In 2007, Congress created the original Public Service Loan Forgiveness (PSLF) program to incentivize college and university graduates to enter less lucrative public service jobs —particularly in health care and education.1
The general idea behind the Public Service Loan Forgiveness (PSLF) is that borrowers would get their remaining balance forgiven (tax-free) after they:
- made 120 qualifying payments;
- while on the right type of repayment plan.
- having the right kinds of loans;
- working full-time for a qualifying employer;
- and be able to prove it all by filling out the PSLF Employment Certification form.
Unfortunately, Public Service Loan Forgiveness (PSLF) is a very complex program, and many student loan servicing companies didn’t do the best job in communicating the program’s strict requirements to earn forgiveness. In fact, they’re still not doing that great of a job, although many loan servicing companies have gotten better over the years.
But that doesn’t change the past. When the first wave of PSLF-eligible student borrowers applied in 2017, only 96 of 28,000 borrowers received loan forgiveness —a 99.6% denial rate.2 That’s nearly thirty thousand people who entered into less lucrative public service careers for ten years, under the promise of loan forgiveness, only to get denied.
Student loan borrowers were making payments for years, thinking they were making progress by putting in their time, but they weren’t. If a borrower had older loans or made payments on an incompatible repayment plan, those payments did not count.
This is where Temporary Expanded Public Service Loan Forgiveness (PSLF) comes into play.
What is Temporary Expanded Public Service Loan Forgiveness (TEPSLF)?
In response to the ridiculously high denial rates in PSLF applications, Congress passed a legislative fix through a new program called Temporary Expanded Public Service Loan Forgiveness or TEPSLF.
TEPSLF can help borrowers who have made payments on Direct Loans (Direct Stafford or Direct Consolidation Loans), but weren’t necessarily on a qualifying right repayment plan. TEPSLF would allow those applicants to get approved for forgiveness.
Unfortunately, TEPSLF isn’t that helpful.
To qualify for loan forgiveness through the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program, borrowers must have also previously submitted a PSLF application for forgiveness that was denied.
Borrowers must switch to an income-driven repayment plan for at least the final 12 payments of the program, then file an appeal through the TEPSLF program
Here’s why I say TEPSLF isn’t that helpful.
Congress gave the Department of Education $700 million and clear instructions to simplify and expand the PSLF program to increase the rates of loan forgiveness.3 So there’s only a finite amount of funding available for forgiveness through TEPSLF.
Is TEPSLF Working?
While TEPSLF can be considered progress, it’s still moderately limited and not without flaws. In a Government Accountability Office (GAO) report, it was discovered that The Department of Education was denying TEPSLF applicants at the same rate as PSLF applicants. Of the 53,523 student loan borrowers who applied for TEPSLF, only 661 (1%) were approved.
Why are 99% of TEPSLF still getting denied?
In short, not many borrowers are getting declined because they were on the wrong kind of repayment plan. They’re getting declined because they have the wrong types of loans. I’ve been advising on student loans for several years and never seen a case where a borrower would have been declined due to having a wrong repayment plan.
Much of this stems to the fact that TEPSLF, like PSLF, has complex, confusing, and poorly-communicated eligibility criteria. People simply don’t know what kind of loans they have, and their loan servicing company doesn’t want to give them the information they need to make educated decisions. Giving people too much data will cause phone calls.
Hopefully, one day, this problem will be addressed but it’s doubtful. The Senate has already received a bill to address this problem, but so far, that bill hasn’t gone anywhere.
Join the webinar
There comes the point in everyone’s student loan journey where they have to question the effectiveness of their student loan payoff strategy. Obviously, there’s a lot on the line.
Perhaps you’ve been making payments for some time now but not seeing your balance go down as fast as you’d like —or worse, your balance is actually increasing.
Register for one of my upcoming Student Loan Destroyer webinars. I’ll provide you a crash course in student loan management and review a real-life case study. I’ll also share how you can have me look at your student loans and answer all your questions.
1) Department of Education, Public Service Loan Forgiveness —StudentAid.gov
2) Diverse Issues of Higher Education, Sara Weismann — https://diverseeducation.com/article/155351/
3) Education & Labor Committee, Chairman Bobby Scott —https://edlabor.house.gov/media/press-releases/gao-report-reveals-education-departments-failure-to-implement-temporary-expanded-public-service-loan-forgiveness-program
For Educational Purposes Only
Neither Hornor, Townsend, & Kent, LLC (HTK) nor any of its affiliates offer lending or repayment advice. The views expressed are those of the presenting party and may not express those of HTK or its affiliates. The information presented is for educational purposes only and is derived from sources assumed to be reliable. it is not to be relied upon as tax, legal, or financial advice, nor used for the purpose of avoiding any tax obligations. Please contact a qualified professional regarding your individual circumstances.