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Public Service Loan Forgiveness: an exercise in faith

When I learned of the Public Service Loan Forgiveness program, I was already 2 years in to my qualifying job, but…I didn’t have the exact right kinds of loans. I spent a lot of time on various phone calls trying to learn as much as I could, and in the end, I consolidated my loans, filled out some paperwork, and figured it out. Or at least I think I did.

The idea of this program is that there are certain jobs that require a lot of training, and the people in them make society better even though their salary is relatively crappy. The government, to encourage people to take these not-well-compensated-but-require-a-degree paths, has agreed to forgive student loans, specific student loans for specific jobs.

With this in mind, the idea is relatively simple: you have to have the exact loans (Direct Loans), your loans have to be quite high compared to your salary (in other words, you are eligible to pay back a smaller payment than would normally be required), you have to work full-time at a non-profit or government job, and you have to always pay on time (not soon, not late). You have to make 120 qualifying payments. Ten years.

Simple idea, complicated execution. It’s difficult to get it just right. 120 payments isn’t necessarily 10 years, because if you miss one payment, then you’re pushed back to 10 years and one month. If you switch jobs in that 10 years, your new job might not qualify. If you try to do the pay-off-debt-at-any-cost thing and pay off debt at any cost, you are actually costing yourself in both possible forgiven loans and screwing up the timeline.

I’ve been keeping this as part of my get-rich-slow plan for the past 6 years. It was super great in the first couple of years because our salaries were so low that I was paying almost nothing. Now that our salaries are much higher, I am paying a lot more, but, if all goes as planned, forgiveness is right around the corner (a corner that is 4 years away).

But in the late fall of last year, I started hearing some news stories that were shocking and frightening: only 1 percent of those who had applied for forgiveness were given it. One percent. This is sickening, because if I had believed that my loans wouldn’t be eligible for forgiveness, and had not been following this plan, and instead trying to reduce debt at any cost, I could have saved myself tens and thousands of hypothetical interest dollars. It’s not so much an “I DESERVE FORGIVENESS OF LOANS” but more of a “hey wait I followed your rules and now you aren’t doing what you promised?”

However, I have not lost faith, for several reasons.

  1. The program was begun just barely over 10 years ago, so those that have already applied for forgiveness are the ones who would only be eligible if they jumped through every hoop, correctly, from day 1. They couldn’t have missed any payments or prepaid anything. They couldn’t have had a period of job loss in there. They couldn’t have, like me, not realized that they needed to re-do their loans until a couple of years into their job. I have a lot of (perhaps foolish) faith that these percentages of forgiven loans will change over time.
  2. As a subset: if you look at the numbers, only 1% of applicants had their loans discharged, but something like 25% of them were denied for “missing information,” and 75% for not meeting the requirements. I don’t know exactly what that means, but I am making an assumption that missing information typically means something like “their employer is not certified,” and it seems that missing information is something that can be fixed. Twenty-five percent still sucks, but it doesn’t suck as much as 1%.
  3. As somebody who is using this as a part of my get-rich-slow plan, I have made sure to have my employment certified every year. It’s a pain in the rear but it’s free and simple. I fill out the forms, have my HR people fill them out, have it get screwed up somewhere, make 20 phone calls, get it straightened out. Yeah, it’s a pain. At any rate, on my loan documents, it now says that I have 61 qualified payments (I’ll recertify again in the summer).

It seems to me that the numbers are so shockingly small because the only people to be eligible thus far are those who could have made zero mistakes in 10 years. I suspect that as another year goes by, and another and another, the numbers will increase dramatically, as people realize how to get to that magic 120 number.

I also have faith that, because the government has already certified 61 of my payments (soon to be 75 or so), they have already let me know that I’m on my way. If I keep on certifying those payments, year by year, until it hits 120, there won’t be any need to fill in missing information once I’m ready to apply for forgiveness – they’ve already told me it’s all there.

That said, the PSLF site says they’ll update the data every quarter, and the most recent data are from late September (I don’t know when they posted the summer data, the dates of newspaper articles make it seem like early September. And maybe they posted the September data in early January. In which case, they could update the December data any day now. Not like I’m checking it every day, many times a day. Nope, not at all like that). I could easily be proven wrong, and trusting the government could be my biggest financial mis-step. I guess time will tell…and in the meantime, I’ll be over here, recertifying my payments every chance I get.

4 thoughts on “Public Service Loan Forgiveness: an exercise in faith”

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