2017 brought plenty of new changes to American student loan policy.
With the first month of 2018 almost finished, it’s important to be up-to-date on what is happening in the world of student loans. If you’re a credit counselor or financial coach, it is the perfect time to reevaluate the student loans of your clients to be sure they are on track. You may even consider checking on your own student loans!
Knowing what happened with student loans in 2017 will help you navigate them more skillfully in 2018. Here are some of the major changes and events.
A Large Number of Public Servants May Lose Public Student Loan Forgiveness
The Public Student Loan Forgiveness Program allows debt on some types of federal loans to be forgiven on the condition that the borrower makes regular payments and works in public service for 10 years. That may change for many soon.
The PROSPER Act, released on December 1, is a massive shift of the $1.3 trillion federal student loan program. Some loan-forgiveness programs would be eliminated, leaving over half a million public servants stuck with student debt that was on track to forgiveness.
However, some in public service are not even eligible for student loan forgiveness, and they may not even know it.
Many Borrowers in Public Service Are Not Eligible for Student Loan Forgiveness
Many in public service believe they are working towards loan forgiveness but actually are not even eligible. Sometimes even financial aid officers make the mistake of not being aware of how Public Student Loan Forgiveness actually works.
Those seeking student loan forgiveness under PSLF need to be sure that:
- Their employer is qualified
- They have eligible loans
- They submit an Employment Certification Form every year
Qualified employers include Peace Corps, Americorps, not-for-profit 501(c)(3) organizations, and government organizations.
Direct loans, such as a direct consolidation loan, are eligible. Private loans are not.
Borrowers should keep careful records and be sure to research information thoroughly to be sure they are on track to proper loan forgiveness.
Defrauded Students May See Less Relief
After several for-profit colleges were shut down for defrauding students, the Obama administration enacted loan forgiveness policies to aid students struggling with the loans. However, the Department of Education has recently changed this policy, and will no longer provide total forgiveness without additional stipulations being met. Now, borrowers must earn less than 50 percent of what their counterparts make to be eligible for total forgiveness.
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