Public Service Loan Forgiveness Policy and Operations

1. Session 18 Public Service Loan Forgiveness Policy and Operations Barbara Hoblitzell and Melissa Shoemaker| Nov-Dec. 2016 U.S. Department of Education 2016 FSA Training Conference for Financial Aid Professionals

2. PSLF Basics 120 Qualifying Payments …When Applying For & Receiving PSLF In Qualifying Repayment Plans Per IRS, forgiven amount is not taxable income On Direct Loans While Working For A Qualifying Employer… 2

3. PSLF Eligible Loans Perkins Loans - NO Federal Direct Student Loan FFELP Loans - NO Parent PLUS Loans – YES* Direct Consolidation Loan - YES PSLF is only for Direct Loans, but all Direct Loans qualify 3

4. PSLF Qualifying Employment It matters where you work, not what you do… Other not-for-profit organizations providing specific qualifying services 501(c)(3) not-for-profit organization Any government organization 4 4

5. PSLF Full-Time Employment • Full-time is the greater of: • Employer’s definition of full-time • 30 hours per week • May work multiple qualifying part-time jobs that equal full-time • For borrowers at a non-profit organization, hours spent in religious instruction, worship services, or proselytizing do not count 5

6. PSLF Qualifying Repayment Plans • 10-Year Standard • IBR • ICR • Pay As You Earn • REPAYE • Others ≥ 10 Year Standard • Income-driven plans are most likely to yield a balance for forgiveness 6

7. PSLF Qualifying Payments 120 separate monthly payments* Do not need to be consecutive Must be made within 15 days of due date After October 1, 2007 Must be for full amount due under plan *Exception for AmeriCorps, Peace Corp, and DOD 7

8. PSLF Payment Amount • Multiple partial payments • Count as one payment • All must be received within 15 days of due date • Payments made when not required • Do not qualify • Lump sum payments • Count as one payment • Exceptions for AmeriCorps, Peace Corp, and Department of Defense borrowers 8

9. Modeling PSLF - Billy Borrower • Is single with no dependents and lives in Georgia • Has an AGI of $35,000 that rises at 5% per year • Has $50,000 in Direct Loan debt ($23,000 of which is subsidized), all of which has a 6% interest rate • Borrowed for graduate school 9

10. Modeling PSLF Without PSLF REPAYE ICR IBR PAYE Time in Repayment Total Paid $36,538 $0 $0 Total Forgiven $0 With PSLF REPAYE ICR IBR PAYE Time in Repayment Total Paid Total Forgiven $55,333 $22,459 $45,065 $51,746

11. Taxation of Forgiveness - IDR *Based on Billy’s year 20 income of $88,455, 2015 tax brackets, uncomplicated tax filer.

12. Taxation of Forgiveness - PSLF

13. PSLF Employment Certification Borrower submits another Employment Certification Form Borrower submits form to FedLoan Servicing FedLoan determines qualifying payments were made during employed period FedLoan determines qualifying payments were made during employed period FedLoan Servicing determines borrower has direct loans FedLoan Servicing determines employment qualifies All federally-held loans transfer to FedLoan Servicing Borrowers who want confirmation that employment and payments qualify should submit the Employment Certification Form to FedLoan Servicing

14. PSLF Employment Certification Form

15. PSLF ECF

16. PSLF ECF

17. PSLF ECF

18. PSLF ECF

19. Common ECF Issues • Inaccurate or Missing End Date on ECF Form • Blank end date when the borrower is still employed vs. checking “still employed” • Check Box 15 to certify accuracy • Missing required fields (such as EIN number) • Payment Tracking • Must submit an ECF for an updated qualifying payment count • Payments made to other servicers (not just FedLoan) can be counted toward PSLF

20. Common Program Misconceptions Eligible Loan Types All Federal loans can be eligible through Direct Loan Consolidation. Employer Eligibility Qualifying employment for the PSLF Program is not about the specific job a borrower does, but rather, who the employer is. Qualifying Payment Plans Qualifying repayment plans include all income-driven repayment plans and the 10-year Standard Repayment Plan. Consolidation and PSLF Consolidating Direct Loans will erase any qualifying payments made. Appropriate Time to Begin Tracking for PSLF Borrowers shouldn’t wait to submit an ECF until after they have made 10 years of qualifying payments. 20

21. PSLF Portfolio Number of borrowers submitting ECF: 2016 Source: FedLoan Servicing

22. PSLF Portfolio Number of borrowers with DL & Qualifying Employment: 2016 Source: FedLoan Servicing

23. PSLF Qualifying Employment Approved ECFs by Employer Type Government 61% 501(c)(3) 39% Source: FedLoan Servicing

24. PSLF Processed ECF’s 719,187 (67%) Approved 1,068,888 Processed 349,701 (33%) Denied Source: FedLoan Servicing

25. PSLF Processed ECF’s Missing/Incorrect Information: 47% No Eligible Loans: 32% Employer Not Qualified: 21% Source: FedLoan Servicing

26. PSLF Qualifying Payments Source: FedLoan Servicing

27. PSLF Qualifying Repayment Plans Source: FedLoan Servicing

28. PSLF Portfolio Amount borrowed by borrowers who had employment and loans certified for PSLF Source: FedLoan Servicing

29. PSLF Portfolio Annual adjusted gross income of borrowers who had employment and loans certified for PSLF (and are on Income-Driven repayment plans) 44% 24% 18% Source: FedLoan Servicing

30. PSLF School Resources • Borrower Toolkits for outreach to student borrowers at MyFedLoan.org/schools • Reporting Available • Customized email communications showing the number of borrowers for your institution who have submitted an Employment Certification Form • Student detail information through the FedLoan Servicing School Portal • Training resources and personalized support at MyFedLoan.org/training • Presentation available for download • Sector-based, personalized support

31. QUESTIONS? Visit StudentAid.gov/publicservice for more information about PSLF.