Ben Kaminar
While being a Texas prosecutor is one of the best jobs possible,1 it has been known to come with a drawback or two. The high cost of legal education coupled with relatively low salaries often makes our commitment to serve justice a financial challenge, which all too often causes prosecutors to leave the profession for more lucrative pastures. To encourage new graduates with student loan debt to enter and remain in public service professions, Congress created the Public Service Loan Forgiveness (PSLF) program in 2007, which offers forgiveness of outstanding student loan debt after 10 years of public service.2 However, as with most things involving government programs, there are some restrictions and a lot of hoops to jump through to qualify. To obtain loan forgiveness, you have to make the right kind of payments on the right type of loans while working in the right sort of job.
Right kind of payments
The first requirement is the one that has tripped up most borrowers working toward forgiveness. An applicant has to have made 120 separate monthly payments within 15 days of the scheduled due dates for the full scheduled installment amount under one of certain repayment plans. Qualifying repayment plans include the Income Based Repayment, Income Contingent Repayment, Pay As You Earn, the Revised Pay As You Earn, and the standard repayment plans.3 Payments under a graduated or extended payment plan do not qualify, nor do lump sum payments, with the exception of certain AmeriCorps and Department of Defense loan repayment programs.
For most of us, there are a few key points here. First, we want to make sure we are in one of the qualifying payment plans. Most of them offer reduced payments based on a borrower’s income, so we would probably be interested in them anyway. Second, we need to ensure timely payments; late ones run the risk of not qualifying. Third, there is no benefit to paying ahead or paying extra if we are working towards forgiveness.
Right type of loans
Once we have the right kind of payment plan, we then need to make sure that we have the right type of loans. Four loan programs qualify for forgiveness:
• Direct Subsidized Loans,
• Direct Unsubsidized Loans,
• Direct PLUS Loans, and
• Direct Consolidation Loans.
Private loans and Federal Family Education Loans4 (FFEL) do not qualify. Most current borrowers receive funding through the Direct Loan program; however, there are still borrowers who have FFEL loans in repayment as those were the primary student loans offered until 2010. Once someone is in a qualifying loan program, trying to consolidate or refinance may be perilous. Direct Loans don’t offer a refinancing option, and other lenders offering refinancing will not qualify for loan forgiveness. Consolidating will likely mean forfeiting any previous qualifying payments, because the consolidation loan is a new one, even though it might be from the same lender.
Right sort of job
This requirement is usually the easiest for prosecutors to meet. To qualify, you have to be an employee of a public service organization. Federal, state, local, and tribal governments are specifically listed as being public service organizations. The requirement to be an employee indicates that elected service does not qualify, especially because the definition of employee is one hired and paid by a public service organization. Certain other 501(c)(3) organizations qualify as well. With non-profit organizations, the devil is in the details. Most reports involving a borrower who thought he qualified for forgiveness only to find out his employer didn’t qualify involve non-profits that are not 501(c)(3) organizations—501(c)(6) seems to be a habitual offender in this regard.
While applicants have to make 120 qualifying payments, they don’t have to be made consecutively or with the same employer. This allows borrowers to move between jobs or have breaks from qualifying employment without losing any progress they have made toward forgiveness. Even with the ability for multiple periods of employment to combine for qualification, forgiveness remains an all-or-nothing proposition; borrowers can receive full forgiveness after 120 payments and absolutely nothing for 119.
Papers, please
Naturally, no government program is complete without a healthy dose of paperwork, and PSLF is hardly the exception. Even once we have ensured that we are making the right payments on the right loans, we still have to submit an application and employer certification showing that we have met all the requirements. Fortunately, the federal government has done two things to help us with the process.
First, although we don’t receive any forgiveness until the full 120 qualifying payments have been made, we may submit certification forms for smaller blocks of time. The Employer Certification Form (ECF) requires the borrower to fill out some basic administrative information and then have an authorized official from her employer sign it to verify the employment. Authorized officials will vary from office to office, depending on local practice. Larger offices may have a human resources division that handles such forms, while the elected prosecutor might personally verify employment in a smaller office.
Once completed, the ECF is sent to FedLoan Servicing, one of the government’s several loan servicers. FedLoan Servicing has been designated to handle all PSLF loans and paperwork, which is the second thing that helps with the process. Once FedLoan Servicing receives the ECF, authorities there will review it and certify any applicable period. If they certify any of a borrower’s employment, the loans are transferred from whichever servicer was handling them to FedLoan Servicing (if they are not already handled there). When the employment is certified, FedLoan Servicing currently issues two letters to the borrower. The first simply states the employer and qualifying time period that was certified. The second is a cumulative roll-up of all qualifying employers, time periods, and payments made. It also includes an estimated eligibility date for forgiveness.
Practical matters
There is no set or required schedule for when to submit ECFs; in fact, the forgiveness application even allows a borrower to submit all of her employment information at once. However, a borrower who does that may be taking a risk, as she may be in a non-qualifying loan or payment plan and not realize it. Submitting an ECF as soon as a payment is made while working as a prosecutor (or in another qualifying job) will help confirm that everything is in order before years of payments have gone by. Once the first certification comes back with everything in order, go ahead and submit a new one every year to continue updating your forgiveness status. Delaying sending in the first ECF can also cause processing delays. Because FedLoan Servicing has to sift through other servicers’ records to verify payments, the longer the payment history, the longer the processing time. In some cases, this can lead to a borrower needing to work with FedLoan Servicing’s customer service to track down all previous qualifying payments. This extra legwork can be minimized by submitting the first ECF early, which then triggers the servicing transfer to FedLoan Servicing. When leaving a qualifying job, whether for a break in public service or simply moving between offices, try to obtain a final ECF that covers your employment through your final day. That will avoid any gap in documentation and will be easier than trying to get one completed some time after the fact.5
For the financially savvy prosecutor,6 financial and tax planning may provide opportunities to reduce the monthly payment under an income-driven repayment plan. Because income-driven repayment amounts are calculated based on family size and adjusted gross income, boosting retirement savings (a good thing) could also reduce monthly loan payments (also a good thing). As with any financial and tax planning, consult with a financial or tax advisor.7
Oops, I made the wrong payments
Some borrowers who recently applied for forgiveness were unpleasantly surprised to learn that while their employment and loans qualified, they were in graduated or extended repayment plans that did not qualify. To address this problem, Congress included a one-time, $350 million pool of money known as Temporary Expanded PSLF. Borrowers who were denied forgiveness due to the wrong repayment plan may apply for reconsideration under Temporary Expanded PSLF. This funding is available on a first-come, first-serve basis, and the program will end once funding is exhausted.
Conclusion
The Public Service Loan Forgiveness program offers a significant benefit for long-term public servants, but it requires effort and attention to get the most out of it. Careful preparation and planning early on can save a new prosecutor a great deal of money over the years, all while making it easier for us to stay in the profession we love.
Endnotes
1 Commanding a Field Artillery battery in the U.S. Army is objectively the best job ever; Texas prosecutor is a close second.
2 See the College Cost Reduction and Access Act of 2007, Pub. Law 110-84.
3 For a rundown of these plans, see https://studentaid.ed.gov/sa/repay-loans/understand/plans.
4 FFEL were loans made by private lenders but backed by the federal government; the program was terminated in 2010 with all federally backed student loans shifted to the Direct loan program.
5 That is also a great time to obtain a letter certifying any employment period as a full-time assistant prosecutor for longevity pay purposes (see the Executive Director’s Report in the March-April 2018 issue, https://www.tdcaa.com/journal/assistant-prosecutor-longevity-pay-danger, for more about assistant prosecutor longevity pay).
6 Not necessarily the author.
7 Definitely not the author.