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So whom you might ask is Dick Blumenthal? He’s Sen. Richard Blumenthal from Connecticut. Why might you love him? It’s because if you’re a government worker and have a load of student debt, he wants to help you. The way he’s done this is by introducing legislation that could make it easier for you to get those debts forgiven.
How it works now
If you’re not aware of this there is a program called Public Service Loan Forgiveness or PSLF. You would qualify if you work for the federal, state or local government or a not-for-profit organization that has been designated tax-exempt by the Internal Revenue Service (IRS). You must also have loans that you received under the William D. Ford Federal Direct Loan Program. If you got loans under the Federal Family Education Loan (FFEL) Program, a Perkins Loan or any other type of student loan program you would not be eligible.
10 years
In the event you qualify for PSLF you would be required to make 120 scheduled, on time, full monthly payments for 120 months or 10 years. These must be payments that you made after October 1, 2007 and you must have made them under what’s called a “qualifying” repayment plan. Finally, you must be working full time at a qualifying public service organization when you make these payments.
A “qualifying” repayment plan is where you repay your loans under one of the income-driven repayment programs, which includes Pay As You Earn, Income-Based Repayment or Income-Contingent repayment. You would likely also qualify if you were on 10-year Standard Repayment or any other program where your monthly payment would equal or exceed what you would pay under 10-Year Standard Repayment.
Loan forgiveness
Assuming you meet these criteria you would then have any remaining balance on your student loans forgiven after those 10 years or 120 payments. But, and here’s the big but, you can’t wait too long to get started on PSLF as the more payments you make, the lower your remaining balance will be, which means less money will be forgiven. In fact, if you were to make all 120 payments under this program, you would have a remaining balance of zero and there would be nothing left to be forgiven.
A word of warning
It’s important to also understand that under Income-Based Repayment, your monthly payments will likely be less than under any of the other PSLF-qualifying repayment plans and your repayment period or terms will be longer. This means that additional interest will accrue on your loan and with a smaller monthly payment; you will end up with a higher loan balance to be forgiven. What happens if you do not meet the eligibility requirements for PSLF? Then you would be responsible for repaying the entire balance of your loan, including all interest that had accrued. Of course, this would not be true if you qualify for forgiveness under the terms of Pay As You Earn, Income-Contingent Repayment or Income-Based Repayment.
What Sen. Blumenthal’s legislation would do
What Sen. Blumenthal has proposed is a plan that would make it easier for you, as a government worker, to get your student loans forgiven. His bill would alter the Public Service Loan Forgiveness program so that 15% of a government worker’s student loan would be forgiven after two years. Two years after this, another 15% would be canceled. If you work for six years in the public sector, you would see another 30% of your debts forgiven. Then, after 10 years on the job you would see the remaining 30% forgiven.
What the senator believes is that the way PSLF is currently structured is that it’s an all-or-nothing deal. You don’t get forgiveness unless you complete 10 years of public service. If you were to quit or lose your job after nine years and 11 months, you’d lose forgiveness. Since PSLF loans continue to accrue interest over those years, if you were to lose your public service job, you might feel as if you are being forced to start all over from scratch.
The downside of his proposed legislation
The biggest negative of Sen. Blumenthal’s legislation is that no one knows how much this would cost the US government – or, to put it bluntly, US taxpayers.
Also, while federal government workers might have been underpaid in the past, this is no longer true. The average US federal government employee now earns $14,632 more in direct income than his or her counterpart in the private sector. In fact, the average US federal government employee now earns$74,436 versus the average private sector worker at $59,804. In addition US federal government workers earn the equivalent of $26,632 in benefits so that their total compensation is $114,436 versus the private sector employee at $87,804. So while Sen. Blumenthal may be well intentioned, it would seem that at least federal government workers already have a major reason to sign up for PSLF and work for the 10 years – although this may not be quite so true for people who work for state or municipal governments.
What types of jobs qualify?
A public sector job is defined as any kind of job where you are paid directly by the government. This even includes civil service jobs such as working for the US Postal Service, the Federal Bureau of Investigation, the Internal Revenue Service or even holding public office. Beyond this, here is a list of the jobs that would definitely qualify for Public Service Loan Forgiveness:
- Law enforcement
- Military service
- Public safety
- Emergency management
- Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten)
- Public interest law services
- Public education
- Public service for individuals with disabilities and the elderly
- 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)
- Public library services
- School library or other school-based services
Teacher Loan Forgiveness
While most teachers would qualify for Public Service Loan Forgiveness under “Public education” (as listed above), there is another program specific to teachers called Teacher Loan Forgiveness.
If your five years of teaching service began before October 30 of 2004 you could have up to $17,500 of your student debts forgiven if you teach for five consecutive years in specified elementary and secondary schools and educational service agencies that serve families with low-incomes, and that meet other qualifications. The loans eligible for this program include Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford loans. Unfortunately PLUS loans are not be eligible for this program.
However, you could earn up to $5000 in loan forgiveness if the chief administrative officer of the school where you taught certifies that you are a full-time elementary school teacher that showed teaching skills and knowledge in reading, writing, reading, mathematics and other parts of the elementary school curriculum; or where you were a teacher full time for five years in a secondary school where you taught in a subject area related to your academic major.
After Oct. 30, 2004
If your five consecutive years of teaching began after October 30, 2004, you could qualify for that $5000 in loan forgiveness if you were a highly qualified elementary or secondary school teacher. To earn the $17,500 in forgiveness you must be certified by your chief administrative officer that you are a highly qualified full-time teacher of mathematics or science in an eligible secondary school; or are highly qualified as a special ed teacher where your main job was to teach children that had disabilities and taught them in an area that corresponded to your training in special education. In addition, you must have shown that you have knowledge and teaching skills in the content area of the curriculum in which you taught.
There are some other requirements to be classified as a highly qualified teacher and you can learn more about them by clicking on this link.
