Public Service Loan Forgiveness

[pagirl82]

This is the progam offered by the federal government to forgive federal student loans after 120 payments if you work in "public service". The definition of a "public service" job gets quite complicated and confusing. Most jobs in non-profit organizations qualify. Jobs in not-for-profit organizations might qualify. Private sector jobs may qualify as long as the company isn't for profit, you aren't in a labor union, and aren't providing religious services.

 

The problem is that there are possible exceptions to all of their rules, but they won't clarify the rules. One of the examples of qualifying jobs would be "public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations) and health care support occupations".

 

What does that mean? I don't believe they actually intend that to mean "public health" as a specialty. I think they intend it to mean providing healthcare services to the public, but it's unclear. Whenever I try to clarify this, the department of education tells me to contact my lender because only the lender can forgive loans. The lender then tells me to contact the department of education because the lender does not have information on qualifying jobs.

 

I don't think this is a shady program. I think the government does actually support it and isn't trying to prevent people from qualifying. At first glance it seems like it's a free ticket for all college grads, but in reality, not that many people have loans high enough to have a balance at 10 years. The main problem with this program seems to be that it literally doesn't exist right now. Forgiveness will begin, at the earliest, in 2017. So right now everything is based on theory. There are no forms to fill out to sign up for the program. There are no employees designated to help borrowers figure out if their job qualifies. There are no detailed rules in place to determine if a job qualifies. Right now they just have general guidelines. They've released one document with Q&A and some clarifications, but that's it. This is going to be a very complicated process to decide whether or not a job qualifies because they have so many exceptions listed.

 

I've heard that most people consider hospital jobs to qualify. If that's true, then that means that they don't mean "public health" in the literal sense. What about office or private practice jobs or outsourced jobs?

 

I'd really benefit from this program, but it's so hard to be sure what will likely qualify.

[Firemedic13]

Okay... I can't tell you for sure on Healthcare providers... but generally speaking they want you to work for the government (local, state, or federal) or for a non-profit or not-for profit. In addition working for public health means exactly what you think it does. And being a PA should qualify. I would simply get a job for one of the above, sign up for it, then retain an attorney if they deny you. (They probably won't) And if you are worried about attorney costs, consider what an extra 15 years of payments would cost.

[pagirl82]

Well, I'm not sure what you consider public health. To me, it means disease prevention/containment, patient education, etc. Not sure if that's what you had in mind or what the gov't had in mind. I hope not because that's a pretty narrow field. Yeah, I realize they want either gov't, or non-profit or not-for-profit. That encompasses everything except those who publically trade and own stock in their own business, right?

 

I wouldn't exactly count on hiring an attourney to fight for me if things don't work out. Nothing against lawyers, I'm just saying, if it's argued that my job doesn't qualify then there's no guarantee that can be changed.

 

One thing I would like recognized: If you see Medicaid/Medicare patients, or patients with any other government funded insurance in your practice or hospital, you ought to qualify as serving the public, IMO.

[Firemedic13]

Don't use your medical definition of public health. To the government public health means working for the government to provide healthcare (either clinical, or public health). IE: http://www.usphs.gov/

[floopy]

For Public Service Loan Forgiveness (PSLF), anyone (college or graduate student) who borrows money from the federal government through the Direct Loan program and works for a federal/state/county/local/tribal/501©(3) entity qualifies to have the balance of their loans forgiven after 120 on-time, monthly payments. The 120 payments do not have to be consecutive. As long as you are directly employed by any of the aforementioned entities, it really doesn't matter what type of work you are doing, regardless of what you were trained to do in your degree program. So if your employer is a 501©(3) hospital then your monthly payments while an employee there (whether you're working as a PA or a hospital janitor) would count towards the required 120 months. However, if you are working at the hospital, but your employer is actually a third-party (for-profit) contractor, then your payments would not count towards forgiveness.

 

You must be employed full-time which is defined as the greater of 30 hrs/wk or what your employer defines as "full-time."

 

Also, there is no partial forgiveness; it is a completely back-ended, all-or-nothing program. So if you make 119 monthly payments, then you get no forgiveness.

 

Payments made using standard 10-year repayment, income-based repayment (IBR), or income-contingent repayment (ICR) qualify for forgiveness. IBR will be the best option for most borrowers who qualify for it.

 

There are several potential problems with PSLF:

1. It may be possible for Congress to repeal or modify PSLF before you qualify for forgiveness. In my opinion, if this happens, then it would likely occur sometime after 2017 when the first batch of borrowers have their loans written off. Keep in mind that there is no limit to the amount of money that a student can have written off. So if you are a medical or dental student who borrowed $300-$400k and then, under IBR, made minimum payments on this loan for the next 10 years, you could get well over $600k forgiven by the government. If large write-offs start happening en masse, then we are likely to see the rules change. Whether existing borrowers will be grandfathered in is an open question. I read in the Federal Register that it is the position of the Department of Education that PSLF is not contractually guaranteed to current borrowers (see http://edocket.access.gpo.gov/2008/pdf/E8-24922.pdf pg. 63242 column 1 paragraph 2).

 

2. PSLF will increase competition for public service jobs. From a public policy standpoint this is a good thing, since under-served clinics will be more likely to attract providers, who would now be eligible for both NHSC or IHS loan repayment assistance, as well as back-end 10 year loan forgiveness for any remaining debt. But more competition for these jobs could mean lower wages, thereby making these jobs less attractive. Another possibility is that NHSC/IHS loan repayment assistance (currently $30-$40k/yr) could be reduced to cover just the student's monthly debt service payment under IBR. The balance would then be forgiven after 10 years of service.

 

3. PSLF will provide an incentive for schools to raise their tuition even higher and for students to be less careful about what they borrow. Under IBR/PSLF, what a student borrows and what a student owes are completely divorced from one another. Theoretically, the school could charge you $1 million in tuition, but your loan payment would be limited to 15% of your adjusted gross income under IBR. Once you reach 10 years of repayment, that $1 million (plus accrued interest) would be forgiven. Obviously this is an exaggerated case, but you can see that when there is a no difference between borrowing $150k and $1 million, there is less incentive for both the schools and the students to be prudent with their budgets.

 

There is very useful information regarding IBR/PSLF at ibrinfo.org and askheatherjarvis.com.

[just_me]

With schools as the gatekeepers and limiting your budget to what THEY feel you should have, this eliminates student choice in the matter. The only other thing a student could do is take out a personal loan (which is more difficult) but then thats not covered under any governemnt loan repayment plans...only federal loans are...

 

3. PSLF will provide an incentive for schools to raise their tuition even higher and for students to be less careful about what they borrow. Under IBR/PSLF, what a student borrows and what a student owes are completely divorced from one another. Theoretically, the school could charge you $1 million in tuition, but your loan payment would be limited to 15% of your adjusted gross income under IBR. Once you reach 10 years of repayment, that $1 million (plus accrued interest) would be forgiven. Obviously this is an exaggerated case, but you can see that when there is a no difference between borrowing $150k and $1 million, there is less incentive for both the schools and the students to be prudent with their budgets.

 

There is very useful information regarding IBR/PSLF at ibrinfo.org and askheatherjarvis.com.

[floopy]

With schools as the gatekeepers and limiting your budget to what THEY feel you should have, this eliminates student choice in the matter. The only other thing a student could do is take out a personal loan (which is more difficult) but then thats not covered under any governemnt loan repayment plans...only federal loans are...

 

True, but it gives an incentive for some students to max out their budget under the federal loans (which they otherwise might not have), and it still gives the school the incentive to jack up the tuition. It also gives the student an incentive to choose the more expensive school, since cost of attendance doesn't matter under IBR/PSLF.

[just_me]

I still cant see people maxing out simply because they may work in public service and possibly have their loans forgiven

 

Schools jacking up tuition? I dunno cant speak for them and I didnt try but even if they did, they cannot control stafford loan limit amounts and Im not sure how Plus loans work but if its under the parents that wouldnt count under this program.

 

Student choosing a more expensive school because they may work in public service for 10 years to get this? I dunno about that.

 

Someone would have to know that for the next 10 years of their life they will work for a public health facility......and I dont see people making all those noted choices at an accelerated rate based on this program. I personally feel that the majority of students will still choose the best options possible to reduce the amount of their collected debt because in the end they would rather work in a high paying speciality an this typically does not happen with non-profits

 

True, but it gives an incentive for some students to max out their budget under the federal loans (which they otherwise might not have), and it still gives the school the incentive to jack up the tuition. It also gives the student an incentive to choose the more expensive school, since cost of attendance doesn't matter under IBR/PSLF.

[floopy]

Schools Jacking up Tuition: Yes. Schools are jacking up tuition at a much faster rate than inflation. I don't know about students attending PA school, but those going to private medical, dental, and law schools are taking out Grad Plus loans. For a health professions doctorate the Stafford loan (subsidized + unsubsidized) covers up to $40k/yr. Everything beyond that, and up to the school's cost of attendance, is funded with a Grad Plus loan at 7.9% interest. Both Stafford and Grad Plus are eligible for IBR and forgiveness under PSLF.

 

Students Choosing the More Expensive School: Well, I think you're right. I should have phrased it a little differently. I don't think a student who gets into private school x and public school y, is going to choose x just because PSLF is there as a backstop. But I do think that a student, whose only acceptance is at an expensive private school, may lean towards rolling the dice and attending because PSLF is there just in case. Case in point: many medical and some dental students have long residences (3 to 7 years). You can enter IBR during residency, and then work for a 501©(3) hospital to get to 10 years, at which point your loans are wiped away. So if you enrolled at a private school, and the loans got out of hand, then you just serve a few extra years in the public/non-profit sector, make minimal payments under IBR, and your $x00,000 problem disappears (absorbed by the taxpayer). Then you head out to the private sector where you enjoy the rest of your 30 year career. I think this is something that's likely to happen as many of these private schools are getting to the point where the loan repayments are no longer affordable on any reasonable timeline (especially at ~7.5% interest). And some of the medical and dental schools are already advertising this strategy in their financial aid literature.

[Gaijyn]

I am currently a first year PA student at a private school. It is a bit more public than most I would say. But tuition is JUST BARELY covered by the Stafford loans. Unless one has the ability to covering living expenses, books, various odds and ends, and the myriad of other things that suddenly are necessary and cause one to hemorrhage money, then GRAD PLUS loans are pretty much a necessity. Luckily it is able to be returned within a given time after being awarded for the semester, but realistically, the vast majority of my fellow students are taking most of the loans available to just live and cover their various expenses. As for tuition, it certainly is not going down anytime soon so I think that it is essentially a system in which the schools become more profitable as the tuition increases without a real increase in services. This last point is not specifically aimed at my program however. This is true in all levels of academia though I would say. Further, my understanding of the governmental loans is that there is no early payment penalty and that the interest is not fully incorporated up front as some graduate loans were previously. Also, the interest rate will theoretically be lowered below the 7.5% upon the consolidation of the loans. At least this is the typical trend.