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How To Get $700 Million Of Student Loan Forgiveness

There’s $700 million of student loan forgiveness up for grabs on a first-come, first-served basis.

Here’s what you need to know and how to apply.

Student Loan Forgiveness

See if you can follow this story. The federal government offers a student loan forgiveness program. Student loan borrowers who think they qualify apply. 99% are rejected. Congress creates an expanded student loan forgiveness program. Student loan borrowers who think they qualify for the expanded program apply. 99% are rejected.

Yes, really.

A new government watchdog report, first obtained by NPR, says a confusing student loan forgiveness program and process resulted in 99% of the 54,184 completed requests for student loan forgiveness being denied. From May 2018 to May 2019, Congress only spent $27 million of the $700 million on 661 requests for this new student loan forgiveness effort, according to the Government Accountability Office.

“The Department has taken steps to help borrowers better understand the complex eligibility requirements, application process, benefits, and other information related to the PSLF and TEPSLF programs,” Angela Morabito, U.S. Education Department press secretary told NPR. The Department agrees with the GAO’s recommendations about how to improve the programs; a number of our efforts are already underway.”

Today In: Money

What happened and what you can do about it?

In May 2018, the U.S. Department of Education announced the details of the Temporary Expanded Public Service Loan Forgiveness program. This program provides for student loan forgiveness for borrowers who previously chose an ineligible repayment plan as part of the Public Service Loan Forgiveness program. The Public Service Loan Forgiveness program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments over 10 years.

Here’s the important part that many of these applicants – including the 71% who were rejected for this reason – missed. To apply for this expanded student loan forgiveness program, you had to meet all the requirements for the Public Service Loan Forgiveness program, but you mistakenly enrolled in an ineligible repayment plan (such as the graduated or extended repayment plans). You with me?

How To Apply For Temporary Expanded Public Service Loan Forgiveness

Ok, so how do you avoid the fate of the 99% who were rejected from this expanded student loan forgiveness program?

Here’s what you need to know to ensure that you qualify:

1. You must work for a qualifying public service employer in a qualifying public service role

Typically, there are two types of employers: a) state, local and federal government; and b) 501(c)(3) non-profit.

2. You must have direct, federal student loans

The Public Service Loan Forgiveness program does not forgive private student loans – even if you work in public service. If you’re not sure what type of student loans you have, check with your student loan servicer or through Federal Student Aid. If you have FFEL loans, you need to consolidate your student loans into a Direct Consolidation Loan with the federal government to qualify for Public Service Loan Forgiveness.

3. You must be enrolled in a federal repayment plan

You also must be enrolled in an income-driven federal repayment plan, and make the majority of your payments under the plan. You can determine which student loan repayment plan works best for you with these student loan calculators.

4. You must have applied for Public Service Loan Forgiveness

This is critical. Do not skip this step. You must have applied for the Public Service Loan Forgiveness program and made some or all of your payments under a repayment plan that did not qualify. Then, you were rejected solely because you enrolled in an ineligible student loan repayment plan.

How do you apply for Temporary Expanded Public Service Loan Forgiveness?

There are two easy steps:

  1. Email FedLoan Servicing at TEPSLF@myfedloan.org to request that the Education Department reconsider your eligibility for Public Service Loan Forgiveness.
  2. Include the same name under which you submitted your Public Service Loan Forgiveness application and your date of birth in the email.

Sample Email Template

Here is a sample template email that you can use:

To: TEPSLF@myfedloan.org

Subject: TEPSLF request

I request that the U.S. Department of Education respectfully reconsider my eligibility for public service loan forgiveness.

  • Name: [Enter the same name under which you submitted your Public Service Loan Forgiveness application]
  • Date of Birth: [Enter your date of birth in MM/DD/YYYY format]

Thank you for your consideration.

Sincerely,

Your Name

You will receive a response from FedLoan Servicing once your request has been reviewed. Separately, you can contact FedLoan Servicing at 1-855-265-4038 from 8 a.m.– 9 p.m. Eastern time, Monday through Friday.

What if you don’t work in public service?

While you could try for student loan forgiveness through an income-driven repayment plan, it may take 20 to 25 years to receive forgiveness and your student loans may be paid off by then. There’s a more proactive approach.

Student loan refinancing can lower your interest rate, which can save you substantial money in interest payments. With student loan refinance, you can combine your existing private student loans, federal student loans or both into a new, single student loan with a lower interest rate and one monthly payment. This student loan refinancing calculator shows you how much you can save.

You won’t have access to federal repayment plans and benefits, but many private student loan lenders now offer forbearance and deferral programs for economic hardship. The higher your student loan balance, the more you can potentially save.

Follow me on LinkedIn. Check out my website.

Zack Friedman is the bestselling author of the highly-anticipated, blockbuster book, The Lemonade Life: How To Fuel Success, Create Happiness, and Conquer Anything. Zack is the founder and chief executive officer of Make Lemonade, a leading personal finance company that empowers you to live a better financial life. He is an in-demand speaker and has inspired millions through his powerful insights. Previously, he was chief financial officer of an international energy company, a hedge fund investor, and worked at Blackstone, Morgan Stanley, and the White House. Zack holds degrees from Harvard, Wharton, Columbia, and Johns Hopkins.

Source: How To Get $700 Million Of Student Loan Forgiveness

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These 76,000 People May Have Committed Student Loan Fraud

U.S. Education Secretary Betsy DeVos Photo credit: ASSOCIATED PRESS

U.S. Education Secretary Betsy DeVos Photo credit: ASSOCIATED PRESS

A new government watchdog report says that 76,200 people may be committing student loan fraud.

Here’s what you need to know.

Student Loan Repayment Fraud: New Report

A new report from the U.S. Government Accountability Office (GAO) found the following with borrowers enrolled in an income-driven student loan repayment plan:

  • 76,200 borrowers claimed they earned zero income and therefore could not “afford” to make a monthly student loan payment
  • As a result, these borrowers paid less money than they should have
  • These borrowers were enrolled in 95,100 income-driven repayment plans
  • This represents 11% of all income-driven repayment plans the GAO analyzed
  • These borrowers owed $4 billion of Direct Loans as of September 2017

According to the GAO, 34% of these income-driven repayment plans were held by borrowers who earned $45,000 per year, on average, with some earning as high as $100,000 per year. About 1% of the plans analyzed (40,900 plans) were for borrowers who claimed they had nine or more family members living in their household.

Why This Matters

Is it possible that some of these borrowers misunderstood the question or mistakenly entered the wrong information? Sure. Is it possible that student loan debt relief companies retained by borrowers may have completed the erroneous information on a borrower’s behalf? Yes. Are there other innocent reasons for these findings? Perhaps.

The report does not name specific borrowers nor determine the underlying reason behind the potentially false information. However, if borrowers erroneously claimed zero income to avoid paying their student loans, they are cheating the federal government, and ultimately taxpayers. Specifically, if a borrower doesn’t make a monthly student loan payment, the federal government doesn’t collect money each month. After 20 to 25 years, if the borrower then receives student loan forgiveness, taxpayers may pay a larger amount for student loan forgiveness.

An income-driven repayment plan enables you to repay your federal student loan based on the amount of income you earn, your family size and other factors. So, if you earn zero income and have a relatively larger family size, you may pay as low as $0 each month. After 20 or 25 years – depending if you have an undergraduate or graduate student loan, respectively – the remaining balance on your federal student loans could be forgiven. That’s potentially good news for you the borrower. The bad news is that you could owe income taxes on the amount forgiven. Ouch.

Education Department Response

“Misrepresenting income or family size is wrong, and we must have a system in place to ensure that dishonest people do not get away with it,” U.S. Secretary of Education Betsy DeVos said. “We didn’t create that problem, but rest assured we will fix it.”

DeVos wants to increase measures to verify income and family size data, including with IRS data, for borrowers enrolled in income-driven repayment plans. DeVos also wants to refer suspected cases of fraud to the U.S. Department of Justice for prosecution.

“If Congress provides the Department with this authority, we could significantly reduce the risk of fraud and improper payments, save taxpayers money, and reduce the burden on borrowers when they annually recertify their income with the Department,” DeVos said.

Your Next Steps

When enrolling in income-driven repayment plans, ensure that you answer all information accurately. If you’re unsure what information to enter, contact the U.S. Department of Education or your student loan servicer.

There are four primary ways to manage and repay your student loans. Make sure you understand all your options:

This free student loan repayment quiz can help you determine which student loan repayment options, including student loan forgiveness, are best for you based on your individual circumstances.

Follow me on Twitter or LinkedIn. Check out my website or some of my other work here.

Zack Friedman is the author of the highly-anticipated, blockbuster book, The Lemonade Life: How To Fuel Success, Create Happiness, and Conquer Anything. Zack is the founder and chief executive officer of Make Lemonade, a leading personal finance company that empowers you to live a better financial life. He is an in-demand speaker and has inspired millions through his powerful insights. Previously, he was chief financial officer of an international energy company, a hedge fund investor, and worked at Blackstone, Morgan Stanley, and the White House. Zack holds degrees from Harvard, Wharton, Columbia, and Johns Hopkins.

Source: These 76,000 People May Have Committed Student Loan Fraud

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