What The CARES Act Means For Student Loan Borrowers Seeking Public Service Loan Forgiveness

Many borrowers planning on applying for loan forgiveness through PSLF were concerned initially that the suspension of payments would affect their eligibility. But according to the U.S. Department of Education’s recently updated website, each suspended payment will be viewed as a qualifying payment for PSLF, as long as it otherwise would have met the program’s requirements. If you’re working full-time for an eligible employer during the forbearance period, then each suspended payment counts toward PSLF. Additionally, unpaid interest won’t be capitalized during or after the forbearance period, according to the U.S. Department of Education.

If you’re still employed with a nonprofit organization or government agency, the CARES Act will benefit you. You have until the end of September before you have to worry about making student loan payments again, and you still make progress toward loan forgiveness.

If You Lost Your Job or Your Employer Reduced Your Hours

The CARES Act will impact you differently if the coronavirus outbreak has affected your employment status.

If you have been laid off, furloughed or if your hours have been reduced so you’re working less than 30 hours per week, payments made during this time — including the suspended payments — don’t count toward PSLF.

If that’s the case for you, you won’t lose your eligibility for PSLF altogether. Qualifying payments do not need to be consecutive. If you get a new job with another nonprofit organization, get rehired by your previous employer or return to full-time status and start making payments again, your payments at that time will count toward PSLF, in addition to any payments you’ve already made.

If you take a job with a nonqualifying employer so that you have income during this difficult time, the payments you’ve made so far will still count toward PSLF. When you return to public service work later on, you’ll get credit for the payments you made while previously working for a nonprofit organization or government agency. You just won’t get credit for the period when your work was ineligible for PSLF.

If You Want to Keep Making Payments

Since no interest is accruing on federal loans through Sept. 30, 2020, some borrowers who can afford to do so may continue making payments or even make extra payments. During this time, the entire payment will go toward principal, helping them pay off their debt faster.

As a PSLF candidate, though, this strategy isn’t effective: You can’t qualify for PSLF sooner by making extra payments. Any balance left after you’ve made 120 payments will be forgiven tax-free. If you pay more than the minimum required — or, in this case, make payments while they’re suspended — you’ll simply be paying more than you need to.

One of the only times it makes sense to make extra payments is if you’re no longer eligible for PSLF, you don’t plan to return to a public service career, and you want to accelerate debt repayment.

How to Apply for Public Service Loan Forgiveness

If you are working toward PSLF, here are the steps you can take to confirm you qualify for the program and apply when you’re eligible for forgiveness:

1. Use the PSLF Help Tool: The government’s PSLF help tool will let you see if your employment qualifies for PSLF, if your loans are eligible and what forms you need to submit to verify that information.
2. Submit an Employment Certification Form: While not required, it’s a good idea to submit an Employment Certification Form annually or whenever you change employers.
3. Review servicer details: After submitting the Employer Certification Form, your loans will be moved over to FedLoan Servicing, which manages the PSLF program on behalf of the government. Once that happens, FedLoan Servicing will send you a letter verifying the number of qualifying payments you’ve made so far. For questions about your loans while working toward PSLF, contact FedLoan Servicing; if it’s difficult to reach a representative via phone while call volumes are high, try emailing instead.
4. Complete the application: After making your 120th payment, you can complete the PSLF application for forgiveness. You must be working for a qualifying employer at the time you submit the application and at the time your balance is forgiven. You can apply online through FedLoan Servicing, or you can mail the application to the address listed on the form.

The CARES Act provides significant relief to many federal student loan borrowers reeling from the COVID-19 crisis. You don’t need to request that your loans be put into forbearance — according to FedLoan Servicing’s website, your online account should now reflect that your interest rate is at 0%, and you’ll receive a notice by April 10 confirming that your payments have been suspended automatically.