Are You Ready for Public Service Loan Forgiveness? Eileen Eiden Student Loan Supervisor Austin Community College Texas Association of Student Financial Aid Administrators

Agenda History and Intent of the program Overview of the program How is your Financial Aid Office getting ready for it? Future of PSLF Texas Association of Student Financial Aid Administrators

History and Intent of the PSLF Program Public Service Loan Forgiveness (PSLF) was signed into law July 2007 by President Bush It is part of the College Cost Reduction Act (CCRA) Intent of PSLF program from CCRA “The Public Service Loan Forgiveness Program is intended to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their Direct Loans after they satisfy the public service and loan payment requirements” Texas Association of Student Financial Aid Administrators

Let’s go over PSLF Texas Association of Student Financial Aid Administrators

Five Steps for Public Service Loan Forgiveness 1. Right Loan 2. Right Payment 3. Right Job 4. Repeat 120 times 5. Prove it

Right Loan ONLY DIRECT LOANS are ELIGIBLE for PSLF As of July 1, 2010, all Federal student loans are Direct Loan Prior to July 1, 2010, most loans were FFEL loans How do I know if my Loans are Direct or FFEL???

NSLDS.ed.gov

Eligible Loans Direct Subsidized Loans Direct Unsubsidized Loans Direct PLUS Loans (for parents and graduate or professional students) Direct Consolidation Loans Special Direct Consolidation Loans Other federal loans eligible if consolidated into a Direct Consolidation Loan, including: FFEL Subsidized/Unsubsidized Stafford Loans FFEL PLUS Loans for parents and graduate or professional students FFEL Consolidation Loans (excluding joint spousal consolidation loans) Federal Perkins Loans Title VII Health Professions and Nursing Loans

STUDENTLOANS.gov To consolidate your loans, you can visit studentloans.gov.

Right Payments Income-Driven Repayment Plan Old IBR – All loans NEW IBR – New Borrower on or after 7/1/14 PAYE – Direct Loan (other rules) REPAYE – Direct Loan Only ICR – Direct Loan Only Standard – All Loan but Not IDR Plan Payments are based on your income and family size. Loans will be forgiven in 20 or 25 years. Old & New IBR and PAYE Plans require partial financial hardship (PFH). No PFH for REPAYE and ICR IDR Plan after 20 or 25 years canceled amount is taxable as income. PSLF is not taxable income.

Summary of Income – Drive Repayment Plans Good example on discretionary income https://www.theatlantic.com/business/archive/2011/10/who-qualifies-for-obamas-10-student-loan-payment-cap/247470/ https://studentloansherpa.com/discretionary-income-calculation/ Family of three income was 42,135 year, the 150% of Poverty Level is 30,135 – the borrower’s discretionary income is $12,000 year (different between 42,135 – 30,135) Divide the DI by 12 (months in a year) this will give you are month DI of $1000. Take the monthly DI by 15% or 10%... This will give you monthly payments.

Modeling PSLF - Billy Borrower 6/27/2018 Modeling PSLF - Billy Borrower Is single with no dependents and lives in Georgia Has an AGI of $35,000 that rises at 5% per year Has $50,000 in Direct Loan debt ($23,000 of which is subsidized), all of which has a 6% interest rate Borrowed for graduate school 12

Modeling PSLF Without PSLF With PSLF Time in Repayment Total Paid 14 yrs., 8 mos. $76,339 ICR 18 yrs., 9 mos. $91,713 IBR 20 years $71,782 PAYE 25 years $108,426 REPAYE Time in Repayment Total Paid Total Forgiven $0 $0 $36,538 $0 With PSLF 10 years $50,501 ICR 10 years $36,927 IBR 10 years $24,618 PAYE 10 years $24,618 REPAYE Time in Repayment Total Paid Total Forgiven $22,459 $45,065 $55,333 $51,746

Taxation of Forgiveness - PSLF ICR Forgiven Amount = Income Forgiven Amount = $22,459 Tax = $0 IBR Forgiven Amount = $39,927 PAYE Forgiven Amount = $55,333 REPAYE Forgiven Amount = $51,746

Taxation of Forgiveness - IDR ICR Forgiven Amount = Income Forgiven Amount = $0 Tax = $0 IBR PAYE Forgiven Amount = $36,538 Marginal Tax Bracket* = 28% Tax* = $10,231 REPAYE *Based on Billy’s year 20 income of $88,455, 2015 tax brackets, uncomplicated tax filer.

THE MAGIC NUMBER On-time Monthly Payments Payments must have been made after 10/1/07 On-time (no later than 15 days after the scheduled due date Must be mad each month Must be made when the loan is not in default status *Reduced and/or Zero dollar monthly payment under an IDR plan qua On-time Monthly Payments

Payments Payments must have been made after 10/1/07 On-time (no later than 15 days after the scheduled due date) Must be made each month Must be made when the loan is not in default status Reduced and/or Zero dollar monthly payment under an IDR plan qualify Lump sum payments that exceed the scheduled payment amount do not count as separate payments

PSLF Qualifying Payments As of last October… Source: FedLoan Servicing

Right Job Yes to Tribal or Gov’t organizations, entities or agencies. Government (Federal, State, & Local) 501 (c) (3) Non-profit AmeriCorps Position Peace Corps Public Service Organization Yes to Tribal or Gov’t organizations, entities or agencies. No Government Contracts Organization can’t be a labor union or partisan political organization Time can’t be spent in religious instruction, worship services or any form of proselytizing Full Time # of hours the employer considers full- time 30 hours per week on average, whichever is higher More than one qualifying part-time job simultaneously, may meet full-time employment requirement if work combined average of at least 30 hours per week with multiple employers

On time payments once a month for 10-years Repeat 120 times On time payments once a month for 10-years

Prove it Fedloan Servicing Myfedloan.org

Prove It Verify income & Family size annually Certify your employment annually Apply for forgiveness

Getting the word out!!! Start educating your staff Encourage them to attend the FedLoan PSLF webinar This webinar is offered monthly through the FedLoan website Or check out American Student Assistance ASA offers a PSLF webinar twice per month Check out Last years FSA Conference on PSLF Reach out to staff and Faculty at your institution by providing information Identify who handles your employment certification at your institution Start talking to your community leaders regarding this program Texas Association of Student Financial Aid Administrators

What is the future for PSLF? http://www.marketwatch.com/story/feds-warn-cops-firemen-and-teachers-theres-no-guarantee-on-student-loan-forgiveness-2017-08-02 Still, borrowers shouldn’t panic about the Department’s argument that the ECF form isn’t a guarantee of forgiveness, said Isaac Bowers, the director of law school engagement and advocacy at Equal Justice Works, an organization that promotes public interest law. seems unlikely that the majority of borrowers who have submitted them — those who work for the government or for 501(c)3 nonprofits — will have their eligibility reneged, he said. Those types of jobs are clearly written into the statute governing the program, he noted. " Texas Association of Student Financial Aid Administrators

Thank you! Eileen Eiden Student Loans Supervisor Eileen.eiden@austincc.edu Phone: 512-223-7553 FedLoan Servicing Support Center MyFedLoan.org/pslf Toll-Free number: 855-265-4038