What the CARES Act Means for Student Loan Borrowers Seeking Public Service Loan Forgiveness

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The Coronavirus Aid, Relief and Economic Security Act enacted on March 27, known as the CARES law, introduced several new measures to support struggling individuals and businesses during the coronavirus pandemic. For most federal student loan borrowers, the CARES Act provides substantial relief by automatically suspending monthly payments and reducing interest to 0%, until September 30, 2020.

But if you’re looking for a civil service loan forgiveness, how does the suspension of student loan payments, known as administrative forbearance, affect you? The short answer: if you still work full time for an eligible employer, you will stay on track for forgiveness. Here’s what you need to know.

The CARES law and the remission of the public service loan

Under Public service loan remission (PSLF), borrowers with federal direct loans can qualify for a loan forgiveness after making 120 monthly payments while working full-time for an eligible employer, which includes government agencies and non-profit organizations. Payments made during a income based repayment plan, which reduce monthly student loan bills to a percentage of income and extend repayment terms to 20 or 25 years, count as eligible payments for the PSLF.

Under the CARES Act, payments on federal student loans – including direct loans, Perkins loans, and federal family education loans held by the US Department of Education – are automatically suspended from March 13 to September 30, 2020. This means that eligible federal loan borrowers do. not having to make payments. As long as loan repayments are suspended, interest does not accrue.

Many borrowers planning to request a loan forgiveness through the PSLF were initially concerned that the suspension of payments would affect their eligibility. But according to the US Department of Education recently updated site, each suspended payment will be considered an eligible payment for the PSLF, to the extent that it would otherwise have met the requirements of the program. If you worked full-time for an eligible employer during the abstention period, then each suspended payment counts towards the PSLF. Additionally, unpaid interest will not be capitalized during or after the forbearance period, according to the US Department of Education.

If you are still employed by a non-profit organization or government agency, the CARES Act will benefit you. You have until the end of September before you have to worry about doing student loan repayment again, and you’re still making progress towards canceling the loan.

If you lost your job or if your employer reduced your hours

The CARES Act will affect you differently if the coronavirus outbreak has affected your employment status.

If you have been laid off, on leave, or if your hours have been reduced so that you work less than 30 hours per week, payments made during this period, including suspended payments, do not count towards the PSLF.

If this is your case, you will not completely lose your eligibility for the PSLF. Qualifying payments do not need to be consecutive. If you get a new job at another nonprofit organization, get rehired by your old employer, or revert to full-time status and start making payments again, your payments at that time will be taken into account. account for the PSLF, in addition to any payments you have already made. .

If you take a job with an ineligible employer so that you have an income during this difficult time, the payments you have made so far will still count for PSLF. When you later return to the public service, you will get credit for payments you made while previously working for a nonprofit or government agency. You simply won’t get credit for the time your job was not eligible for the PSLF.

If you want to continue making payments

Since no interest accumulates on federal loans until September 30, 2020, some borrowers who can afford it may continue to make payments or even make additional payments. During this time, the full payment will go to principal, which will help him to pay off his debt faster.

As a PSLF candidate, however, this strategy is not effective: you cannot claim the PSLF earlier by making additional payments. Any balance remaining after making 120 payments will be exempt from tax. If you pay more than the minimum required – or, in this case, make payments while they’re on hold – you’ll simply pay more than you need to.

One of the only cases where it makes sense to make additional payments is if you are no longer eligible for the PSLF, if you do not plan to return to a career in the civil service, and if you want to speed up your reimbursement. debt.

How to apply for a public service loan forgiveness

If you work for the PSLF, here are the steps you can take to confirm that you are eligible for the program and apply when you are eligible for the pardon:

  1. Use the PSLF help tool: The government PSLF Help Tool will allow you to see if your job is PSLF eligible, if your loans are eligible and what forms you need to submit to verify this information.
  2. Submit a certificate of employment form: Although it is not mandatory, it is a good idea to submit a Certificate of employment form annually or whenever you change employer.
  3. Examine the details of the repairman: After submitting the Employer Certification Form, your loans will be transferred to FedLoan Servicing, which manages the PSLF program on behalf of the government. Once this happens, FedLoan Servicing will send you a letter verifying the number of qualifying payments you have made so far. For any questions about your loans while you are working for the PSLF, contact the FedLoan service; If it is difficult to reach a representative by phone while call volumes are high, try sending an email instead.
  4. Complete the request: After you’ve made your 120th payment, you can complete the PSLF file for forgiveness. You must be working for an eligible employer at the time you submit the application and at the time your balance is canceled. You can apply online through FedLoan Servicing, or you can mail the application to the address listed on the form.

The CARES Act offers significant relief to many federal student loan borrowers reeling from the COVID-19 crisis. You don’t need to apply for forbearance on your loans – according to the FedLoan Servicing website, your online account should now say your interest rate is 0%, and you will be notified by April 10 confirming that your payments have been automatically suspended.

Read more: Your Money and the Coronavirus: A Guide to Financial Protection

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