If you’re on track for Public Service Loan Forgiveness, the current COVID-19 crisis might have completely upended your plans. On-time payments are a requirement for PSLF, and if payments aren’t currently required, how does that impact your road to forgiveness?
The short answer is that you can still qualify for PSLF even if you aren’t making payments right now. Here’s how PSLF works during this federal forbearance period.
PSLF is included in current administrative forbearance
Currently, most federally owned student loans are in administrative forbearance through Sept. 30, 2021 — meaning payments are not required, interest rates are set at 0 percent and collections activities are halted. This forbearance period automatically went into effect for federal student loans on March 20, 2020.
Of course, Public Service Loan Forgiveness requires borrowers to make 120 continuous payments in order to be eligible. However, the government has also made concessions here. If you are not currently making payments on your student loans but you work for a qualifying employer, you’ll still receive credit for PSLF or Temporary Expanded PSLF as if you made the payments — in other words, they’re counted as payments of $0.
To make sure these credits take place, you’ll need to submit a PSLF form that certifies your employment for the same period as the federal student loan suspension. If you reached your 120 qualifying payments during the suspension period, you can still apply for PSLF.
That said, if you’ve lost your job with a qualifying employer or face fewer than 30 hours at an eligible employer, this time won’t count toward PSLF. Keep in mind that you don’t lose your PSLF eligibility entirely; it just might take longer to qualify for forgiveness.
Should you stop making payments if you’re pursuing PSLF?
While continuing to make payments on your student loans during administrative forbearance can help you pay them off faster, it may not be the best move if you’re pursuing PSLF. Since you’ll get credit for that time whether you make those payments or not, you may as well keep that money in your pocket, since continuing to make payments will only reduce the amount that gets forgiven.
Instead, you might want to use that money for other pressing needs, like paying off debt, staying current on home payments, keeping the lights on or paying for food. The point of the student loan payment suspension is to keep you from having to decide between student loan payments and basic survival. If you have the cash and need a place to put it, consider putting money into an emergency fund or even helping others who can’t afford necessities right now.
How to stay on track for PSLF
If you’re taking advantage of the suspended federal student loan payments, you’ll need to complete a PSLF form that certifies your employment during the suspended time period. You’ll see your qualifying payments updated when you complete your employment certifications.
If you’ve lost your job or you’re facing reduced hours because of the COVID-19 crisis, you’re probably facing a PSLF setback right now, since you’ll still need to meet basic PSLF criteria in order for your suspended payments to count. However, having your hours cut during this time doesn’t mean you’ll lose your eligibility — as soon as you meet the requirements again, your qualifying payments will pick back up where they left off.
Take note that grace period, in-school and some deferment, forbearance and bankruptcy statuses still aren’t eligible for Public Service Loan Forgiveness during the period of administrative forbearance.
Biden could expand the PSLF program
Even if you don’t qualify for PSLF now — currently it’s designed for teachers, government workers and nonprofit workers — it’s possible that you could access this program soon.
In addition to more relaxed eligibility requirements for PSLF, President Biden has proposed a new avenue for debt relief, which would forgive up to $10,000 of undergraduate or graduate student loan debt for every year of qualifying national or community service service, up to five years. This is different from the current program, which forgives any remaining debt after 10 years of payments.
It’s important to note that private student loans will remain ineligible for PSLF even if Biden’s modifications pass. However, one of Biden’s proposals is to allow private student loans to be discharged in bankruptcy, which could serve as some form of relief.