Episode 18 – Student loan forgiveness and PSLF
Episode transcript:
[musical intro]
Jenny
Welcome back to Fund Your Future with the DRS. And in addition to managing money and saving for retirement and paying off loans, one of the largest sort of loan debts that Americans have is student loan debt. And so, we’re happy to have an episode today to talk about a great program available in the state of Washington for student loan forgiveness.
Seth
I’m super excited about this, Jenny, because oftentimes I think we hear from people that they’re not ready to save for retirement because they’ve got so much student loan debt, they don’t know what to do. And they feel overwhelmed. And it’s a topic that I think is very scary for people. We’ve talked about [how] people aren’t really comfortable talking about money in general.
People can get really scared talking about student loans and feel like they’re just drowning. So I’m super excited. We have Jessica from the Washington Student Achievement Council, Office of the Washington Student Loan Advocate. Jessica, could you just start by telling our listeners a little bit about the Washington Student Achievement Council and what your role is in the office?
Jessica
Yeah, of course. So the Washington Student Achievement Council that I’m going to be referring to as WSAC from now on so that they don’t have to be saying that mouthful every time. It’s a state agency that basically works to raise educational attainment through a lot of different things like strategic engagement, program management and some partnerships. Some of the things that we do is: ensure the quality of state financial aid programs, provide college savings opportunities, and also support students through outreach and success programs that are targeted for specific populations.
My role within WSAC is as the interim student loan advocate, which basically means that my daily job is to kind of analyze and monitor any laws or policies that can impact student loan borrowers at the federal, state and local level, and also make recommendations about that. And I also work directly with Washington state student loan borrowers to address complaints that they may have regarding usually their loan servicers, as well as to help them navigate any issues and identify resources such as potential student loan forgiveness.
Seth
That’s awesome. This is an office I didn’t know existed until a few months ago, and I think you’re all doing a lot of wonderful work. And there’s been a lot of news about student loan forgiveness and I think folks who have started working in the public sector have kind of always had in the back of their mind that they might be able to get their student loans forgiven.
And there’s kind of been different sets of information. So, could you kind of just give us like a one minute spiel for what does a public employee have to do to get their student loans forgiven?
Jessica
Yeah, of course. So the first thing that you need to do is that you have to have federal student loans. So, if you have private student loans, unfortunately, those are not eligible for public service loan forgiveness. And when it comes to the specific federal student loan that you want to have, you need to have a direct federal student loan.
And if for some reason you don’t have a direct federal student loan, you actually have the opportunity to consolidate your loans into a direct consolidation loan to make that eligible. You also need to be working full-time in a qualifying public sector employer for a minimum of ten years while making payments on your student loans. This is about 120 payments, roughly.
You know that the ten years equate to. But it’s also important for them to know that the payments do need to be made while working in the public sector, meaning even if you work 25 years in the public sector in the past, if you haven’t started making payments on your student loans yet, you haven’t entered re-payment, like that ten year clock starts the moment that you enter re-payment on your loans.
And then finally, the last piece that’s very important to know is that you do have to be either in an income driven repayment plan, which is also known as IDR, but you also can have some periods under those ten years and the repayment plan and still qualify.
Jenny
And so, what was that again? You mentioned it was an…
Jessica
An income driven repayment plan, which is a plan that is based on your income. So there are four different repayment plans that are available under that category. Each one of them, you qualify based on a bunch of different things, like when you took out your loans, what your current income is, as well as there’s a percentage that is required of your discretionary income for each of those plans.
That can vary anywhere currently from 10% to 20% of discretionary income.
Jenny
And kind of who might qualify for this? Is it only. You know, we mentioned public employees. You know, does that cover states, county and city employees?
Jessica
It’s actually any level of government, including federal, state, local and tribal government, as well as local government includes things like educators, teachers, firefighters, police officers. You know, the list goes on and on.
And it also includes anybody working at a nonprofit organization that is consider a 501(c)(3) organization under the tax code, as well as anybody working at a nonprofit organization that considered a 501(c)(4) that provides specific public services. Things like emergency management, military service, early childhood education, public service for individuals with disabilities and the elderly, public health, things like nurses, social workers, counselors, etc., as well as public library services. So, it covers a lot more than just what people traditionally think as government.
Jenny
Gotcha. That’s perfect.
Seth
So, Jessica, are there common mistakes that people make when they’re thinking about applying for student loan forgiveness? Are there things that folks should be aware of ahead of applying? Yeah. Can you just kind of give us some background on what things people need to be aware of?
Jessica
So, the first thing is just not talking about your student loans and your finances in general because there is such a stigma around student loans. Any debt relief, right, that people don’t talk to each other about it. And then because we don’t talk about it, we just don’t realize that there might be resources and options available on how to handle that.
So, I think just talking starting to talk to each other about student loans would be good. And I’m sure that this is probably something that you touch on in this podcast. So that’s my number one tip.
Jenny
We’re big advocates for that.
Jessica
Now, besides that, I would say that not certifying your employment every year tends to be a mistake that people do.
Jenny
And how do people do that? How would I certify my employment?
Jessica
Yes. So, there’s basically a form that’s called the PSLF form that you complete that basically asks for your employer’s information, your information, and then basically has your employer signs the dates that you have been working for that employer. So, you technically don’t have to submit that form every year. You could be paying a loan for ten years and then submit that form on the 10th year and still get forgiveness.
That’s possible. But here’s the thing. The issue of you waiting until the end of the ten-year period is that if something is not right, like, for example, you don’t have a direct loan or maybe you’re in an incorrect repayment plan, you’re not going to find out that information until the 10th year. Right? So, it’s better for you to be re-certifying every year because, one, you can track the progress towards the forgiveness, like how many qualifying payments you have made.
Right. So like, you can be like watching that closely so that hopefully once you hit that 120 qualifying plan the next day, you’re like submitting your paperwork, right? But also, it allows you to identify any issues that you may have that might make you ineligible for the forgiveness. Right? If you’re re-certifying it every year. So, I would say that completing your PSLF form in order to certify your employment every year would be the number one thing that I would tell people to do to hopefully stay on track, to get on track and stay on track for forgiveness.
The next thing would be being in an incorrect repayment plan, which by certifying every year, [if] you are in an incorrect repayment plan, you’re going to find out that information. Hopefully on the first year, not after ten years. Right? So yeah, people sometimes are in other types of repayment plan that federal student aid offers that are not eligible, that are not income driven or the ten years standard repayment plan.
And that can cause issue. Some people don’t understand the full-time requirements. Right? They think that any employment qualifies and basically you do have to be employed at least 30 hours a week or more in order to be considered full-time. You could patch up multiple part-time jobs to get to the 30 hours a week requirement, but you are required to be working at least 30 hours a week in order to be considered full-time for PSLF.
And then I would say the last thing is basically not taking advantage of some special periods that are happening right now that allow you to get payments that you traditionally wouldn’t be able to add to your account. Things like payments that were made in an incorrect repayment plan or some periods of forbearance and deferment. So last year, we had something called the PSLF waiver that allowed people to get credit for payments that may not have qualified in the past.
And right now, we have something else called the income driven repayment account adjustment that also allows you to get credit for that. So, a lot of people don’t realize that there’s these special opportunities to potentially get some extra PSLF payments under their belts and achieve forgiveness faster. Because of that, they miss out on really good opportunities to be able to either get forgiveness or try to get to that forgiveness faster.
Jenny
Would you remind myself and our listeners, what does PSLF stand for?
Jessica
Yes, PSFL stands for: Public Service Loan Forgiveness.
Jenny
And so, student loans might not just impact younger workers, it could impact retirees. Are there forgiveness programs that retirees should be aware of?
Jessica
So, when it comes to PSLF specifically, right, you have to be employed in the public sector when you both apply and when you receive forgiveness. Under that PSL waiver that we had last year, people could actually have been no longer in the public sector, whether they’re retired or maybe switched to a job in the for-profit sector and still get that forgiveness.
But unfortunately, as of right now, if they’re not employed in the public sector anymore, whether that because they moved on to another opportunity or because they are retired, there’s no opportunity to qualify for PSLF. However, for people that have been in repayment for quite some time or that may be in repayment for quite some time in the future here I’m talking about like 20 to 25 years in repayment, which sounds like a long time, but you’d be surprised how many people would be on this bucket of people.
There’s actually opportunity to get credits towards earning potential income driven repayment forgiveness. So, which is what I was talking about earlier. So, a lot of people don’t know that income driven repayment plans not only potentially allow you to keep your monthly loan obligations more affordable. Right? Because it’s taking away potentially making a really big loan payment to a smaller loan payment, depending on your income.
But it also is a vehicle that you can use to get potential forgiveness. But if someone has been in repayment for some time or they think that they’re going to be in repayment for at least 20 to 25 years, it would be great to get a little bit more education on the special period of time because they might be able to either get forgiveness right away or be closer to forgiveness than they might already know.
Seth
So, Jessica, I know that there were a lot of concerns from people feeling like no one ever got forgiveness. That’s really improved in the more recent time periods. I’m wondering if you might just have a story or two that you would like to share generally a success that a person has had regarding loan forgiveness?
Jessica
Yes. So you were absolutely right when you say that a lot of people have been discouraged by the PSLF program. So, PSLF first started in 2007. That’s when Congress actually first passed a bill to create the program and make it into a possibility, which, if you think about the rules of the program, would mean that the first batch of people that would potentially be eligible would be eligible in 2017.
Right. So, in 2000 17 people that had been in repayment since 2007 kind of like, “Oh, yay, I’m going to submit my paperwork and I’m going to get the forgiveness that I deserve.” But a lot of people found out, “oh, no, I was in an incorrect repayment plan” or “oh, no, I didn’t have the right loan.” Right? Like, didn’t have a direct loan or “oh, no, I had an extended period of forbearance and that period of time is not going to count towards credit for PSLF.”
So around that time is when you heard that, like so many people applied and got denied. And that was very discouraging for borrowers because they felt like they had been working in the public sector for such a long time but were still not eligible for this forgiveness that was promised to them. So, the PSLF waiver, which we talked about earlier, was a kind of a response to that, to try to make up for the mistakes that the Department of Education did in like not educating people enough about the program and as a result of that waiver.
Just to give you a little bit of perspective in numbers, right. For the people in the state of Washington in October of 2021, before any of those special opportunities for PSLF were implemented, we had about only 3000 people in our state that had received forgiveness under the program. And then as of April of 2023, then the number has more than quadrupled to about 13,460 people.
So, which is amazing. We’re really excited to see… And there’s going to be more, more people coming because they haven’t forgiven everybody yet that took advantage of that opportunity. So, I like to talk about these numbers first because, like I said, a lot of people felt like they were let down by the program in the past and felt discouraged to apply.
But I want to show people that like this is actually working. These special periods of time are here to help you get closer to the forgiveness. And I want people, if they even have a slight bit of hope, you know, that they could potentially get their loan forgiveness to act now because it can make a really big difference on whether they get forgiveness or not.
Now, to talk about a little bit more about like stories of specific people, just last month, I got so many good news from people that we had been working with since October and some of them for a couple of years that achieved forgiveness though PSLF. One of them was a teacher who had been paying for her loan and working in the public sector for, I kid you not, 24 years.
Right? So, remember when I said that 20 years sounds like a long time? There’s definitely people that have been paying their loans for a really long time. And she tried for over… since 2017, basically over and over, to apply for PSLF, without success. And finally, last month, she received the good news that her loans, which at that time had a balance of over $75,000, had finally been forgiven.
And then we also had another person who had been working for Washington State Ferries since 2009 and actually had done everything right. This person had the right type of repayment plan. They had the right loans, but they didn’t actually submit their last form once they hit the 120 qualifying payments. And this is when we… that piece that I was talking about, it’s good for you to be resubmitting this every year so they don’t lose track. This person, because they already…he had submitted the paperwork once that the Department of Education knew that he was still working.
And I’m like, “Oh, no, no. Like, they don’t know that you are working still until you submit the form to show that you’re still working.” So, for that person specifically, basically all we had to do was resubmit the form. And as soon as that form was submitted within like a month or so, they were able to find out that their loans had been forgiven. And that obviously, you know, it’s usually not the case for a lot of the people that got discouraged.
But I figured that that was a good anecdote of like why it’s important to submit your form every year because this person actually might be getting a refund for some overpayments that they did, because I think that they paid a couple of years extra than they needed to for the program. And we also hear all the time from different borrowers about how much forgiveness has completely changed their financial standing in life.
And like the huge difference that it has made for the families. At the end of the day, this is what this work that we do is all about, you know, to advocate for borrowers so that hopefully we can change people’s lives and also give them recognition for the public service that they have provided to us all.
Jenny
Yeah, this is a truly life changing program.
Seth
Jessica, it seems like there’s a lot of different things people need to know about and there’s a lot of different things that your office is making people aware of, and it seems like you’re helping a lot of people navigate some challenging circumstances. So where, where would a person go if they want to learn more information about public student loan forgiveness?
What resources do you have available? I think you already mentioned that you do some webinars. Could you just talk a little bit about what people might do if they’re ready to take a next step and do some investigation about student loan forgiveness?
Jessica
Yeah, of course. So, I would say if they’re state employees specifically, or not state employees. I would say if they’re Washington state borrowers, a great place to check out would be our PSLF web page, which is WSAC, wsac.wa.gov/pslf There’s a lot of really, really good information that talks about all the things that I highlighted today that breaks it down step by step, as well as a recorded webinar that talks about the requirements to get PSLF and also more specifically about the income driven repayment account adjustment and how we could benefit both people that are working towards PSLF.
But also people that maybe are not working towards PSLF and are hoping to get their loans forgiven in the 20 to 25 year time frame. So, I would say like if somebody wants to get started today on learning more, go to our webpage and watch that webinar. Because it will give you a very comprehensive overview about PSLF requirements and also how you can hopefully take advantage of the special opportunity. Some people may have to act before the end of 2023 to really maximize their benefits.
So, I’m just trying to shout that through the rooftops so that people know: “please, please watch the webinar.” And if you have any questions, we also have an option for people to submit questions to us through our Washington State student complaint portal. The link to that is on the webpage, and you can use that portal. A lot of people think because it has the name “complaints” there, that you can only submit a complaint and that’s not true.
If you have a complaint for your student loan servicer because of how they’re handling your loans, you can definitely use that. But if you just have a question, right? It could be a general question about PSLF, about the income driven repayment, account adjustment, or anything else really related to student loans. That’s a place that you can go to and ask questions.
And the only requirement in order for us to get back to you is that you have to be considered a Washington state resident. I also want to make sure that I shout out to our wsac.wa.gov/loan-advocacy which is just general information about student loans. So, it’s not so specific to public service loan forgiveness.
It talks about other options for forgiveness that folks may have. And then if you have federal student loans, the number one place for you to get information would be StudentAid.gov people can get confused because especially once you graduate, you are going to be assigned to a servicer, which is basically the company that is going to be sending you bills and processing any forms that you submit.
Right. Regarding student loans. And they get confused between the servicer and the Department of Education. And I always say, yes, your servicer website is a great place for resources, but really where you should be getting 99% of your information regarding both your specific loans and just student loan forgiveness in general should be StudentAid.gov because you’re going straight to the source — if that makes sense — instead of going to just the company that’s trying to collect money from you.
Seth
So, I wanted to plug… Jessica, you mentioned that there’s a lot of good resources on your website. And before we started recording, we were talking about how currently there’s a pause on people having to make repayments on their student loans and that that’s going to end sometime in the relatively near future. And that if people have questions about that going to your website is probably a great place to do some research. So, I just wanted to plug that as a resource. There’s additional information that might be available for people who have student loans.
Jessica
Yeah, when it comes to return to repayment, we’re going to have a webinar sometime in July. And the reason for that is because we’re waiting until the decision on the one time debt relief litigation that’s going on. As far as like, when the repayment is going to start, is basically 60 days from when the litigation is resolved. We don’t know when that’s going to be resolved.
We have a hunch that most likely they’re going to wait until the date that the Department of Education has said for when basically when they will start the 60 day clock if the litigation has not been resolved. We’re thinking that that’s probably what the Supreme Court’s going to do just so that it all can fall within the same date, which would be June 30th, which would mean that the first payments that would be due would be in September.
But there are some very simple things that you can do right now. At least try to get in motion being ready for repayment. And we’re going to be doing some social media posts that are going to be talking about like these steps. And I would highly recommend not waiting until September 1st to start taking the steps to think about your repayment options.
To think about your forgiveness options and your options in general when it comes to student loans. So I just wanted to do a shout out, that please consider at least looking at that information now so that hopefully when September 1st comes, you are not caught by surprise with the bill in the mail and potentially panicking, you know, about what to do at that point.
But if that does happen, we’ll also be available to help people. I just want to make sure that people know that, yes, we’re here for public service employees, but we’re also here for all student loan borrowers in the state of Washington that may need assistance, whether that’s with repayment options or looking at forgiveness or cancellation that they may be eligible for.
Jenny
That’s awesome.
Seth
That’s great. Yeah. Thanks for coming. And join us on the podcast.
Jenny
Yeah, thank you. We really appreciate it.
Jessica
Awesome. Thank you so much for having me.
Jenny
Yeah, thank you.
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