As of fall 2012 all PSLF qualifying payments under IBR, PAYE, or the 10-year repayment schedule, only count if made within a 20-day period before and on the due date. Payments made after the due date or before that 20-day period do NOT qualify for PSLF. Please check with your loan servicer and consider arranging auto-debit at a day the month that falls within the PFLF qualifying 20-day period.
NEW rule for PSLF qualifying monthly payments
Pay-As-You-Earn Repayment Plan
Today the Department of Education announced the new Pay As You Earn Repayment Plan.
In order to qualify you must have a partial financial hardship and meet the following requirements:
“You must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan as of Oct. 1, 2007, or had no outstanding balance on a Direct Loan or FFEL Program loan when you received a new loan on or after Oct. 1, 2007. ”
The Pay-As-You-Earn plan caps federal student loan borrowers’ loan payments at 10% of the discretionary income and the remaining loan balance will be forgiven after making 20 years of payments.
The Pay As You Earn plan will be available to borrowers by the end of 2012.
Please see details at the Department of Education’s website: studentaid.ed.gov
Action Required for PSLF / IBR participants: PSLF employment verification form
This is an update of our February blog post.
On January 31 the Department of Education released its Employment Certification for Public Service Loan Forgiveness forms www.studentaid.ed.gov/publicservice and a Dear Borrower Letter. Please read the PSLF Fact Sheet, the Q&A and instructions very carefully before submitting your Employment Certification for PSLF.
The employment verification process is a must for all borrowers, who are enrolled, or at some point anticipate enrolling in IBR, and plan to utilize the Public Service Loan Forgiveness Program (PSLF). To read more about IBR and PSLF please go to IBRinfo.org.
To start the verification process you need to submit the employment certification forms completed and signed by your employer, either at the end of a calendar year during which you were employed by a PSLF qualifying employer, or at the end of such an employment.
The PSLF is a federal program that works in conjunction with the Income Based Repayment (IBR) option and is independent of the LRAP.
If you are enrolled in IBR and work in public service you may want to submit a PSLF employment verification form at your earliest convenience. Once it is determined that your position qualifies for PSLF, your loans will be transferred to MyFedLoans.org. As a side note, several graduates have mentioned MyFedLoans’ excellent customer service.
Federal Student Aid website – NEW
The Department of Education redesigned the Federal Student Aid website into a more user friendly tool. Here are some valuable links for Public Service graduates:
- Repayment option overview
- IBR
- PSLF
- NSLDS
- Forbearance – the Department of Education now distinguishes between discretionary and mandatory forbearance
If you have a moment please browse this new tool and complete a Survey and provide Feedback about your experience.
Need help to find your federal student loan servicer?
The processing of federal student loans is contracted out to one of several loan “servicers.” You can find the name and contact information for the servicer of your loans on the National Student Loan Data System (NSLDS) website.
After logging in, click on the individual loan number to access detailed information such as the “scheduled start of repayment” date and the servicer / lender contact information. The most common lenders for Boalt students are Direct Loan Servicing (ACS) and Department of Education (Pheaa). Regularly updated contact information for each servicer can be found on the Department of Education’s studentaid.ed.gov.
Some Boalt graduates reported that their federal student loans were transferred from Direct Loan Servicing (ACS) to another servicing provider without any notice or access information. The NSLDS website is the best place to find the new servicer’s information.
Direct Loan Early Repayment Problem
The financial aid office has received word from a growing number of you that at least one of your Direct Graduate Plus loans has been placed into early repayment by the Direct Loan Servicing Center (ACS) due to an error in the ACS processing system. Some have been in repayment for some time and are now considered “past due” or may have had a payment deducted from your personal account.
We recommend that ALL students who have borrowed Graduate Plus loans view their loan record online at www.nslds.ed.gov. If Direct Loan (ACS) is your servicer and you find that your recent GradPlus loan(s) are in repayment, contact the ACS customer service center immediately at 1-800-848-0979. Ask to have the loan placed into forbearance until your graduation date and confirm your current address. It can take up to 7-20 days for the the request to be processed. For those of you who have had early payments deducted from your accounts, request that you be reimbursed. We are told it can take up to 6 weeks for the reimbursement to be processed.
If you find your interaction with the customer service representative unhelpful, ask to speak to a supervisor. Should you find that unhelpful as well, contact our office and we will contact them on your behalf.
Finally, we recommend that you report your loan servicing problem with ACS to the Consumer Financial Protections Bureau at 1-855-411-2372. We are hoping that enough students will submit a complaint with the CFPB to expedite the system-wide fix.
Update to “LRAP funds are taxable?” blog post
On March 18, 2012 the IRS released the Publication 970, Tax Benefits for Education for 2011 returns. Unlike in previous editions, the “Law school LRAP” is no longer listed as being tax free. According to the revised p970 edition for the tax year 2011 LRAP funds are taxable income unless for services in the health care profession as defined by the IRS p970 pages 36 and 37.
We believe this speaks to the availability of the exclusion under § 108(f)(4), which addresses LRAP programs as such and is restricted as stated, and that it does not speak to the availability of the exclusion under § 108(f)(1), which provides a separate exclusion for discharge of indebtedness that covers public interest employment more generally. Under the LRAP program, funds are loaned to a participant to assist with debt repayment and then this loan is discharged. Thus there is an argument that the exclusion in § 108(f)(1) applies. We are aware of no ruling or other statement by the IRS that the exclusion under § 108(f)(1) does not apply. But neither are we aware of clear authority that it does apply. Rev. Rul. 2008-34 is authority that § 108(f)(1) exclusion does apply to an LRAP program but is not clear authority.
If you do report the LRAP forgivable loan as income you should be able to deduct the amount of the benefit used to pay interest under § 221 though the deduction is subject to a cap.
Since there is discussion within the law school community based on IRC § 108(f)(2) that the LRAP forgivable loan should not be taxable, we recommend that you consult with a tax accountant for further advice.
LRAP funds are taxable?
On March 18, 2012 the IRS released the Publication 970, Tax Benefits for Education for 2011 returns. Unlike in previous editions, the “Law school LRAP” is no longer listed as being tax free. According to the revised p970 edition for the tax year 2011 LRAP funds are taxable income unless for services in the health care profession as defined by the IRS p970 pages 36 and 37.
If you do report the LRAP forgivable loan as income you should be able to deduct the amount of the benefit used to pay interest under § 221 though the deduction is subject to a cap.
Since there is discussion within the law school community based on IRC § 108(f)(2) that the LRAP forgivable loan should not be taxable, we recommend that you consult with a tax accountant for further advice.
Please see excerpt of the 2011 Tax Benefits for Education p970.
IBR enrollment must be renewed annually with your loan servicer
Last Fall the rules for Income Based Repayment (IBR) changed.
Approximately every twelve months the servicing provider for your Direct Loans will send you a notification with a time-sensitive request to submit either your most recent tax return (1040, 1040 A or 1040 EZ) or an Alternate Documentation Form along with proof of you current income. In order to keep your IBR enrollment active you must respond within 30 days of the date of the letter. If the requested documents are not received within those 30 days, your loans will default into the 10-year repayment schedule.
Please make sure your lender always has your current address and that you read all correspondence.
PSLF Employment Certification Form
The Department of Education released its Employment Certification for Public Service Loan Forgiveness forms: www.studentaid.ed.gov/publicservice and a Dear Borrower Letter. Please read the PSLF Fact Sheet, the Q&A and instructions very carefully before submitting your Employment Certification for PSLF.
The employment verification process is a must for all borrowers, who are enrolled, or at some point anticipate enrolling in IBR, and plan to utilize the Public Service Loan Forgiveness Program (PSLF). To read more about IBR and PSLF please go to IBRinfo.org.
To start the verification process you need to submit the employment certification forms completed and signed by your employer, either at the end of a calendar year during which you were employed by a PSLF qualifying employer, or at the end of such an employment.
The PSLF is a federal program that works in conjunction with the Income Based Repayment (IBR) option and is independent of the LRAP.