Getting your student loan forgiven is a high-wire act. Here’s how to do it right

Personal Finance

Student loan borrowers who work in public service jobs may want to double-check that they are doing everything they need to if they want their loans forgiven under a federal program.

October marked the first month in which borrowers could have made enough qualifying payments to apply to have their debt wiped away. About 139 borrowers reached that threshold as of the end of 2016, according to the National Association of Student Financial Aid Administrators.

More than 500,000 borrowers have indicated they intend to pursue forgiveness through the program, according to a report issued by the Consumer Financial Protection Bureau earlier this year. More than 32 million individuals are repaying loans that could be eligible, according to the CFPB.

The program has not been immune to criticism. A Trump administration budget proposal that was introduced earlier this year suggested eliminating it completely for borrowers who take out loans after July 1, 2018. In August, the Massachusetts Attorney General sued one of the largest federal student loan servicers, alleging that the firm prevented borrowers from making qualifying payments.

The program, known as the Public Service Loan Forgiveness Program, was established in 2007. The aim was to help public service employees who have high student loan balances and low salaries repay their debt in 10 years. Those who are eligible include teachers, nurses, firefighters and police officers, among others.

To qualify for loan forgiveness, borrowers must fulfill four requirements: they must have loans through the William D. Ford Direct Loan Program; they must make 120 qualifying payments; they must be enrolled in repayment plans that qualify; and they must work full-time for a qualified employer.

But there are details in those stipulations that can trip borrowers up.

“Due to servicing break downs, they are running into unnecessary roadblocks to achieving each of these four objectives,” said Seth Frotman, assistant director and student loan ombudsman at the CFPB.

Some public service employees have found out that, though they have been paying their loans back for a substantial amount of time, say six or seven years, those payments do not qualify toward forgiveness, he said.

“Start taking the steps now to ensure that if you are working toward student loan forgiveness that that is actually the case,” Frotman said.

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