Student Loan Forgiveness

Skyrocketing college costs have left many graduates paying off loans for decades—but there may be a light at the end of the debt tunnel courtesy of the federal Public Service Loan Forgiveness program (PSLF).

The program is aimed at helping college graduates who choose careers in public service (defined below). If such a 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 process of qualifying for the program is complex, but the information below can help you or your loved ones navigate the maze.

Qualifying Employment: The first step in qualifying for PSLF is to be employed in a public service job while you are making payments. This means work through a government organization, a qualifying 501(c)(3) or a private non-profit that provides public services such as early childhood education or health services. Your employer will be able to tell you if they are a non-profit organization. (To learn more about what types of jobs and employers qualify, click here.)

Loan Eligibility: Not all loans are eligible for student loan forgiveness. Currently, to qualify for PSLF, 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 checking in with your financial adviser before making that move.

Repayment Plan: In order to qualify for public student loan forgiveness, you must have made 120 qualifying payments under what is called an Income-Driven Repayment (IDR) plan. There are different kinds of IDR plans and they base your payments on factors such as your income, family size and debt size. Typically, the higher your income, the higher your monthly payment will be.

Make Timely Payments: To have your loan forgiven, you must make 120 qualifying payments after October 1st, 2007. These payments must be made on time and in full while you have a job that qualifies. It is important to note that these payments do not need to be made consecutively. That means if you leave one qualifying employer and later return to another qualifying employer, you can continue building towards that 120-payment hurdle.

CARES Act Impact: As a result of the CARES Act passed in March, interest and payments on direct loans were suspended until September 30, 2020. For those under the PSLF umbrella, those suspended payments count towards the 120 payments needed to achieve loan forgiveness. That means you can stop making payments for the time being and still achieve loan forgiveness as originally scheduled.

Navigating student loan forgiveness is not easy, and requirements are subject to change over the next few years. But for those able to qualify, it can be a useful option to help lower your debt burdens and meet your other savings goals. If you have questions about your personal situation or on behalf of your loved ones, please contact your portfolio team. We are happy to help.

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Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.