [00:19:00] these waivers in my experience of the many years that I've been working, helping borrowers with PS L F I've come to the conclusion that the best avenue to do outreach about PS L F is through the PS L F eligible employers. It doesn't have to cost the employer or anything. It could be as simple as sending out an email with a link to either the department of education's website or our website, or both encouraging their employees to look into this program, especially before October of 2022. It could, you know, preferably it means giving them more education, such as presenting a webinar. But this is a free benefit that employers should. Should be shouting from the rooftops about
Jonathan Hughes: Betsy. I cannot thank you enough once again, for coming on the show.
Betsy Mayotte: It was my pleasure. I, I love talking about this stuff, so bring it
Jonathan Hughes: Okay, well, thank you very much.
Betsy Mayotte: My pleasure.
Jonathan Hughes: All right. Once again, thank you to Betsy Mayotte for sharing her [00:20:00] time and her expertise with all of us today on this special bonus episode of MEFA podcast.
And folks, if you like the show today, and you want to hear more from MEFA and all topics related to planning, saving, and paying for college and career readiness, please subscribe to us on apple podcast Stitcher, iHeartRadio, wherever you get your shows from and whether you're new or a regular listener, please remember to rate or view us so we can keep doing what we're doing in getting this good information to people like you.Thanks to our producer, Shaun Connolly, and our editor, Laura Patten. Once again, my name is Jonathan Hughes and the MEFA podcast.