Easing the Burden of Student Loans - Adviser Investments

Easing the Burden of Student Loans

Student loan debt was a topic of debate during the 2020 presidential election, and the Biden administration has since signaled a willingness to explore it further during his first term in office. In the meantime, there may be a light at the end of the debt tunnel courtesy of the federal Public Service Loan Forgiveness program (PSLF).

PSLF is aimed at helping college graduates who choose careers in public service (defined below). If a qualified borrower makes 10 years’ worth of timely payments on their loan, they are eligible to have the remainder of their loan balance wiped out.

The four steps below can help you or your loved ones navigate the maze-like qualification process.

  1. Qualifying Employment: The first requirement for PSLF is to work in a public service position when you are making payments. This means a civil service, 501(c)(3) or a private non-profit employer that provides public services such as early childhood education or health care. Your employer will be able to tell you if they are a government or non-profit organization. (To learn more about jobs and employers that fit the bill, click here.)
  2. Loan Eligibility: Not all student debt is eligible for forgiveness. To qualify, it must be a federal direct loan. This includes direct subsidized and unsubsidized loans, PLUS loans and direct consolidations. Private loans do not qualify. However, you can consolidate non-eligible federal student loans into a direct consolidation loan to make them eligible for PSLF. We recommend speaking with a financial adviser before making that move.
  3. Repayment Plan: The next qualifier is making 120 loan payments after October 1, 2007 under what is called an Income-Driven Repayment (IDR) plan. The various IDR plans base your payments on factors like income, family size and debt size. Typically, the higher your income, the higher your monthly payment.
  4. Timely Payments: Finally, your payments must be made on time and in full while you hold a qualifying job. It is important to note that these payments do not need to be made consecutively. If you leave one qualifying employer and return to another later, you can continue building toward that 120-payment hurdle.

Requirements for student loan forgiveness are subject to change over the next few years. In the meantime, the PSLF may be a useful option to help you lower your debt burden and meet other savings goals. If you have questions, please contact your wealth management team at any time—remember, we are The Planner You Can Talk To.


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