Public Service Loan Forgiveness For Nonprofits is about a new program that provides charitable team members financial relief.
You can build a beautiful career for yourself with a nonprofit organization and also help other people build their lives. However, the public service salary you would be receiving may make it very difficult to pay off your student loans. Thankfully, a program called The Public Service Loan Forgiveness (PSLF) can grant your forgiveness for your student loan if you’ve been in public service for 10 years.
Public Service Loan Forgiveness For Nonprofits
You’re entitled to several benefits by working in a nonprofit, especially if you’re a federal student loan borrower. The PSLF program allows student loan borrowers working full-time at some nonprofits to be eligible for forgiveness such that their remaining loans are erased. However, the same cannot be said for private student loan borrowers as they’re ineligible for PSLF, unfortunately. Some conditions must be met before individuals are qualified for the loan forgiveness program. Some of these conditions are:
- The individual must have federal direct loans (you may be eligible with other types of loans as long as the Direct consolidation loan program consolidates it).
- You must be working at a nonprofit full-time with a designation of 501(c)(3) or other public service organizations such as a government organization.
- Your loans must be repaid based on income-driven repayment, which ensures that your loan payment cap is based on your income level.
- The monthly payment of your student loan must be up to 120, while you work full time for a qualifying employer(s) for over 10 years.
Choosing the best income-driven repayment plan for PSLF
Apart from working for a nonprofit organization for 10 years, you’re also important to pay back your loans with the eligible repayment plan that helps you qualify for PSLF. The four income-driven qualifying repayment plans are:
- Income-based repayment (IBR)
- Income-contingent repayment (ICR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
These plans ensure that your monthly payment cap is at 10% to 20% of your discretionary income and extend your repayment term to between 20 and 25 years. Because these plans differ, you must carefully consider the merits and demerits of each plan before you make your choice.
- PAYE or IBR are more appropriate for married people who expect a significant salary increase during repayment time. This is because your student loan payment will be based solely on your salary if you file taxes separate from your partner.
- REPAYE looks at the married couple’s combined income, even if they’re filing their taxes separately. This is likely to result in a higher monthly payment. Also, this doesn’t cap your monthly payment amount, so that a salary increase can lead to more monthly payments than standard repayment plans.
- You should typically avoid ICR plans when choosing income-driven plans specifically for the Public Service Loan Forgiveness program, which can lead to a high monthly payment and lesser debt left to forgive. This plan is the only one available for parents PLUS borrowers, and you would also need to consolidate the loan through a Direct consolidation loan.
How does the PSLF Limited Waiver work?
Typically, student loan borrowers need to pay their loans back based on an income-driven plan to be eligible for PSLF. However, more recent legislation has waived this requirement temporarily.
The limited waiver opportunity allows you to have your student loan repayment eligible for PSLF even if your plan doesn’t typically qualify for the program. Also, this waver ensures that the suspended payment period caused by the emergency forbearance counts towards PSLF.
You can take advantage of this opportunity by submitting your Employer Certification form before 31st October 2022. If you owe any loans such as the FFEL loan that are not part of the Direct loan program, you must also use a Direct consolidation loan to consolidate the loan before the deadline.
Unfortunately, the only loan ineligible for this waiver is the parent loan. So, taking advantage of this waiver makes sense if you have other types of loans since it moves you months or years closer to getting loan forgiveness through the PSLF.
How to apply for the PSLF program?
If you’re a new graduate working for a nonprofit organization or in this sector, these are some steps that you can take to apply for this program:
- Sign up for the income-driven repayment plan through your loan servicer.
- Fill out the Employment Certification for Public Service Loan Forgiveness form annually (or whenever you change employers) and submit it to FedLoan Servicing.
- If you’ve worked in the nonprofit sector for up to 10 years and made 120 payments, then you can submit a PSLF application to FedLoan Servicing to receive loan forgiveness.
Note that there’ll be another loan servicer to handle the PSLF paperwork if the contract with FedLoan Servicing ends.
- Continue working for a nonprofit organization or in this sector until they grant your loan forgiveness.
You must submit your Employment Certification form because your loan servicing company is going to inform you whether your employment qualifies for this program or not. If your employer doesn’t qualify for the program, the best thing to do is to look for other employment options. However, it would be detrimental to you if you don’t know this early enough. If you have qualified employees to receive loan forgiveness, and you play your part, then in no time, you’ll receive the student loan forgiveness that you seek. The best part of this program is that your loan isn’t considered a taxable income. This means that you won’t be getting hefty tax bills.
Other means of getting loan forgiveness while working for a nonprofit
The most commonly-known path to receiving student loan forgiveness is PSLF. However, it’s not the only option for people working in the public service. Other programs, even job-specific programs, exist, and they can earn your loan forgiveness as well. Some of these are:
- National Health Service Corps: this gives loan assistance of as much as $50,000 to healthcare professionals that have worked at a suitable place for up to two years.
- Teacher loan forgiveness: this offers teachers up to $17,500 to cancel their student loans if they teach specific subjects and work in low-income settings for five consecutive years.
- Nurse Corps Loan Repayment Program: This program helps pay off as much as 60% of student loans for nurses who have worked for two years in underserved communities. It also gives an additional 25% of the balance if you continue for the third year.
You can consider other options for your loan forgiveness if you’re working in the public sector and specific careers. You’ll find that many of these programs offer student loan forgiveness much sooner than the PSLF program.
If you’re a new graduate working in the public service, you should consider exploring the PSLF program as soon as possible. It ensures that your payments are more manageable and you’re not overwhelmed by the burdens of your student loan debt. However, you must also explore other options and consider their downsides before proceeding.
Contact Dennis Lodge at [email protected] to learn more.
Public Service Loan Forgiveness For Nonprofits was first posted at NANOE
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