Search the Internet for “student debt stories,” and you’ll easily find dozens of terrified stories of student loan borrowers struggling to keep up with enormous debt balances spiraling out of control due to compound interest.
However, very few of these stories end in full debt relief. But that’s exactly what happened with Kristin Eliason, legal director at Network for Victim Recovery of DC, or NVRDC, a nonprofit in Washington, DC; She watched her $413,000 in student loan debt disappear overnight.
Eliason had her debts paid off through the Public Service Loan Forgiveness Program (PSLF). The federal program has an exemption that counts previously ineligible past payments.
The original amount she borrowed for public elementary school and private law school was around $180,000, and the interest has grown too fast over the years to pay off any of her major debtors, she says.
Eliason describes it as a “mental strain” to watch her debt bubble with no certainty that she would ever be forgiven. That weight was removed when her application under the waiver was approved.
“When the shock of not being able to believe this was real wore off, it was such a relief that I really never thought it would happen,” she says.
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A forgiveness program that rarely pays off
The waiver has worked for Eliason, but the program itself describes it as “a benefit on paper – no benefit in practice.”
Most borrowers who apply for government loan forgiveness are denied. According to an analysis of federal data, since the program began in 2007, the approval rate has been about 2.4%.
To receive full debt relief, 120 qualifying payments must be made while working full-time for an eligible employer, such as a. B. A public school, public hospital, legitimate non-profit organization, or the government.
Borrowers are left to fight, sometimes for years, to get payments counted towards the 120 for forgiveness of their remaining debt.
In the wake of public criticism, the Biden administration sought to make temporary improvements to address some of the shortcomings in the original program’s execution. Hence the PSLF waiver: it offers borrowers the opportunity to receive a credit for past payments that have not met the program’s strict rules. Since the waiver was introduced in October 2021, federal data shows permits increased to 10% through June 2022.
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What’s a few extra thousand when you’re in a six-figure hole?
Eliason took out less than $15,000 in federal student loans to attend the University of Virginia as an undergraduate. She studied law at the Columbus School of Law at the Catholic University of America, where she says taking out large loans was common practice.
She graduated from law school in 2009 with $180,000 in debt. She then took out an additional private loan to pay for her expenses while studying for the bar exam.
Eliason made most of her payments under an income-based repayment plan — it’s the only plan that normally qualifies for PSLF. The repayment schedule kept her payments lower than a standard 10-year repayment plan, but those lower payments allowed interest to continue accumulating.
After passing the bar, she participated in a postgraduate scholarship and clerkship and then experienced six months of unemployment.
“There were a few periods of forbearance where I didn’t make monthly payments because I couldn’t afford to make monthly payments and eat,” says Eliason.
In September 2012, she began practicing law and making $43,000 a year. Her payments were $600 a month. “It was unmanageable in the DC area,” she says.
When she started at NVRDC in 2013, Eliason was able to qualify for DC’s Loan Repayment Assistance Program, which helps pay attorney student loans to 37 nonprofit employers. But to receive the tax-free benefit, her income had to remain at or below $90,000. In DC, the current average household income in 2020 was $90,842, according to the US Census Bureau.
Eliason says as she neared the PSLF layoff, she began filing a certificate of employment. But her service provider miscalculated the number of payments she feels should have been counted. “They said I only made 90 payments, but I’ve been working for nonprofits for eight years,” she says. “I knew that couldn’t be translated.”
She continued to submit her certification of employment, and in March 2022 Eliason was told she had reached 119 payments, but she was required to submit additional forms to certify employment. In April, she was told she had made 124 qualifying payments – four more than she needed to – and was now owed money. Soon after, her servicer account showed a $0 balance and she received a letter notifying her of the full discharge.
Eliason says being forgiven on credit will make a big difference in her life. She will no longer need the loan repayment assistance program, which means there is no longer an income cap.
“It means I can get a raise at my job. That means if I want to do additional contract work I can do it to supplement my income. That means if the work gives me a bonus, it wouldn’t affect my ability to get repayment help,” says Eliason.
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How to get the PSLF waiver
More than 128,000 borrowers were forgiven $8 billion of collective debt through the temporary waiver. If you think that waiving could qualify you for PSLF, there are no downsides to applying.
The PSLF waiver counts previous payments that were previously ineligible, including:
Payments of less than the full amount due.
Payments due to an incorrect repayment schedule.
Payments for loans that were not previously eligible, such as B. Federal Family Education Loans or FFEL and Perkins Loans.
Payments not made during deferral periods of 12 consecutive months or longer.
Months spent in procrastination prior to 2013 other than school procrastination.
Use the PSLF Help Tool to search for a qualified employer and create a form. It has been updated to match the waiver.
To qualify, borrowers must already have direct loans or be consolidating their federal debt into a new direct loan. The consolidation step is critical: borrowers can submit a combined PSLF/employer certification form prior to consolidation, but they must consolidate to be eligible for waiver. To find out if you’re eligible for additional payments and to learn more about the waiver, log on to the Federal Student Aid website.
If you are hoping to receive the waiver, be sure to submit it before it expires on October 31st.
Anna Helhoski writes for NerdWallet. Email: firstname.lastname@example.org. Twitter: @AnnaHelhoski.