During and After College: Despite What You May Have Heard, Public Service Loan Forgiveness is Still Available!

IMG_5373Hey current and future public servants! Are you hoping the Public Service Loan Forgiveness (PSLF) program will cancel part of your student debt? But do you keep hearing scary things about the program? Well, the PSLF news is both bad and good.

Bad News: Republicans want to kill PSLF. The president’s last two proposed budgets would have eliminated it. So would a Republican bill the House Education and Workforce Committee passed on a party line vote early this year.

Good News: Congress ignored all these proposals. Even if it accepts them in the future, PSLF’s end will probably apply only to those not borrowing qualifying loans (see below) before the following July 1st. If you borrow such loans before that date they’ll likely remain PSLF-eligible.

Keep tabs on PSLF with the U.S. Education Department’s easy to read and very informative PSLF web page.

Bad News: Most who’ve applied for PSLF so far have been disqualified. One problem seems to be that FedLoans, the company administering PSLF for the government, misled many borrowers about PSLF-qualifying repayment plans (again, see below).

Good News: Congress put up $700 million to fund the Temporary Expanded Public Loan Forgiveness program under which PSLF goes on a first-come/first-served basis to borrowers whose PSLF applications were rejected solely because they used the wrong repayment plans.

Bad News: PSLF’s low forgiveness rate is also due to borrower mistakes.

Good News: You can avoid such mistakes. Remember, you must meet four criteria for 120 months to get PSLF. These need not be consecutive months, but they count only if you have:

  1. Qualifying Loans: Only Federal Direct Loan Program (FDLP) loans qualify for IMG_5374PSLF. The National Student Loan Data System will show you other federal college loans you may have. Replacing them with an FDLP Consolidation Loan makes them PSLF-eligible.
  2. Qualifying Employment: Only months in which you work full-time in public service positions count and you must submit PSLF employment certification forms on which your employers confirm the months you had such jobs. It’s best to submit these forms to FedLoans by certified mail every year or when your qualifying employment with a government agency or nonprofit ends, whichever’s first, and to keep copies and your certified mail receipts.
  3. Qualifying Repayment Plan: As indicated above, a month counts only if you’re making payment under the standard repayment plan or one of the four income-driven repayment plans.
  4. Qualifying Payment: A month counts only if you pay the full required amount on-time.

IMG_5375Don’t qualify for PSLF? Don’t give up! The (Almost) Complete Guide to Student Loan Forgiveness from The Institute of Student Loan Advisors is a wonderful resource for information on over 200 other student loan forgiveness programs in the United States. Use it!

Contact College Affordability Solutions for a free consultation about your postsecondary debt if you want to take advantage of its 40 years of experience in the field of college borrowing.

Before, During, After College: Vote as if Your Student Aid and Loan Repayment Depend on It . . . They Do!

Do you think your family will one day need financial aid for college? Are you or your student now relying on state or federal aid? Are you struggling to pay off your college debt?

If any of these circumstances apply to you, you have until November 6 to take IMG_5103personal actions to make government programs work for you. How? Vote! You’re not registered to vote? Get registered right away!

There are 6,070 state legislative seats, 435 U.S. House seats, 36 governorships, and 33 U.S. Senate seats up for election on November 6, and you can vote for and against candidates at least in part based on what they’ll do about college affordability.

Make sure you educate yourself about candidate records and positions on grants, loans, scholarships, and work-study. To do this:

  • Review their campaign websites for statements about college affordability and student aid;
  • Write and ask what they plan to do about college costs and student aid; andIMG_5105
  • Confront them at campaign events with direct, specific questions — and don’t let them off the hook until they give real answers.

For example, did you know that, over the last decade:

  • Congress increased funding to provide up to $1,160 (37%) more in Federal Pell Grants. But the average cost of one year at a public college or university increased $7,924 (146%), so the nation’s largest college grant program now covers $6,314 less of those costs.
  • State legislatures allocated only 33% more for grants and scholarships even though there’s been a 12% increase in college students who are paying almost 150% more to attend college.

Did you know the U.S. House Committee on Education and the Workforce recently passed HR 4508 on a party-line vote. If this bill becomes law it would:

  • Eliminate Federal Direct Subsidized Loans, the least expensive form of college IMG_5106debt, which, even if interest rates don’t climb, will raise the typical undergraduate’s cost of borrowing by at least $2,710 (8%).
  • Kill Public Service Loan Forgiveness, leaving tens of thousands of first responders, teachers and others who provide low-paying but essential community services without a way get some of their college debt cancelled in exchange for 10 years of full-time government or nonprofit employment.
  • End the Federal Supplemental Opportunity Grant program that currently provides $840 million a year to our neediest college students.

And did you also know that more candidates than ever are pledging to work for free college tuition if they get elected or reelected?

So there’s no shortage of financial aid issues on which you need to pin down the candidates, then use what you learn in voting decisions. Get busy. November 6 is just 35 days away!

Use College Affordability Solutions’ Topical Index or contact College Affordability Solutions to learn about strategies that’ll help you control your postsecondary education costs before, during, and after college.

College Affordability Solutions Topical Index

This index links to almost 90 articles. Each describes an wat to make college more affordable. Use them to learn how to do this before, during, or after college

And don’t forget! On August 15, 2018, new articles will be posted here every Wednesday.

Before College

College Finance Plan

Cost Reduction Strategies

College Costs

College Search and Selection

Credit Cards

Deadlines

Dependent and Independent Students

FAFSA (Free Application for Federal Student Aid)

Financial Aid Application Processes

Financial Aid Offers

Grants

Money Management

Parent Borrowing

Private Student Loans

Saving and Investing for College

Scams and Rip-Offs

Scholarships

Seeking Financial Assistance

Student Loans

Tuition and Fees

Value of Postsecondary Education

Verification

During College

College Finance Plan

Cost Reduction Strategies

Credit Cards

FAFSA (Free Application for Federal Student Aid)

Financial Aid Offers

Grants

Money Management

Off-Campus Housing

Parent Borrowing

Private Student Loans

Scams and Rip-Offs

Scholarships

Seeking Financial Assistance

Student Loans

Tax Benefits for Higher Education

Working While in College

After College

College Finance Plan

Consolidation and Refinancing

Debt Forgiveness and Cancellation

Grace Period

Missed Payment

Repayment of College Loans

Repayment Assistance

Repayment Problems

Tax Benefits for College Loan Repayment

After College: Were You Wrongly Denied Public Service Loan Forgiveness? There’s a Chance to Fix That!

Are you a Federal Direct Loan Program (FDLP) borrower who applied for Public Service Loan Forgiveness (PSLF) after completing a decade of public service employment? Did you do exactly what you were told to qualify for PSLF, then told you weren’t eligible because you used the wrong student loan repayment plan? If so, help is now available!

What is PSLF?

Normally, PSLF forgives your remaining FDLP debt after you use a qualifying repayment IMG_2908plan to make 120 qualifying monthly payments while performing qualifying employment.

What’s the Problem?

Congress recently found that student loan servicing personnel hired by the U.S. Education Department (ED) to administer FDLP steered untold numbers of public servants into FDLP repayment plans that didn’t qualify them for PSLF.

After faithfully making payments for 120 months under the repayment plans they were directed to use, FedLoans (the loan servicer administering PSLF) informed these public servants they didn’t qualify for PSLF because they used the wrong plans.

So Congress created a $350 million fund to help borrowers left in the lurch by this fiasco. Applications for this money are now being reviewed under a program ED calls Temporary Expanded Public Service Loan Forgiveness, or “TEPSLF.”

What Should You Do?

If you were denied PSLF because of this blunder, ask for loan forgiveness again by sending an email to TEPSLF@myfedloan.org. Here’s the model ED recommends for this email:

IMG_2906

Do You Qualify for TEPSLF?

TEPSLF will forgive what’s left of your FDLP debt only if:

  • You submitted a PSLF application that was denied solely because some or all of your 120 monthly payments were made under the Extended or Graduated repayment plans — which don’t qualify for PSLF; and
  • Your employer(s) certified that you completed a total of 120 months of qualifying employment; and
  • FedLoans Servicing accepted your employer certification(s); and
  • Your payment amount for the 12 months before you applied for TEPSLF, and the last payment you made before applying for TEPSLF, equaled or exceeded what you would have paid under one of the four income-driven repayment plans qualifying for PSLF. FedLoans Servicing will make this determination and, when it does, it’s supposed to notify you by email.

Hurry Up!

While $350 million sounds like a lot, it’ll be used to forgive debts on a first-come/ first-serve basis. So if your PSLF application was rejected over the type of repayment plan you used, don’t miss your chance — email FedLoans Servicing right away!

Looking for advice on managing the debts you took on for college? College Affordability Solutions has been 40 years experience with student loan repayment issues. Call (512) 366-5354 or email collegeafford@gmail.com to consult us at no charge.

After College: Look for Employers Offering Student Loan Repayment Assistance

You have or soon will complete your college commencement. Unless you’re about to begin graduate or professional study, you’re no doubt job hunting. If you have college debt, be sure to learn whether prospective employers offer student loan IMG_2287repayment assistance among their employee benefits.

Currently, only a few employers help employees pay down student loans. A recent survey found that just 4% of companies were doing this in 2017. But the number of companies offering this benefit is expected to grow in 2018, and some of America’s leading corporations — Aetna, Fidelity Investments, New York Life, Pricewaterhouse Coopers, Prudential, etc. — already provide it. So do some nonprofits and local governments such as the City of Memphis, Tennessee.

IMG_2288How does repayment assistance work on postsecondary debt? Your employer contributes a certain amount above and beyond the monthly payment you’re required to make. It’s contribution generally occurs on a monthly basis, although there may be annual and/or lifetime caps on its total contributions.

Employer-provided loan repayment assistance means your loans will be paid-in-full faster. Also, since the interest you pay is a product of how much you owe and for how long you owe it, it’ll also lower the amount of your lifetime earnings that you’ll devote to repaying your debt.

The Internal Revenue Service treats employer college debt payments as “taxable IMG_2289income” for the employees receiving this benefit, so put some money away to cover the increased federal income taxes you’ll pay on this amount. Nevertheless, any additional taxes you pay will be considerably less than what you’d spend if you paid 100% of your debt without employer assistance.

Why would an employer spend money to help repay its workers’ student loans? Think about it. Businesses in need of highly educated workforces gain a competitive advantage when recruiting the world’s most knowledgeable and skillful people — U.S. college graduates — 70% of whom borrowed while in school. Also, college educated employees are among the most mobile workers in today’s workforce but, being young and healthy, they often gain more from repayment assistance than medical, dental, or other types of benefits. So a company offering repayment assistance over a numbers of years also gives itself an advantage in retaining them.

You’ll likely earn less early in your career than at any other time. Employer-provided student loan repayment assistance can help resolve this while reducing your student debt, so carefully consider it as you evaluate prospective employers.

College Affordability Solutions brings 40 years of student loan experience to the table when consulting with ex-students about ways to manage their college debts. To arrange for a free consultation, email collegeafford@gmail.com.

Before and During College: Games the Government Plays — Federal TEACH Grants

Maybe your high school senior is planning to be a teacher, or your college student’s already an education major. Her 2018-19 financial aid offer may include a Federal TEACH Grant. If so, she needs to be extremely careful about that grant!

IMG_1648TEACH Grants aren’t grants at all. Financial aid pros call them “groans” — grants that all-too easily turns into loans.

TEACH Grant Basics

TEACH Grants provide up to $4,000 per academic year. Their eligibility requirements include financial need and:

Teachers must submit forms for each year they plan to fulfill TEACH Grant service requirements in low-income schools, then submit proof they completed those requirements — all to FedLoans, a private company hired to administer TEACH Grants.

The Risk

If your student fails to timely document four years of required service within eight years of leaving the major for which she got a TEACH Grant, her grant will turn into a Federal Direct Unsubsidized Loan. Interest then gets charged going back to the dates her TEACH Grant was disbursed. For example, if a $4,000 TEACH Grant received eight years ago converted to an unsubsidized loan today, your student could end up repaying $9,360 in principal and interest.

So it’ll be quite costly if your student receives a TEACH Grant but then moves to IMG_1651another major (80% of all students change majors), doesn’t teach, or teaches in a school or subject that doesn’t fulfill TEACH Grant service requirements. Small wonder a recent U.S. Department of Education study shows that 63% of TEACH Grants have been converted to unsubsidized loans.

Compounding the Risk

Some teachers also allege their TEACH Grants were falsely turned into loans due to minor paperwork errors or FedLoans losing their documents.

IMG_1658The situation’s so bad that at least one state’s Attorney General is trying to sue FedLoans for “callous disregard” of ex-students’ needs. But the current Secretary of Education is protecting FedLoans by asserting that it’s immune from state consumer protection lawsuits as a federal contractor. Ultimately, the courts will have to resolve this matter.

A Bad Deal!

If your student’s awarded a TEACH Grant, suggest she request other grants instead. If she must take the TEACH Grant, stress the importance of completing its service requirements and carefully documenting everything she does to provide FedLoans with proof that she fulfilled them. Even then, that TEACH Grant may still be a bad deal!

Need help deciphering financial aid offers? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-cost consultation!

Before and During College: Parent Loans — Helpful Today, But a Potential Curse Tomorrow

IMG_1169Federal Direct Parent PLUS Loans. They’re often the way families fill the gap between their resources, financial aid, and costs their undergraduates incur at college. But parent PLUS loans have their pros and cons.

Parent PLUS loan advantages:

 

  • There’s no PLUS borrowing limit other than the cost of attendance for the student for whom you borrow (i.e. your “beneficiary”) minus her other financial aid.
  • The interest rate on each academic year’s PLUS loan is fixed so, unlike this rate on many private loans, it’ll never go up.
  • The only fee is a 1.069% federal loan fee.
  • Amounts you repay within 120 days of disbursement reduces principal and IMG_1150cancels interest and loan fee on that principal.
  • Your payments may be deferred while your beneficiary is enrolled at least half-time and during her 6-month post half-time grace period.
  • Payments may also be postponed under other federal deferment and forbearance programs.
  • Should you die or become totally and permanently disabled, or if your beneficiary dies, your PLUS debt will be discharged.

Parent PLUS loan downsides include:

  • The highest interest rate of all federal college loans. Currently 7.0%, this rate’s expected to rise on PLUS loans borrowed for the next few academic years. But with fixed rates, PLUS interest is still likely to be lower than variable rate private education loans.
  • To borrow a PLUS loan, you (or a cosigner) must have a sound credit history. IMG_1152Your credit history isn’t “sound” for PLUS if (1) when your credit report runs, you don’t owe over $2,085 that’s 90 or more days delinquent, or (2) for five years before your report runs, you’ve had no charge-offs, bankruptcies, defaults, foreclosures, repossessions, tax-liens, wage garnishments, or write-offs.
  • PLUS debt isn’t legally transferable to anyone else unless it’s privately refinanced.
  • Parent PLUS debt isn’t easily forgiven. Bankruptcy generally won’t discharge it, and it’s not eligible for the federal teacher loan forgiveness program. But, in addition to the discharges described above, it is eligible for Public Service Loan Forgiveness.

IMG_1151Borrow parent PLUS loans only as a resort, especially if you’re approaching retirement. Why? The Government Accountability Office recently found 17% of 65-74 year old parent borrowers had defaulted on such loans — subjecting themselves to expensive collection fees and the confiscation of their Social Security benefits and tax refunds. So while PLUS can be helpful today, it can be a curse tomorrow.

Note: College Affordability Solutions will be on “spring break” next week and so won’t be posting a blog. But look here again on Wednesday, March 21, for another post on issues related to keeping college affordable.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford.gmail.com if you’re looking for a no-cost consultation on strategies for minimizing college costs.

After College: Help! I Can’t Make My Student Loan Payments!

You’re repaying loans you borrowed to pay for college. But you often find yourself IMG_1086choosing between paying for essentials and making monthly loan payments. What should you do?

You’re in luck if, like 90% of today’s college borrowers, you borrowed federal loans. Washington offers multiple ways to get relief from your predicament. The question — which is best for you?

IMG_1087If you’ve not already done so, consider replacing your federal loans with a Federal Direct Consolidation Loan. These offer longer repayment periods and lower monthly payments if you owe more than $7,500. But look into consolidation’s advantages and disadvantages before going this route.

You can also tell your loan servicer will change your repayment plan. To check out how this’ll affect your payments use the Federal Student Loan Repayment Estimator. IMG_1090It already knows your loan balances and can tell you the repayment plans for which you’re eligible plus monthly payment amounts in each available plan. It can also determine how consolidation would impact your loan repayment.

If the reason you can’t afford monthly payments is temporary, look into getting a deferment to postpone your payments for up to a year. You’re entitled to deferment if you’re:

No deferment? Another temporary solution is asking your servicer for a forbearance. You’re not entitled to forbearance. It depends on your situation. But you can totally postpone or partially reduce your payments while in forbearance.

But be careful about deferment and forbearance. During the former, interest continues to build on your unsubsidized and PLUS loans. During the latter, interest keeps building on all your loans. Unpaid interest from these periods then gets capitalized (added to principle) when your deferment or forbearance ends.

If your trouble making payments is because of your monthly due date, ask your servicer if you may change your payment due date to another day that works better for you.

Act fast, because missed and late payments have really bad consequences.

College Affordability Solutions offers 40-years of experience working with various educational loan repayment strategies. Call (512) 366-5354 or email College Affordability Solutions for a no-cost consultation.

Special Bulletin: Congress Considering Cuts to Student Aid Programs

On Monday the White House released its budget proposal for Fiscal Year 2019, which begins this coming October. The prospective budget is similar to HR 4508, the “Promoting Real Opportunity, Success, and Prosperity through Education Reform” IMG_0890(PROSPER) Act. This is a bill designed to revamp federal higher education programs. It will soon to be debated in the House.

If your student is now or likely will be a federal financial aid recipient, contact your  U.S. Representatives and Senators to let them know your thoughts on the proposed budget and HB 4508. Why? If Congress passes either as written, several federal student aid programs would be reduced or eliminated.

Subsidized Federal Direct Loans: Currently, no interest is charged on these loans until six months after their undergraduate borrowers leave college. But they would end for those first borrowing on or after July 1, 2019. Even at current interest rates, which are expected to rise, this would increase the cost of borrowing the $27,000 maximum allowed over 4 academic years by at least $2,800.

Income-Driven Repayment: Four repayment options would be replaced by one repayment plan requiring ex-students to pay 12.5%, instead of the current 10%, of their discretionary income toward their federal college debts. The repayment period would last 15 years instead of 20 to 30 years for undergraduates, and 30 years for graduate students. Discretionary income is the amount a borrower’s income exceeds 150% of poverty-level.

Public Service Loan Forgiveness (PSLF): Any student first borrowing a federal loan on/after July 1, 2019 would be ineligible for PSLF.

Federal College Work-Study (FCWS): The budget would reduce FCWS funding by 49.5%. FCWS currently helps over 630 thousand students earn more than $1 billion a IMG_0891year to pay college costs. Graduate students would become ineligible for FCWS.

Federal Pell Grants: College costs keep rising, but the budget proposes to limit Pell Grants to the same amount as in FY 2019 as this year.

Pell Grant eligibility would be extended to students in short-term programs providing certificates, licenses, or other credentials for “in-demand fields”. For-profit vocational schools usually offer such programs, but their certificate earners average 1.5% higher unemployment rates, 11% lower earnings, and $5,000 more in student debt than students earning similar certificates at community colleges.

Federal Supplemental Education Opportunity Grants (FSEOGs): The FSEOG program, which provides extra grant dollars to approximately one million of the nation’s neediest Pell Grant recipients, would be eliminated.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-cost consultation you have questions about how to pay for college.

Special Bulletin: Your College-Related Tax Breaks Survived a Congressional Move to Eliminate Them

In November College Affordability Solutions urged you contact your members of the U.S. House and Senate in opposition to certain provisions within the House tax bill that was then working its way through Congress.

That bill was supposedly designed to cut taxes. But it would have done away with IMG_0428deductions and exemptions that reduce taxes for you and other students and parents by over $18 billion a year — money that helps pay college costs.

The original House bill was remarkably partisan. It was written by Republican House members without input from Democrats, and it got 227 Republican votes but no Democratic votes

Fortunately, the Senate also opposed eliminating college-related tax deductions, exclusions, and exemptions. It made sure they remained unchanged in the final bill, which is now law. So don’t ever think your voice doesn’t matter — constituent pressure clearly helped preserve these tax breaks!

Here are the college tax benefits that were preserved in the final bill:

  • If you’re a student, you still won’t be taxed on money you use from your College Savings Bonds to pay your educational expenses.
  • Parents, you may keep on making deposits into your Coverdell Education Saving Accounts to build up money for college.
  • The first $5,250 you use from your Employer-Provided Educational IMG_0429Assistance program to pay higher education costs will continue to be untaxed.
  • The Lifetime Learning Tax Credit remains unchanged. So you may keep reducing what you’ll pay in federal income taxes by up to $2,000 a year based on what you spend on tuition, required fees, books, and supplies for any student (including you) taking courses to get a degree or improve job skills.
  • The Scholarship and Fellowship Exclusion will continue to omit from federal taxation what your scholarships and fellowships pay toward your college costs.
  • Borrowers, you’ll still be able to claim your Student Loan Interest Deduction of up to $2,500 for student and/or parent loan interest you pay each year.
  • Your $4,000 per year Tuition and Fee Deduction remains unchanged.
  • Are you or will you be a graduate student? If so, any Tuition Reduction you receive in connection with a graduate assistantship or fellowship still won’t be subject to taxation.

Congratulations on keeping these benefits! But stay active and alert. More bills impacting college affordability will come before Congress soon.

Contact College Affordability Solutions by calling (512) 366-5354 or emailing collegeafford@gmail.com.