Action Required for PSLF / IBR participants: PSLF employment verification form

By Sigrid | Posted on

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

By Sigrid | Posted on

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:

If you have a moment please browse this new tool and complete a Survey and provide Feedback about your experience.

Loan Payment History Documentation

By Sigrid | Posted on

All federal student loans are serviced by private loan companies and most of these servicers provide only 3 – 5 months of payment history information. Therefore I strongly recommend that you save a screenshot of your most recent 3 – 5 monthly student loan payments (or more if available) and set a pop-up reminder on your calendar/smartphone. This will come handy when you have to submit payment documentation for the cancellation of your LRAP loan that requires up to 12 months of payment documentation.

Disputes with your federal student loan servicer?

By Sigrid | Posted on

If you have not received satisfactory results working with your student loan servicer resolving a dispute you may contact FSA Ombudsman Group at fsaombudsmanoffice@ed.gov or 1-877-557-2575 for assistance.

For example if, due to the current problem with GradPlus, you had to make a payment or your account was debited by your student loan servicer without authorization while you were in school, the Ombudsman’s office should be able to assist you in retrieving your payment or clearing up discrepancies with your student loan servicer.

Need help to find your federal student loan servicer?

By Sigrid | Posted on

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.

Update to “LRAP funds are taxable?” blog post

By Sigrid | Posted on

Berkeley is not issuing 1099’s because it has concluded that the benefit is excluded as a refinancing loan that is discharged under § 108(f)(1) of the Internal Revenue Code. Consequently the Disbursement’s Office is not reporting LRAP payments to the IRS.

Please consult a tax accountant or tax attorney for advice on the taxability of LRAP.

”Form 1099 series is used to report various types of income other than wages, salaries, and tips (for which Form W-2 is used instead). Examples of reportable transactions are amounts paid to a non-corporate independent contractor for services (in IRS terminology, such payments are nonemployee compensation).”

Direct Loan Early Repayment Problem

By Corina | Posted on

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

By Sigrid | Posted on

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?

By Sigrid | Posted on

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

By Sigrid | Posted on

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.