The issue of student loans is bubbling away on the back burners of Congress. Forbearance authorized by the Cares Act is scheduled to end on September 30th, at which point borrowers will have to start making regular payments again. Since the start of forbearance, nearly 42% of borrowers have not made any monthly payments.
Many are hoping that the President will announce some sort of student loan forgiveness program at the same time as payments resume. The American Recovery act paved the way for up to $10,000 of forgiveness, making such a move tax-free – instead of treating it as a taxable event. But it’s not in the President’s recent budget announcement, and the administration is waiting for a legal opinion on whether the President has the authority to authorize some forgiveness without the vote of a divided Congress.
If loans are not forgiven, many borrowers are likely to resort to one of the income-based repayment plans available to lower those monthly payments. But that will drag out their payment schedule well into retirement! And at that point if they can’t pay, their Social Security benefits will be reduced!
A Better Solution
Millions of Americans are eligible to take advantage of the Public Service Loan Forgiveness program. It is designed to forgive the entire balance of most Federal student loan if eligible workers make 120 on-time payments – even at reduced levels offered by one of the four income-adjusted Federal programs.
This PSLF program is available to teachers, nurses, doctors, government employees like police and firefighters, tribal employees, and employees of non-profit organizations and charities. If you work in any job at a qualifying employer – for example, whether nursing or administrator at a non-profit hospital – you are eligible. All Federal Direct loans qualify for forgiveness, but not FFEL or Perkins loans.
The PSLF program was launched in 2007, amidst much fanfare. But since the initial 10-year period ended in 2017, only around 3700 borrowers have had their loans forgiven. The program required such specific conditions and employer certifications that many borrowers who worked hard to make all those payments over 10 years were devastated to be told they hadn’t met the requirements!
A New Employee Benefit from Tuition.io
Tuition.io enables employers to offer a full suite of education assistance benefits such as direct contributions to employee student loans, student loan management tools, and tuition assistance.
Now, they’ve launched online, interactive PSLF tools for qualifying employers (all those public service employers noted above) to make available to their workers. There is no cost to the employee.
The Tuition.io PLSF tools make it easy for PSLF-eligible employees to take the right steps for PSLF, track their qualifying payments, and handle completion of required forms. It links your specific loans, giving advice during the set-up process. Here’s a perfect example from their website:
Alex has $58,519 in federal student loans and $2,890 in private student loans. His payments are $662/month and he can’t afford to save anything for retirement right now. His starting salary is $54,000.
By enrolling through his employer into the PSLF program, he will learn that he needs to consolidate ONLY his FFEL loans to make them eligible for PSLF, and make lower monthly payments through the Federal PAYE (income based) program. His monthly payments drop to $328 /month, saving him $334 per month. At that level, he can easily make the required 120 months (10 years) of payments – and even set some money aside in the employer’s 403(b) plan.
Alex will have his loans forgiven tax-free in 10 years and save $34,502 in payments!
Note: There is no income limit to benefit from PFLF. But, to be eligible for an income-based repayment program that lowers the monthly payment significantly and makes the plan attractive, you need to have qualifying household income. that means many married couples earn too much on a joint return for the spouse with loans to get reduced payments.
Public Service Loan Forgiveness is not too good to be true. And now, it’s easier to qualify and track compliance with the program. But employees of non-profits need to bring this opportunity to the attention of their employer’s HR department, since the program is only offered through qualifying employers. So, if you work for a non-profit, or government agency, or tribal organization, clip this column and show it to your employer. Tell them to call tuition.io at 650-918-0326 or email firstname.lastname@example.org to see the PSLF tools for themselves.
This is an easy, compelling, money-saving program to be offered as an employee benefit. It will keep workers loyal – and it will save them a fortune in student loan payments. Everyone wins. And that’s the Savage Truth.