The U.S. Department of Education has announced how borrowers who were in the wrong repayment plan may qualify for Public Service Loan Forgiveness (PSLF).
The second chance opportunity for loan forgiveness, called Temporary Expanded PSLF (TEPSLF), is available on a first-come, first-served basis. Congress appropriated $350 million in funding for TEPSLF, which should last for the next few years.
How to qualify for TEPSLF
Borrowers who were in the Direct Loan program, but in the wrong repayment plan while working full-time in a public service job, may be able to qualify for TEPSLF. Borrowers must satisfy all of the following criteria:
- Loans must be in the Direct Loan program. Payments made while the loans were in the FFEL program do not count.
- Private student loans are not eligible.
- The borrower must have been working full-time in a qualifying public service job (e.g., working for the government or a 501(c)(3) organization) while making 120 qualifying payments on eligible federal student loans. The qualifying payments do not need to be consecutive.
- The qualifying payments must have been made on or after October 1, 2007.
If the borrower was in a graduated repayment plan or extended repayment plan, instead of or in addition to standard repayment or an income-driven repayment plan, the last payment and the payment twelve months prior to the last payment must have been at least as much as a payment under an income-driven repayment plan.
How to calculate monthly loan payments under income-based repayment
The monthly loan payment under income-based repayment is 15% of monthly discretionary income. Discretionary income is the amount by which adjusted gross income (AGI) exceeds 150% of the poverty line. Monthly discretionary income is one-twelfth of this figure.
For example, suppose a borrower earns $30,000 a year. The 2018 poverty line for a family size of one is $12,140. 150% of this figure is $18,210. Subtracting this from AGI yields $11,790. Dividing this by 12 yields $982.50. The monthly payment under income-based repayment is 15% of this figure, or $147.38.
Workaround if loan payments were too low
If the borrower’s last loan payment or the payment one year prior were too low, there is a workaround.
The borrower can switch into an income-driven repayment plan or standard 10-year repayment immediately, and then wait 13 months before applying for TEPSLF.
Clearly, these payments will be at least the amount required under an income-driven repayment plan.
Although the borrower will not be first in line for TEPSLF, there may still be able to qualify a year later.
How to ask for reconsideration
To qualify for TEPSLF, the borrower must first apply for Public Service Loan Forgiveness and be denied.
Then, the borrower should send email to TEPSLF@MyFedLoan.org, asking for reconsideration. The email message should ask the U.S. Department of Education to reconsider the borrower’s eligibility for Public Service Loan Forgiveness and provide the borrower’s name and date of birth to allow FedLoan Servicing to identify the borrower’s loans.