As a nonprofit employer, deciding which employee benefits to provide is one of the most important decisions you can make for your organization. Offering student loan assistance programs is a great option, especially as it will help your employees get closer to forgiveness for their federal student loans.
But did you know that there have been a number of changes to how the Department of Education is approaching forgiveness? We sat down with Bridget Haile (Hi-lee), Head of Borrower Success, to talk about the latest developments on the forgiveness front, how employers can support employees as they seek forgiveness, and why helping employees is good for employers too.
Hi Bridget, let’s get into one of the hottest and most misunderstood topics in federal student debt these days: Public Service Loan Forgiveness, aka PSLF. What is PSLF exactly, and what should nonprofit employers know about the program?
PSLF is the best deal in the student loan world. A borrower works at a nonprofit employer and makes low monthly payments on their loans for ten years, and the rest of their federal student debt is forgiven tax-free. Unfortunately, participating in the program isn’t as simple as it seems—PSLF has a 98% rejection rate. So what’s the reason for the low approvals?
Basically, there are dozens of underlying rules and requirements that are difficult for borrowers to navigate on their own. Borrowers also have to stay up to date with paperwork for multiple different federal loan programs simultaneously. They also can’t miss any deadlines otherwise they’re back to square one.
For nonprofit employers, the bottom line is that all of your full time employees with student loans qualify for PSLF. It doesn’t matter what their job is—what’s important is that they work for you. And the great news is that you can help them achieve forgiveness.
Wow, that rejection rate is alarming! What mistakes do nonprofit employers make that hurt their employees’ ability to get approved for PSLF?
Without question, the biggest mistake an employer can make is ignoring the program. That’s either by failing to inform employees of how they can benefit from PSLF or failing to establish a concrete process for verifying their employment.
The Department of Education requires borrowers to submit an employment certification form to verify that they work full-time at a PSLF-eligible nonprofit employer. This form, which we recommend submitting annually, has to be filled out in a very specific way. But we sometimes see employers disregarding signature requests from their employees, which means that those borrowers will never get forgiveness.
Additionally, sometimes when employers do verify employment, they aren’t aware of the various reasons why the Department of Education can reject the form, like using slashes instead of dashes in date formats.
At a minimum, employers should make sure they aren’t standing between their employees and forgiveness. And in the best case scenario, employers can leverage a digital PSLF solution from a company like Summer to do the hard work for them.
Speaking of the Department of Education, the agency announced a Limited Waiver to PSLF last year. Can you explain what the Limited Waiver is? Also, when does it end?
The Limited Waiver is a really exciting development and one that’s already having a positive impact on borrowers working with Summer. This past October, the Department of Education announced a temporary expansion of the PSLF requirements, which will expire in October 2022. The expansion applies to federal loan payments made since 2007, when PSLF was created, to the present—and it allows a greater variety of loan types, payments, and repayment plans to qualify for PSLF.
Before the waiver, we saw a lot of hopelessness around the program. Borrowers didn’t believe forgiveness could really happen for them. They saw the 98% rejection rate and they saw their own rejections, as well as those of their friends and coworkers, even when they thought they were doing everything right.
Now, thanks to the Limited Waiver, the number of people who’ve received forgiveness has gone from 7,000 last year to 70,000 today. The proof is here: borrowers are seeing on social media and from people they know that loans are being forgiven. And there’s been a HUGE amount of interest from borrowers who are eager to get on track for the program. Summer’s team is busier than we’ve ever been in our history. It’s a really exciting time!
How can nonprofit employers help their employees take advantage of the Limited Waiver?
There are three things employers can do to make it easier for their employees to navigate the Limited Waiver and PSLF:
- Have a clear process for completing employment verification forms in a timely manner.
- Be aware of common form mistakes to make sure the employment certification form is completed correctly.
- Point employees to resources about how to be successful in the program.
Of course, another option is to partner with Summer and let us do all of this work for you.
Ok, so October 2022 is the deadline for the Limited Waiver. Are there other key student-loan dates HR leaders need to know?
Yes, there are a few important dates coming up this year:
- May 1, 2022 is when payments and interest resume on federal student loans that qualified for the CARES Act. This will be the first time payments have been required in over two years.
- October 31, 2022 is when the PSLF waiver expires. In order to take advantage of the expanded options, all next steps need to be completed by this date. Depending on the person, that could involve verifying their employment, consolidating their loans, and/or enrolling in income-driven repayment (IDR).
- November 2022 is when temporary protections on defaulted student loans will end, and the Department of Education will continue to garnish wages, tax returns, and Social Security income for federal loans in collections. The last point is important because even borrowers who are employed full-time are often in default; in fact, nearly 20% of all federal student loans are. Default carries serious consequences like negative credit reporting, wage garnishment, and huge collection fees. And some employees at your organization may be facing this alone.
With all of these dates, it’s important to note that the time to make a plan is several months before the date itself, not when it’s just around the corner. Borrowers can enroll in savings and forgiveness programs now to beat the rush: loan servicers take time—up to several months—to process forms correctly.
Seems like there’s a lot happening with loans this year. Any guesses what else lies ahead for PSLF?
There have been a number of long-term changes proposed to PSLF. However, those proposals have yet to go through the Department of Education’s rulemaking process, so nothing has been confirmed and it’s not clear when they might be.
We’re optimistic that we’ll continue to see positive change that makes PSLF more accessible to borrowers. And Summer is committed to being first out of the gate to communicate any program changes to our borrowers and to help them understand exactly what those changes mean for them.
Final question for you Bridget: Why should an employer invest in helping employees manage their student loan debt?
Helping your employees manage student loan debt is a true win-win situation. The impact of student loans on mental health is well-documented, and having a plan in place alongside expert support improves employees’ wellbeing, as well as their productivity, at work.
Putting a student loan benefit in place is also a commitment to retention, especially in response to our current increase in job turnover and burnout among many workers. Getting student loans under control or receiving forgiveness can improve borrowers’ credit scores, making it easier for them to qualify for rental housing or to take out a mortgage. It can help borrowers start to save for emergencies or take advantage of your workplace’s retirement plan for the first time.
An investment in employees’ financial health is one that pays dividends to everyone involved: to your employees of course, in improving their stability and opening up opportunities for their future, but also for you, the employer, who wants to retain these employees as happy and productive members of your team.
Schedule a one-on-one demo with our product specialists to see how Summer eases the burden for your HR team and employees navigating the PSLF Limited Waiver period while making a lasting impact on your employee population.