If you work in a not-for-profit organization, this article is all you need to reduce your debt obligations. A great federal aid program exists to help non-profit employees get rid of their debt quickly. This non-profit student loan forgiveness program is available through one of the most useful federal assistance plans - Public Service Loan Forgiveness. This guide will explain the PSLF in full detail and answer the most frequently asked questions by the potential applicants. Besides, Biden’s administration is planning changes in this program. Hence, we will also discuss what types of changes you might expect in 2021 for Public Service Loan Forgiveness.
PSLF at a Glance
Non-profit Student Loan Forgiveness is possible via the Public Service Loan Forgiveness program. This program cancels any remaining debt after making 120 qualifying payments. Once you make 120 payments, you do not need to pay anything else, no matter the outstanding balance. However, there exist many requirements for eligibility. In short, a successful applicant:
- Should be employed in a not-for-profit organization,
- Work full time,
- Have qualifying loans,
- Have a qualifying repayment plan,
- Make 120 eligible payments.
Each of these points needs further explanation, which we will focus on in subsequent sections.
Employment Conditions
Public Service Loan Forgiveness programs are available to different employment types, including federal, state, local government positions, or volunteer jobs in AmeriCorps. However, in this guide, we are focusing on Non-profit Student Loan Forgiveness. Hence, the main condition for employment is being employed by a not-for-profit organization. Such establishments are free from tax and regulated under the 501-c-3 Section of the Internal Revenue Code. some examples of eligible non-profits are:
- Elementary or secondary schools
- Private colleges
- Some universities
Yet, some non-profit organizations that do not satisfy tax-exemption requirements - not regulated under the 501-c-3 section of Internal Revenue Code- can still qualify for this forgiveness opportunity. However, in this case, the employer should provide an eligible public service. Some eligible public services are in the fields of:
If you want to be sure about your workplace qualification for Non-profit Student Loan Forgiveness, you can ask your employer. They should be able to tell if it’s a not-for-profit organization and which tax status is applicable. Alternatively, one can use the Internal Revenue Code database to identify tax-exempt employers.
Full-time Work
Non-profit Student Loan Forgiveness requires full-time work. This requirement is evaluated by considering either 30 hours of work per week or the employer’s full-time employment description. However, the greater one matters. In other words, if the employer’s full-time work is only 24 hours, you will still need to work 30 hours per week to be eligible.
Working part-time is also possible. However, one needs to work in several jobs simultaneously so that the accumulated hours will satisfy the full-time work condition. Besides, keep in mind that Non-profit Loan Forgiveness does not consider hours spent on worship or religious instruction qualifying for this program.
Qualifying Loans
Even if borrowers work in not-for-profit organizations, they will not be eligible if their student loan types do not qualify. Generally speaking, only Direct loans qualify. If you have private loans, Perkins loans, or Federal Family Education Loans, they will not be covered with this forgiveness program. Yet, there is an opportunity for borrowers to convert their loans. In more details, if the borrower consolidates debt to a Direct loan, they can become eligible. However, it should be considered that successful payments made till the consolidation will not count toward the 120 payment requirement of Non-profit Student Loan Forgiveness. Only the payments after the consolidation matter for this program.
Payment Requirements
We understand that the conditions are getting more complex, but borrowers need to be patient and be familiar with all requirements. Till now, we have discussed specifications for employers, work hours, and loans. In this section, we will present qualifying payments, followed by repayment plans for eligibility.
As mentioned before, borrowers need to make 120 qualifying successful payments to benefit from the Non-profit Student Loan Forgiveness program. Here, the term ‘qualifying’ is essential as it brings some conditions for the paid amount.
First, payments made only after October 2007 are considered as progress for forgiveness. Debtors need to make these payments in the full required amount by the eligible repayment plan. We will discuss eligible repayment options in the next section. Besides, the timing is also important. Borrowers have only 15 days after the due date to make the monthly payment to get one credit out of 120. Lastly, during the period debtors repay the debt, they should be employed by the eligible employer as full-time or part-time with the conditions discussed above.
It is also important to keep in mind that payments should be made only when they are required. While studying, in the grace period, or forbearance/deferment status on loan, the borrowers, should not make payments. However, if you want to pay the debt during loan forbearance, you need to contact the loan servicer.
Lastly, the 120 payment condition does not require them to be consecutive. It is acceptable to have periods in which the payments do not qualify. For instance, you might work with a non-qualifying employer without losing your prior credits.
Ensure Successful Payments
It is advisable for borrowers to sign up for an automatic debit service with the loan servicer. In this case, each month, the due amount will be withdrawn automatically on time. Besides, if the debtor is not sure whether he/she is on the right track with the payments, they can submit the form annually or when having changes in the workplace. In this way, their progress will be determined by the PSLF.
Eligible Repayment Plans
Debtors need to utilize Income-Driven Repayment plans so that their payments qualify for Non-profit Student Loan Forgiveness. Other programs like Graduated, Extended or Alternative repayment are not eligible for forgiveness. However, the case for Standard Repayment is different. If you have this plan for Direct Consolidated Loans, your repayment does not satisfy the eligibility criterion. But in other cases, the Standard Repayment plan for 10-years counts for the Public Service Loan Forgiveness.
Standard Repayment also helps borrowers make 120 payments, and in the end, the debt balance will be 0. When moving these payment plans to Income-Driven plans, you need to be careful. An Income-Driven Repayment plan may increase monthly payments volume because it depends on the owed amount or the income. If you do not want to pay more per month, it is advisable not to consider Non-profit Loan Forgiveness. Under the Income-Driven Repayment, these programs are qualified:
Pay As You Earn Repayment Plan (PAYE)
Each repayment program under an Income-Driven plan has its own terms- payback period, payment amount, eligible loans, etc.
Pay As You Earn plan usually requires 10% of the discretionary income divided by 12 as a monthly due amount. It is also adjusted based on the family size or owed debt balance, but it is not higher than the amount required in the 10-year Standard Repayment plan. With PAYE, it takes 20 years to repay the debt.
Only Direct Loans qualify for this program. Borrowers should receive the disbursements on or after October 2011. Besides, they should be new debtors, which means on or after October 2007, they should not have any balance for a Direct Loan.
Revised Pay As You Earn Repayment Plan (REPAYE)
With REPAYE, it takes 20 years to pay back the debt for undergraduates and 25 years for graduate or professional study debtors. The payment amount is determined in the same way as the PAYE plan. Again, only Direct Loans qualify for this plan. For more information, one should check the official website or contact Student Loans Resolved experts.
Income-Based Repayment Plan
New borrowers on or after July 2014 face different conditions for this plan than others who were not new borrowers. New borrower means that at the defined time, the borrower did not have an outstanding related balance. If you are a new borrower, usually only 10% of discretionary income, divided by 12, is required, while others will pay 15% of the discretionary income. Keep in mind that these amounts cannot be more than the terms of the 10-year Standard Repayment Plan.
Besides, new borrowers will repay the debt in 20 years, while this period is 25 years for not new borrowers under the Income-Based Repayment Plan. Luckily, this time, both Federal Family Education Loans and Direct Loans will be eligible.
Income-Contingent Repayment Plan
Debtors can pay their loans fully in 25 years with the help of the Income-Contingent Plan. However, this program is eligible for Non-profit Student Loan Forgiveness, allowing borrowers to receive relief in 10 years (after 120 qualifying payments). The monthly amount required is either 20% of discretionary income, divided by 12, or a fixed amount over 12 years.
If you have a Parent PLUS loan, this is a great program for you. Among the available options for Income-Driven Repayment plans, only the Income-Contingent Repayment covers Parent PLUS loans. Parent borrowers should consolidate their loans before repaying them under the Income-Contingent plan.
This guide mainly focuses on Non-profit Student Loan Forgiveness. Hence, we give a short introduction to qualifying repayment plans. Borrowers who want to take advantage of this opportunity need to get further information through our blogs, official websites, or by contacting our experts. As 120 qualifying payments are required, it is advisable to decide on the most suitable repayment plan to repay the debt with peace in mind.
Non-Profit Student Loan Forgiveness Process
This student debt forgiveness opportunity for non-profit employees requires 120 payments. Hence, the process can be finalized fastest in 10 years. When applying for this program through Public Service Loan Forgiveness, one should keep in mind that a qualifying employer should employ him/her.
Besides, when the benefit is claimed or the debt is forgiven, you should still work with an eligible employer. It is advisable to submit the PSLF Certification no matter in which stage you are. This certification or form allows the officials to detect if you are on the right track with the payments. If debtors do not submit this form periodically, they will be obliged to supply employment certification for each qualified employer they worked with when applying for forgiveness.
When borrowers submit PSLF Form, they will be informed about the number of qualifying payments. This notice is received by letter only when PSLF Form is submitted. Applicants will need to send this form together with the employer’s certification to the official mail address or by fax. For further information, an employer’s certification is the document proving your employment and signed by someone related to your job, such as human resources, supervisor, etc.
PSLF Help Tool
The officials want to make the Public Service Loan Forgiveness program easier for all applicants, including non-profit employees. Hence, they created the PSLF help tool. This tool is an online application that allows borrowers to understand the requirement and determine how to get the debt forgiven. Besides, it informs if the employer or student loan type is eligible and explains further actions.
As helpful as this tool is, it still does not allow electronic signatures. Hence, debtors and their non-profit employers should sign the printed form generated before submitting it.
Taxes
Non-profit Loan Forgiveness via Public Service Loan Forgiveness is exempt from taxes. It means the successful applicants do not need to pay taxes for the income earned from the forgiveness program.
Can I Make Higher Monthly Payments?
Sometimes borrowers think that if they make higher monthly payments, they will become eligible for Non-profit Student Loan Forgiveness faster. As mentioned before, 120 payments are necessary, which takes around 10 years to complete. However, one cannot shorten this period by paying more.
However, prepaying is possible. Though this technique does not shorten the eligibility, it guarantees timely payments. Imagine a borrower’s monthly payment amount is $50. If he/she makes the $500 payment in one month, it will count for the 10 month period. During these 10 months, no need to repay the debt. However, you should still wait for these periods to end to become eligible or continue repaying.
Temporary Expanded Public Service Loan Forgiveness
This forgiveness opportunity is accessible to non-profit employees who applied to the PSLF but were rejected due to unqualified payments. However, borrowers who think they are eligible for this program should act fast. The funding for this forgiveness program and the timeframe for application is limited. Hence, the benefit is awarded based on the ‘first come-first serve’ basis.
Qualification for TEPSLF
There exist various conditions to be eligible for temporarily expanded Non-profit student loan forgiveness. The most important requirement is that the borrowers’ application should be rejected due to unqualifying payments. Some or even all of them can be unqualified for Public Service Loan Forgiveness for non-profit employees. The eligible applicants should have a minimum of 10 years of full-time work with the qualifying employer and have 120 payments that were made:
- After October 2007
- In full amount, during a maximum of 15 days later than due
- While having qualified employment
Again, only Direct Loans are eligible for this Non-profit Student Loan Forgiveness program, and they should not default.
How TEPSLF Works?
You might wonder what makes you eligible for TEPSLF but not eligible for PSLF. The answer is repayment plans. For Non-profit Student Loan Forgiveness through PSLF, you need to make payments with an Income-Driven Repayment plan. However, for TEPSLF, it is acceptable to make payments with Graduated, Extended, Consolidated Standard, or Graduated Repayment plans. However, an extra condition is introduced in this case. A borrower’s last payment and 12 months prior payment should be as much as the payment required with an Income-driven plan or more.
Application to TEPSLF
Applicants need to get a PSLF Form (or TEPSLF Form) in the PSLF Help Tool or download it on the official website. After filling the form, you need to send it to FedLoan Servicing by mail or fax. Applicants that did not utilize Income-Driven plans might be required to provide information about the income and family size. In this way, the Department of Education and FedLoan Servicing determines the repayment amount per month.
Usually, the officials notify the applicants about the required supplementary documents. Borrowers have only 21 days to supply the information, or otherwise, their application will be canceled. If an applicant gets rejection, he/she should continue making payments for the loan as mentioned in the Master Promissory Note.
Similar to PSLF, the forgiveness amount under this Non-profit Student Loan Forgiveness is not taxable.
What to Expect from Non-Profit Student Loan Forgiveness in 2021?
Before moving to the most frequently asked questions about Non-profit Student Loans, it is better to know what is expected in 2021. Biden’s student aid plan already involved Public Service Loan Forgiveness for non-profit employees. The plan aims to make this opportunity available to more borrowers. Hence, it is mentioned that the PSLF process will be simplified by granting $10000 forgiveness per year of the service. It means, after making 60 payments, $50000 forgiveness will be received.
However, this change can bring its own benefits and drawbacks. First, it is useful because instead of making payments for 10 years, debt can be decreased sooner- in five years. Yet, with the current state of the Non-profit Student Loan Forgiveness, there is no limit on the cancellation amount. If a borrower has more than $50000 debt outstanding, the current conditions for him/her can be more suitable than Biden’s administration plans.
Debatable Forgiveness- $10000 per Person
In March 2020, President-elect Joseph R.Biden Jr. tweeted that it is necessary to give $10000 worth of forgiveness to every borrower. However, Democratic leaders now insist that this amount should be $50000 and immediately executed on the first day of Biden’s presidency. Yet, this issue is still uncertain. Many people think that such forgiveness can be a little relief for young people struggling with debt, especially during economic difficulties due to the pandemic.
However, others argue that taxpayers are not obliged to pay another’s debt. Experts think that most borrowers belong to the middle to upper class as they attend famous universities. Hence, such debt forgiveness will not solve the problems of poor people. Still, the discussions continue.
Not-Profit Student Loan Forgiveness FAQ
We understand that getting forgiveness is not a piece of cake. Forgiveness programs have extensive eligibility criteria, so not every borrower will qualify. Besides, the terms can be unclear, so even qualifying borrowers might have difficulty understanding what is required from them. In short, in this section, we will answer several questions that prospective Non-profit Student Loan Forgiveness applicants usually ask from our experts.
Both Public Service Loan Forgiveness and its temporarily expanded version are not taxable. It means, the IRS does not consider the forgiven amount as income, so the applicants do not need to pay annual income tax.
In the eligibility criteria for Non-profit Student Loan Forgiveness through PSLF, there is no condition for income level. Hence, the income level does not qualify a borrower. Yet, the income level is considered in repayment plans, which determines the amount you need to pay monthly.
Non-profit organizations regulated with the Internal Revenue Code, section 501-c-3, are eligible for this program, such as elementary schools, private universities, etc. If this section does not regulate the organization, it can still qualify if it provides eligible public service. The list of eligible services is provided above. Keep in mind that non-profits such as labor unions or partisan political organizations are not covered in this program.
If you are unsure about the employer’s qualification, you can use the PSLF Tool or ask the employer about the eligibility.
In general, one is employed by a qualifying party if it hires, pays, and requires a Form W-2 statement at the end of the year. Besides, an Employment Certificate is necessary, which is signed by the employer. This certificate has information regarding the employment details.
Part-time work might qualify if the total working hours satisfy the full-time requirement. In other words, borrowers should work in at least two part-time jobs so that the work hours combined will be a minimum of 30 hours. However, all employers that the debtors work with should meet the Non-profit Loan Forgiveness opportunity’s eligibility conditions.
Non-profit employees benefiting from this program usually work in elementary, secondary school, or private educational institutions. These organizations are mostly considered as not-for-profit establishments. If the borrowers’ workplaces have non-profit status, it is eligible regardless of being a private school student. However, a private school operating for a profit will not qualify.
Making 120 payments requires at least 10 years. During this long period, it is understandable that you might not work with the same employer. So, changing the workplace is possible. Even working for a non-qualifying employer for some time will not cause a problem because 120 payments do not need to be consecutive. However, it is necessary to have qualifying employment at the time of application for fiveness and when the 120 payments are finally made.
Non-profit employees working outside the U.S can still qualify if they provide full-time work for an establishment regulated with Section 501-c-3 of the Internal Revenue Code. However, organizations without 501-c-3 tax-exempt status do not qualify as eligible employers if the borrower works in a different country and the organization does not operate in the U.S. Besides, qualifying public service conditions should still be applicable.
Yes. If the W-2 Form providing organization has a contract/agreement with your workplace, you can still be eligible. Usually, in such cases, another entity deals with the payroll or other administrative services for an eligible employer. Still, it considers the borrower as the employee of the qualifying employer. Hence, the borrower can apply to Non-profit Student Loan Forgiveness with these conditions.
However, keep in mind that in the employment certification, one should provide information about the employer that he/she directly works with, instead of the W-2 Form generating party. Besides, an individual from a qualifying employer, such as a supervisor or human resources team member, should certify.
Sometimes, borrowers might be asked to submit supplementary documents that show the relation between these two parties. In this case, both parties should write a letter together and explain the relation, as well as confirming your employment status with the qualified employer.
Unfortunately, no. Borrowers will lose their earned credits if they decide to consolidate Direct Loans. In this case, they need to start earning credits from scratch. Hence, it is advisable not to include the Direct Loan that you made some payments for the Public Service Loan Forgiveness as a non-profit employee if you need consolidation.
Unfortunately, no. Private student loans are not eligible for this program. It is better to look for other ways to reduce the debt obligation, such as Refinancing or negotiating with the creditors.
Defaulted loans do not qualify for this Non-profit Student Loan Forgiveness. However, if borrowers get the loan out of default, they can become eligible. There exist different ways of eliminating default, and it is advised to check our blog on Student Loan Default.
If you and your spouse took out a loan jointly, both of you must satisfy the requirements. When both parties make 120 qualifying payments, the debt will be forgiven. However, if one of you works with a qualified employer, only the debt attributable to that individual will be canceled. For example, if you made 120 payments and your spouse has never worked, the original loans you received will be paid off. Meanwhile, both of you will still be responsible for paying the rest.
Keep in mind that both of you should make 120 payments, not in total, but individually.
Some borrowers receive a salary two times a month, in partial installments. They can still be eligible if their partial payments for a month is at least as much as the monthly payment amount required. Besides, these payments should be made no later than 15 days after the due.
In general, Standard Repayment for Consolidation does not qualify. The reason is that the monthly payments for such a repayment plan are much less than a 10 year Standard Repayment plan. If the Standard Repayment for Debt Consolidation is set for 10 years, the borrowers’ loans can qualify for this program. This case can happen if the total owed debt is less than $7500. Otherwise, it is advisable to pay the debt, even a consolidated loan, with an Income-driven repayment program.
Get Expert Help
Non-profit Forgiveness, or in general, Public Service Loan Forgiveness has always been a complex program. If you do not qualify for PSLF due to ineligible payments, you can also benefit from Temporary Expanded Public Service Loan Forgiveness. However, it has limited funding and is available for a limited period. Besides, currently, it is one of the Biden administration’s plans to make changes to this program. Instead of full forgiveness in ten years, the new changes will bring $10000 forgiveness for five years. Hence, if your debt is more than $50000, you need to act fast to enjoy current conditions.
Every year, thousands of applications get rejected due to being ineligible. It indicates that applicants still do not understand the eligibility criteria. Besides, they also receive rejection because of technical mistakes in documentation. Therefore, it is advisable to get expert help to maximize the likelihood of a successful application. Time can be crucial in such a program as there is no guarantee that the Non-profit Student Loan Forgiveness program will continue to exist. So, you need to ensure that your application is approved as fast as possible. Contact us now to ensure success.
