The Student Loan Ranger's Mailbag Express: Forgiveness and Repayment

We answer some questions from readers about loan forgiveness and repayment options.

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The Student Loan Ranger would like to give a special shout out to all you new graduates!

As you know, we dedicate a blog post each month to questions we have received in order to shed some light on the educational debt decisions our readers face. This month, we are going to look at some slightly technical (but oft asked) questions regarding Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF).

Please note that our responses are not meant to provide specific legal or financial advice. Your situation is unique, and we encourage you to reflect carefully on your options and to consult a financial adviser.

Q: I am trying to have my loans forgiven under Public Service Loan Forgiveness. I had Stafford loans, but the payments were too high, so I had them consolidated and they are now considered FFEL loans according to the National Student Loan Data System. Can these loans still be considered for the public service program? If so, what are the steps? If not, are they eligible for IBR?

First, congratulations on looking up your loan information on the National Student Loan Data System. We always encourage people to do that, because it is important to know exactly what loans you have.

Your FFEL Federal Consolidation Loan is not eligible for PSLF; only Federal Direct Loans are eligible. However, you have a right to reconsolidate your FFEL Federal Consolidation Loan into a Federal Direct Consolidation Loan.

If you want your payments to qualify for PSLF (remember, you need to make 120 qualifying payments to earn forgiveness) you should reconsolidate as soon as possible. You can use the online Federal Direct Consolidation Loan application available on the Department of Education's website. It is important to remember that payments must still be made on your loans during the process of reconsolidation.

Also, IBR is a qualifying repayment plan for PSLF, so you should be able to select IBR as your repayment plan when you reconsolidate. (This is the sweet spot in the College Cost Reduction and Access Act: making low payments under IBR that count toward your loan forgiveness!)

Finally, both FFEL and Federal Direct Loans are eligible for IBR, so you can apply for IBR immediately by contacting the current servicer of your loans (the company with which you previously consolidated your loans) and tell them you want to sign up.

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Q: Is it possible to consolidate private loans with the Department of Education in order to apply for PSLF?

Unfortunately, there is no way to consolidate private loans in order to apply for PSLF. Again, only FFEL and Federal Direct loans are eligible for IBR and only Federal Direct loans are eligible for PSLF. For that reason, we urge students who think they are interested in those programs to avoid private loans and take out as many federal loans as possible.

Q: I work for the Department of Justice as an assistant attorney general in the Federated States of Micronesia. Am I eligible for PSLF?

Thank you for getting in touch with us. The Student Loan Ranger will be happy to do an in-person seminar in the Federated States of Micronesia for you if the DOJ will cover the cost of travel!

Assuming you are being paid by the federal government and working full time, you should be eligible for PSLF. (All levels of government­—federal, state, local and tribal­—count as qualifying employment.) Also, you may be eligible for debt relief under the John R. Justice Student Loan Repayment Program. We are unsure at this point if that program will be funded for the coming year, but the latest information we received from the Bureau of Justice Assistance was relatively hopeful. We will be updating our website as we find out more information regarding the funding of this program.

I assume you have already done this, but just in case, you should also check with your law school to see if they have a loan repayment assistance program (LRAP) in place. Finally, many federal government agencies have their own LRAPs that you might be eligible for.

Q: Is working at a 501(c)(4) qualifying employment for PSLF?

Unfortunately, at this time a 501(c)(4) nonprofit is not employment that qualifies for PSLF. (Working at a 501(c)(3) is qualifying employment.)

However, a number of private organizations do qualify as public service organizations. For example, a private organization that provides public services such as emergency management, military service, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities and the elderly, public health, public education, public library services, school library, and other school-based services can qualify.

Here are links both to the College Cost Reduction and Access Act (you will want to scroll down to Title IV) and to the relevant federal regulations. You may want to look at these to see if your organization qualifies under some of the provisions listed there.

May's mailbag is now in the bag. Please continue to send questions to us at debtrelief@equaljusticeworks.org. And sign up for our Friday, July 8, webinar: Drowning in Debt? Learn How Government and Nonprofit Workers Can Earn Public Service Loan Forgiveness.