Student loan forgiveness: the details

Student loan forgiveness is in trouble, according to findings from the Student Borrower Protection Center, which found through the newly-released data that:

80% of student loan borrowers will get rejected for student loan forgiveness by 2026

According to monthly projections from PHEAA — the student loan servicer that manages the Public Service Loan Forgiveness program — PHEAA expects only 276,370 student loan borrowers to secure public service loan forgiveness through January 2026. These student loan borrowers represent approximately 20%, or 1 in 5 borrowers out of 1,250,373 who have currently declared their intent to pursue public service loan forgiveness. The first student loan borrowers became eligible for student loan forgiveness in 2017, which means that nearly a decade later, nearly 80% of student loan borrowers will still be rejected.

This data ignores future enrollment in student loan forgiveness

As Student Borrower Protection Center indicates, this estimate for an 80% rejection rate is based on the current number of student loan borrowers who are pursuing student loan forgiveness. However, more student loan borrowers will continue to pursue public service loan forgiveness between now and 2026. Student Borrower Protection Center estimates that 2.2 million student loan borrowers will declare their intent to pursue public service loan forgiveness by 2026. If 276,370 student loan borrowers are expected to get student loan relief, then that represents closer to a 12.5% approval rate, which means 87.5% of student loan borrowers would be rejected for student loan forgiveness.

Paying student loans for 10 years won’t necessarily get you student loan forgiveness

Importantly, student loan borrowers who pay federal student loans for 10 years won’t necessarily get student loan cancellation. Why? The Public Service Loan Forgiveness program has multiple requirements, including being enrolled in an income-driven repayment plan, making a majority of the 120 monthly student loan payments while enrolled in an income-driven repayment plan, and consolidating any FFELP Loans into a Direct Consolidation Loan. This is in addition to working for a qualified public service or non-profit employer. Here’s some more striking data: in 2017 — which was 10 years after the program started — the U.S. Department of Education said that 739,719 student loan borrowers intended to pursue public service loan forgiveness. If only 276,230 are expected to get student loan forgiveness, that means that nearly two-thirds of the student loan borrowers who are currently pursuing student loan forgiveness won’t get their student loans cancelled. Remember, these are student loan borrowers, who in many cases, will have paid their student loans for 10 years, but still won’t get student loan forgiveness.

Student loan forgiveness: make sure you do this

If you want to know how to get student loan forgiveness, make sure you understand this:

1. Focus on your employer, not your role

Public service loan forgiveness is not based on your role. “Working in public service” won’t qualify you for public service. You need to work full-time (at least 30 hours a week) for a qualified public service or non-profit employer. So, your employer, not your role, matters. Complete an Employment Certification Form with the U.S. Department of Education.

2. Make sure your Employer Certification Form is completed correctly

This sounds obvious, but the number one reason that student loan borrowers get rejected for public service loan forgiveness is incomplete or incorrect paperwork. Seriously. Double check your form. Make sure all your information is included. Make sure your form is signed by your employer.

3. Focus on 120 student loan payments, not 10 years of public service

To get student loan forgiveness, it’s imperative that you focus on the number of student loan payments, not years of service. In most cases, 10 years of service and 120 monthly student loan payments will cover the same period. However, sometimes a student loan borrower could work for a public service employer for 10 years, but that borrower has made fewer than 120 monthly payments on-time and in full. The good news is that student loan relief due to the Covid-19 pandemic will give student loan borrowers “credit” toward the 120 payments even if you didn’t make any federal student loan payments since March 2020. That means you can get credit for more than 20 monthly student loan payments through January 31, 2022 toward the 120 monthly student loan payments.

4. Enroll in an income-driven repayment plan

Working in public service for 10 years for a qualified employers isn’t enough. You must enroll your federal student loans into an income-driven repayment plan such as IBR, PAYE, REPAYE or ICR, for example. Plus, you must make a majority of the 120 monthly student loan payments while enrolled in an income-driven repayment plan.

5. Consolidate FFELP student loans

If you have FFELP student loans, please pay attention to this. Please do not ignore this and work for a public service employer and think you meet every requirement to get student loan forgiveness. FFELP student loans aren’t eligible for public service loan forgiveness. There are too many stories of public servants who met every requirement for the Public Service Loan Forgiveness program only to find out later that their student loans don’t qualify, which is another main reason for rejection. Fortunately, there’s a solution: consolidate your FFELP Loans into a Direct Consolidation Loan. Do this before you start your 120 monthly student loan payments, or your student loan payments won’t count. Student loan consolidation can be completed through the U.S. Department of Education, and you can contact your student loan servicer for details. The reason you need to consolidate your FFELP Loans is because only Direct Loans are eligible for public service loan forgiveness.

Student loan forgiveness: final thoughts

President Joe Biden has cancelled almost $10 billion of student loans. (Find out here if you qualify for student loan cancellation). Biden’s approach has been based on targeted student loan cancellation, but he has not focused on actively revising the Public Service Loan Forgiveness program. (Here are 5 reasons why Biden hasn’t cancelled student loans). If Congress intended for the Public Service Loan Forgiveness program to provide student loan relief to public servants, then student loan cancellation hasn’t been made available as widely as anticipated. Presidents George W. Bush, Barack Obama and Biden all have supported the Public Service Loan Forgiveness program. President Donald Trump eliminated the program from his proposed budget, and believed that student loan forgiveness should continue to be available for everyone through income-driven repayment plans. Biden, along with U.S. Secretary of Education Miguel Cardona, are focused on improving the program and outcomes for student loan borrowers. (Here’s what Biden student loan forgiveness means for your student loans). The Education Department has been soliciting feedback from the public on how to improve student loan forgiveness and student loan cancellation. This could lead to substantial changes in the program to help more student loan borrowers get more student loan forgiveness. Biden also has proposed to cancel student loans after five years, rather than 10 years, which could result in $10,000 of student loan forgiveness for each year of service for a total of $50,000 of student loan cancellation.

If and until there is any fix for student loan forgiveness, make sure you understand all your options for your student loans. Hundreds of thousands of student loan borrowers who are expecting student loan forgiveness may not qualify or ultimately get student loan forgiveness. Plus, student loan forgiveness only applies to federal student loans, not private loans, so make sure you have a game plan especially for private loans. Here are some popular options to save money:

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Student loan cancellation became focus today on Capitol Hill