6 Things Every Social Worker Should Know About Public Service Loan Forgiveness

It’s a closely-guarded secret that social workers are among the highest paid professionals in the United States. The average salary for a social worker in the US is closing in on 90K/yr, which is why most social workers live in luxury and retire early.

Just kidding.

Many of our peers ride the line between Final Notice and I Get to Go Out to Eat This Month for their entire careers. The average starting salary of Master’s level social workers in the United States is right around $49,000/yr, with the bottom 10% taking in around $28,000, and the top 10% taking in an average of $79,000.

We also have a lot of debt: the average debt-load of a MSW grad is between $30,000 and $42,000, although that number can vary greatly, and can even eclipse $100,000.

It’s no wonder, then, that Public Service Loan Forgiveness (PSLF) is a hot-topic on social work message boards from California to Maine.

Unfortunately, navigating PSLF can get real confusing, real fast. There is information everywhere, fears of that the program was far too good to be true, and, oh, and the very existence of the program has been called into question recently.

With that said, it’s not all doom and gloom. PSLF forgiveness may well be as attainable as social workers were promised, but getting to the finish line demands attention to detail and understanding the options available.

So here are six things every social worker should know about the current state of Public Loan Forgiveness and Income-Driven Repayment Plans.

1. PSLF is awesome... or the greatest lie ever told. We just don’t have much data on it, yet.

PSLF was introduced in 2007, and requires 10 years of on-time payments to qualify. The first wave of borrowers turned in their applications for forgiveness just one year ago. So… how did it go?

Great! Or not, depending on who you listen to. In the first year, more than 28,000 borrowers applied for forgiveness, yet the Department of Education extended forgiveness to just 96 of those borrowers. Ninety-six. In other words, .3% of borrowers from the first wave of applicants received forgiveness.

A less than 1% success rate might seem like cause for major alarm, but a closer look at the first wave starts to tell a different story.

Of the initial 28,000 applicants, 28% were denied forgiveness due to incomplete applications or missing information, while a full 70% were denied due to not meeting the basic criteria for eligibility, which the Dept. of Ed defines as borrowers who have ineligible loans, who have not yet made 120 qualifying payments, or do not have qualifying employment. Some of the borrowers in that larger 70% block have been the subject of outreach by Federal Student Aid to see if they may qualify for the Temporary Expanded Public Service Loan Forgiveness Program, which provides a marginally expanded opportunity for borrowers who may have made payments under a non-qualifying plan.

So while just under 100 of the initial 28,000 applicants were approved for forgiveness, all is not yet lost. Those 100 borrowers still received $5.52 million in loan forgiveness, which is far from nothing.

Now, there’s a lot of discussion about what exactly is considered qualifying employment, and you may have read about lawsuits filed against the government or FedLoan that allege borrowers have been wrongly told they do not qualify for forgiveness.

The key point for qualification seems to be this: do you work for a government agency (district and charter schools count), or do you work for a non-profit organized under 501(c)3? If you do, you’re probably in good shape. If you don’t, you may not be, and really need to dig in to whether your work qualifies.

Which brings us to point 2…

2. Get Certified, like, Yesterday

If you have not yet turned in a PSLF employment certification form, you may be in for a surprise. The Federal Government has tasked just one federal loan servicer to handle every single borrower who has requested PSLF certification. That servicer? FedLoan.

FedLoan is far from the only game in federal loan servicing town, and your loans may be serviced by another company, like Navient, Great Lakes, or Nelnet. While these organizations service federal loans, they have nothing to do with PSLF.

When you complete and submit a certification form for the first time, your loans will be transferred to FedLoan, which can create lots and lots of headaches. When you’re first transferred, FedLoan will have no record of previous qualifying payments made, and so you’ll be effectively starting from 0, unless you request a review of qualifying repayments. If you do, FedLoan will dive into your past payments to non-FedLoan servicers to see what may have qualified for forgiveness.

The process isn’t quick, however, with many, including this author, reporting that the review process has dragged on for more than a year with no resolution.

All of this is to say that, if you believe you may qualify for PSLF at some point, you should send in a certification form right away so that your loans are transferred to the right servicer and so that they can be counted properly. The longer you wait to certify, the longer it will take for FedLoan to review your specific situation, and the longer you risk running astray.

And while you’re at it…

3. Certify your employment at least annually, and whenever you change employers

PSLF is complicated, and there are lots and lots of people who have discovered they don’t actually qualify after years of believing they would.

The best way to avoid being one of those many people is to certify your employment early and often. Have your employer sign off on the form around your anniversary date, and any time you switch employers. Sending in the form annually betters your chances at creating a paper trail with FedLoan, and will hopefully make the process smoother when it comes time to apply for forgiveness.

Now, there’s one important thing to note. While FedLoan will give you a thumbs up or down on your certification forms, it’s actually the Department of Education that ultimately certifies your eligibility forgiveness, and they only do that once, after 10 years of qualifying payments made while working for a qualifying employer. What that means is that even though you certify annually, there’s still a chance the Department of Ed will say ‘no.’ Yikes.

But it’s not just about your employer, you also have to be on the right repayment plan, and there are a lot to choose from, so…

4. Make sure you’re on an income-driven repayment plan

While any on-time payment made while working for a qualifying employer counts toward your 120 PSLF payments, payments for the purposes of PSLF only really matter if you are enrolled in an income-driven repayment plan.

Why? A standard repayment plan is designed to pay off the full balance of the borrower’s loans after 10 years, or 120 on-time payments. If you’re on a standard plan, you’ll discover that, assuming everything went to plan, you have zero balance left when you become eligible to apply for PSLF.

So, if you haven’t already, it’s time to pick an Income Driven Repayment Plan, and you have four options: Pay as you Earn (PAYE); Revised Pay as You Earn (REPAYE); Income-based Repayment Plan (IBR); and Income-Contingent Repayment Plan (ICR).

Paye as You Earn: Generally, 10% of your discretionary income, but never more than the standard 10-year payment plan. 20 year repayment.

Revised Paye as You Earn: Generally, 10% of your discretionary income, with no cap on how high the payments go. 20 year repayment, if loans used for undergrad; 25 years if used for graduate school.

Income-based Repayment: If you took out loans for the first time on or after July 1, 2014, this plan usually limits your payment to 10% of your discretionary income, but never more than the standard plan. 20 year repayment plan.

If you took out loans for the first time before July 1, 2014, this plan caps your payment at 15% of your discretionary income, but never more than the 10-year standard plan. 25 year repayment.

Income Contingent Repayment: Usually limited to the lesser of the following: 20% of your discretionary income or what you’d pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to income. 25 year repayment.

When you apply for an income-driven repayment plan, you can alternatively ask for a specific plan by name, or you can request the loan servicer determine which plan you qualify for and then select the one that has the lowest monthly payment amount. Be careful when going this route, as mistakes have been known to happen.

Be sure to consult with your loan servicer and/or trusted financial advisers to make the decision that’s right for your situation. And, when you do find the right plan…

5. Don’t pay ahead. Ever.

To qualify for PSLF, you have to make 120 on-time, qualifying payments in order to be eligible. On-time means on-time - not ahead, not late - exactly on-time. You can’t qualify for forgiveness early, so there is no incentive to pay ahead, and in fact, paying ahead can really mess up your journey to PSLF. If you pay ahead, you run the risk of falling into “paid ahead” status. If you make an additional payment while you’re in “paid ahead” status, that payment will not count toward your 120 qualifying payments.

Finally, after between 10 and 25 years, you’ll be ready to apply for forgiveness, if you haven’t already paid off the balance. In which case you’ll want to be sure to…

6. Mind the taxes…

…mind the cheese, too.

…mind the cheese, too.

The idea of PSLF is pretty amazing. Work for 10 years for a qualifying employer, make your 120 on-time payments, and have the remainder of your loans forgiven. And it is super awesome for folks who dedicate their careers to public service.

PSLF comes with one additional major perk that differentiates it from other IDR plans: the forgiveness you receive is not taxed. For every other income-driven plan, the forgiveness you receive is taxed, which could mean a major, major tax hit when it comes time for forgiveness.

So… be careful with taxes, especially if you don’t qualify for PSLF. If you have questions, you should definitely talk with a tax expert you trust who is knowledgeable about income-driven repayment plans.

Final Thoughts

Income-based repayment plans and Public Service Loan Forgiveness go together like peanut butter and jelly, or mac and cheese and ketchup (it’s called cuisine, Karen, look it up). Except really, it’s a bigger deal than that: you’ll simply never reap the benefits of PSLF if you are not enrolled in an income-driven plan.

On top of that, there are four different IDR plans to choose from, and choosing the right one isn’t always super duper clear. On top of that, mistakes have been known to happen, so keep a close eye on the payment calculation and double check that the plan your service has chosen for you is, indeed, the best plan for your situation.

Finally, never pay ahead, because you’re just losing money at that point. Oh, and mind the taxes, which could be enormous if you don’t qualify for PSLF but do qualify for forgiveness under another plan

Whatever route you go, be sure to get advice from qualified and trusted financial advisors who know the ins and outs of public service loan forgiveness and income-driven repayment plans.

Ed Morales, MPP, MSW, LICSW, is a Minneapolis-based therapist, writer, and trainer, and the founder of Socorro Consulting, an organization dedicated to closing gaps in quality mental health care for kids and families in the Twin Cities. He lives in North Minneapolis with his two adopted daughters, his wife, and his cat, Mocha.