(NerdWallet) – Search the internet for “student debt stories” and you’ll easily find dozens of harrowing stories of student borrowers struggling to cope with huge debt balances that have swelled out of control due to compound interest.
However, very few of these stories end in full debt forgiveness. But that’s exactly what happened with Kristin Eliason, legal director of the Network for Victim Recovery of DC, or NVRDC, a nonprofit organization in Washington, DC; she saw her $413,000 student loan debt disappear overnight.
Eliason got his debt repaid through the Public Service Loan Forgiveness Program, or PSLF. The federal program has a waiver in effect that counts previously ineligible past payments.
The original amount she borrowed for public undergraduate and private law school was around $180,000, and the interest grew too quickly to pay off any of her principals over the years. , she says.
Eliason describes watching his debt balloon with no certainty that it would ever be forgiven as a “mental burden”. That weight was lifted when her application was approved under the waiver.
“Once the shock of not believing it was real wore off, it was such a relief that I really never thought it would happen,” she says.
A rarely paying forgiveness program
The waiver worked for Eliason, but regarding the program itself, she describes it as “a benefit on paper – not a benefit in practice.”
Most borrowers going to Cancellation of civil service loans are rejected. The approval rate since the program’s inception in 2007 has hovered around 2.4%, according to an analysis of federal data.
Obtaining full debt discharge requires 120 qualifying payments made while working full-time for a qualifying employer, such as a public school, public hospital, qualifying nonprofit organization, or the government.
Borrowers have been on their own fighting, sometimes for years, to have payments count towards the total of 120 needed to cancel their remaining debt.
Following public criticism, the Biden administration sought to make temporary improvements in an effort to fix some of the flaws in the execution of the original program. Therefore, the PSLF waiver: it offers borrowers the opportunity to receive credit for past payments that have not met strict program rules. Since the waiver was put in place in October 2021, federal data shows that approvals through June 2022 have climbed 10%.
What’s a few thousand more 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. She then studied law at the Columbus School of Law at the Catholic University of America, where she said taking out large loans was common practice.
She graduated from law school in 2009 with a debt of $180,000. She then took out an additional private loan to help pay her expenses while she studied for the bar exam.
Eliason made most of his payments on an income-driven repayment plan — it’s the only plan that generally qualifies for the PSLF. The repayment plan kept its payments lower than they would have been under a standard 10-year repayment plan, but those lower payments allowed interest to continue to accrue.
After passing the bar, she participated in a postgraduate scholarship, an internship, and then experienced six months of unemployment.
“There were a few forbearance periods where I wasn’t making monthly payments because I couldn’t afford to make monthly payments and eat,” Eliason says.
In September 2012, she started working as a legal services attorney, earning $43,000 a year. His payments were $600 per month. “It was unmanageable in the DC area,” she says.
When she started working at NVRDC in 2013, Eliason was able to qualify for DC’s Loan Repayment Assistance Program, which helps pay student loans for attorneys at 37 nonprofit employers. But to receive the tax-free benefit, his income had to remain at or below $90,000. In DC, the current median household income in 2020 was $90,842, according to the US Census Bureau.
Eliason says that as she got closer to the PSLF discharge, she began to submit proof of employment. But her agent miscalculated how many payments she thought should have counted. “They said I only made 90 payments, but I had been working in nonprofits for eight years,” she says. “I knew it didn’t translate.”
She continued to submit her proof of employment, and in March 2022, Eliason was informed that she had reached 119 payments, but she had to submit additional forms to certify employment. In April, she was told she had made 124 qualifying payments – four more than needed – and now owed money. Shortly after, her repairer account showed a balance of $0 and she received a letter informing her of the full discharge.
Eliason says the loan forgiveness will make a big difference in his life. She will no longer need the loan repayment assistance program, which means that there will no longer be an income ceiling.
“It means I can get a raise at my job. This means that if I want to do additional contract work, I can do it to supplement my income. This means that if the work earned me a bonus, it would not impact my ability to get repayment assistance,” says Eliason.
How to obtain the PSLF exemption
More than 128,000 borrowers have seen a collective debt of $8 billion canceled thanks to the temporary waiver. If you think you might qualify for the PSLF through the waiver, there is no downside to applying.
The PSLF waiver counts past payments that were not previously eligible, including:
- Late payments.
- Payments less than total amount due.
- Payments made on an incorrect repayment plan.
- Payments made on loans that were not previously eligible, such as Federal Family Education Loans, or FFEL, and Perkins Loans.
- Payments not made during forbearance periods of 12 consecutive months or more.
- Months spent in adjournment, other than academic adjournment, before 2013.
Use the PSLF Helper Tool to search for an eligible employer and generate a form. It has been updated to align with the waiver.
To qualify, borrowers must already have direct loans or must consolidate their federal debt into a new direct loan. The consolidation step is essential: borrowers can submit a combined PSLF/employer certification form prior to consolidation, but they must consolidate to qualify for a discount. To find out if you are entitled to additional payments and to find out more about the exemption, log on to federal student aid website.
If you hope to get the waiver, be sure to submit it before it expires on October 31.