Buzz
The government has given federal student loan borrowers a temporary break from payments. While this is a relief, it creates confusion, particularly for those hoping to have their loans forgiven under the Public Service Loan Forgiveness program.
According to announcements from the Department of Education and President Trump, confirmed by the CARES Act relief law, most federal loan borrowers don't need to make payments from mid-March 2020 through September 2020. During this time, no new interest will accrue, and missed payments won't harm your payment history or credit score. Any voluntary payments made will be applied to the principal balance.
PSLF borrowers must meet strict eligibility criteria, including 120 monthly payments and annual employment certification in a public service role. The CARES Act assures that the six-month relief period will count toward PSLF, but given the program's low approval rate, public servants are understandably cautious and want to ensure they maintain their eligibility.
I spoke with Adam Minsky, a lawyer who specializes in student loan issues, to get his take on what the CARES Act means for those aiming for PSLF.
To start, Minsky confirmed that the months under suspension still count as “qualifying payments” toward PSLF. However, you must continue fulfilling your part of the deal by working full-time for a qualified PSLF employer.
If your job situation changes during this period—such as reduced hours or being furloughed—be sure to document these changes. Having proper documentation will help in case there's any doubt about your eligibility later.
We've previously discussed that this payment pause might be a good opportunity to pay down your loan balance, especially since no interest is accruing. But for those aiming for PSLF, the end goal is forgiveness, not paying off the loan, right?
According to Minsky, “Borrowers working toward PSLF can still make progress toward forgiveness without making any payments, as long as they meet all other PSLF requirements.” He added, “Some PSLF borrowers may find that it makes more sense not to make payments at all.”
If you’re aiming for loan forgiveness and feel confident you'll meet the criteria over the course of the next 10 years, it might be smarter to allocate any extra funds to building your emergency savings or boosting your retirement account. Paying down your loans won't be as critical if you're focused on working for a decade to have the balance forgiven.
Minsky emphasized that if you have concerns about your eligibility right now, you should reach out to your loan servicer, as different servicers are managing the current situation in varying ways.
While your loans are on a temporary pause, it’s a great opportunity to get into the habit of checking your PSLF status. Be sure to submit the employment certification form every year, even if your job hasn’t changed, and regularly contact your servicer—we’ve suggested doing this twice a year—to stay on top of your progress.
Minsky advised, “If a borrower believes their servicer made an error or miscounted qualifying PSLF payments, they should challenge that right away and request an audit or a re-evaluation.”
Are you a PSLF applicant who has spoken with your loan servicer? If you've picked up any helpful advice on maintaining your forgiveness eligibility during this period, feel free to share in the comments.
