CENTER FOR FINANCIAL EMPOWERMENT

Student Loan Debt

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CENTER FOR FINANCIAL EMPOWERMENT

Student Loan Debt

Currently, 3.86 million Californians, or 9.8% of the state’s population has some form of student debt. Nationwide, student loan debt is at an all-time high of nearly $2 trillion and the average loan takes 20 years to repay.

Federal Student Debt Relief Plan

NOTE: The Student Loan Debt Relief program is being challenged in the courts and is currently on hold. The Federal Government will have more updates as they are available.

The U.S. Department of Education previously accepted applications for the Student Debt Relief for federal student loan borrowers. The original deadline to apply was December 31, 2023 The plan calls for:

  • Up to $20,000 to be forgiven if a borrower attended college on Pell Grants and
  • Up to $10,000 to be forgiven if the borrower did not receive Pell Grants

To qualify:

  • Individuals must have earned less than $125,000 in 2021 or 2020
  • Married couples must have earned less than $250,000 in 2021 or 2020

The application is a short online form. You are not required to log in or submit any documents. The application will require you to give your Social Security number and confirm that you earned less than the income caps.

When you apply you will receive a confirmation email. The Department of Education will determine your eligibility and will contact you if they need more information. Your loan servicer will notify you when your relief has been processed.

For more detailed information, visit StudentAid.gov.

Avoid scams: Scammers are trying to take advantage of uncertainty about this program. Know the facts to avoid scams.

Note: Leaders of California’s State Senate and Assembly have pledged that debt relief funds will NOT be subject to State tax, despite some news reports suggesting they would.

Payment Pause Extended

The student loan pause has been extended through June 30, 2023 OR whenever there is a final decision by the courts regarding the Federal Loan Debt Relief plan, whichever comes first. The extension will happen automatically. The borrower does not need to apply for an extension.  Payments will resume on or before July 2023.

Additional Proposed Reform

To make the student loan system more manageable for borrowers the administration is proposing to create a new income-driven repayment plan that will reduce future monthly payments by:

  • Capping loan repayment at 5% of a borrower’s monthly income for undergraduate loans.
  • Guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
  • Forgiving loan balances after 10 years of payments, instead of the current 20 years, for borrowers with loan balances of $12,000 or less.
  • Making sure that no borrower’s loan balance grows if monthly payments are made—even when the monthly payment is $0 because of low income.

For more information, please visit The Federal Student Aid FAQ page.

College students in a classroom raise their hands

Federal Student Loan Payment Pause

The American Rescue Plan, in response to the COVID-19 emergency, gave a reprieve to those who currently owe student loans. The law reduced the interest rates on all loans held by the U.S. Department of Education to 0%. The 0% period is retroactive to March 13, 2020. The law automatically set currently active, delinquent, and defaulted federal student loans to 0% and the Education Department suspended collection activity.

The student loan payment moratorium ends June 30, 2023 OR whenever there is a final judgment in the courts regarding the Federal Student Debt Relief plan, whichever comes first.

NEXT STEPS FOR BORROWERS

  • Borrowers should update their contact information on their loan servicer’s website and with StudentAid.gov.
  • Borrowers should contact their loan servicer to find out what their payment amount will be and when payments restart.

OPTIONS AVAILABLE FOR BORROWERS

  • Consider an Income-driven repayment (IDR) plan.
  • If the borrower already has an IDR plan but their income or family size has changed they should ask their servicer to recalculate their monthly payment.
  • If you the borrower still can’t afford their payment and they only need a temporary pause on payments, they may want to consider a deferment or forbearance.

Fresh Start Program

The U.S. Department of Education announced earlier this year the Fresh Start program, which eliminates the negative effects of default for borrowers with defaulted federal student loans. Borrowers with federal student loans in default will be able to reenter current repayment status without any past-due balance and have other federal student aid benefits and protections restored.

The Fresh Start program will continue through one year after the COVID-19 payment pause ends.

The Fresh Start Program:

  • Restores access to repayment options
  • Restores eligibility to receive federal student aid so borrowers can complete their course of study and increase long-term repayment success
  • Protects borrowers from involuntary collection efforts and costly collection fees
  • Restores eligibility for future rehabilitation
  • Provides credit reporting features—making it easier and more affordable for borrowers to afford living expenses

Borrowers with Fresh Start-eligible loans must make long-term payment arrangements. Those who do not make payment arrangements during the Fresh Start will again be subject to default collections. Payment arrangements can be made by visiting myeddebt.ed.gov, contacting your loan holder by phone or in writing, or calling the Default Resolution Group at 1-800-621-3115. If you’re not sure whether your loans qualify, you can call the Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923). This program is free, and you do not need to pay to enroll.

Public Service Loan Forgiveness

What is Public Service Loan Forgiveness?

The PSLF Program forgave the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

The application deadline for PSLF has passed. For more information, click here.

Important: You must have been working for a qualifying employer at the time you submit the form for forgiveness and at the time the remaining balance on your loan is forgiven.

What counts as full-time employment?

For PSLF, you’re generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater.

If you are employed in more than one qualifying part-time job at the same time, you will be considered full-time if you work a combined average of at least 30 hours per week with your employers.

If you are employed by a not-for-profit organization, time spent on religious instruction, worship services, or any form of proselytizing as a part of your job responsibilities may be counted toward meeting the full-time employment requirement.

What are Qualifying Employers?

Qualifying employment for the PSLF Program isn’t about the specific job that you do for your employer. Instead, it’s about who your employer is. Employment with the following types of organizations qualifies for PSLF:

  • Government organizations at any level (U.S. federal, state, local, or tribal) – this includes the U.S. military
  • Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
  • Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program.

 The following types of employers don’t qualify for PSLF:

  • Labor unions
  • Partisan political organizations
  • For-profit organizations, including for-profit government contractors

Contractors: You must be directly employed by a qualifying employer for your employment to count toward PSLF. If you’re employed by an organization that is doing work under a contract with a qualifying employer, it is your employer’s status—not the status of the organization that your employer has a contract with—that determines whether your employment qualifies for PSLF. For example, if you’re employed by a for-profit contractor that is doing work for a qualifying employer, your employment does not count toward PSLF.

Other types of not-for-profit organizations: If you work for a not-for-profit organization that is not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, it can still be considered a qualifying employer if it provides certain types of qualifying public services.

What are Qualifying Payments?

A qualifying monthly payment is a payment that you make

  • after Oct. 1, 2007;
  • under a qualifying repayment plan;
  • for the full amount due as shown on your bill;
  • no later than 15 days after your due date; and
  • while you are employed full-time by a qualifying employer.

You can make qualifying monthly payments only during periods when you’re required to make a payment. Therefore, you can’t make a qualifying monthly payment while your loans are in

  • an in-school status,
  • the grace period,
  • a deferment, or
  • a forbearance.

What loans are eligible?

Any loan received under the William D. Ford Federal Direct Loan (Direct Loan) Program qualifies for PSLF.

Loans from these federal student loan programs don’t qualify for PSLF: the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan (Perkins Loan) Program. However, they may become eligible if you consolidate them into a Direct Consolidation Loan.

Student loans from private lenders do not qualify for PSLF.

Under normal PSLF Program rules, if you consolidate your loans, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the loans before you consolidated them don’t count. However, if you consolidate these loans into a Direct Loan before October 31, 2022, you may be able to receive qualifying credit for payments made on those loans through the limited PSLF waiver.

The following repayment plans do not qualify for PSLF:

  • Standard Repayment Plan for Direct Consolidation Loans
  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Alternative Repayment Plan

a college student holds his books

Limited PSLF Waiver Opportunity

On Oct. 6, 2021, the U.S. Department of Education (ED) announced a temporary period during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF. Learn more about this limited PSLF waiver.

Most of the PSLF qualifying payment rules were suspended through October 31, 2022. Under this temporary waiver, you may have received credit for payments you’ve made on loans that would not normally qualify for PSLF. These payments would count even if you didn’t pay the full amount or on-time. However, only payments made after Oct. 1, 2007 can count as qualifying payments.

Loan types include: Direct Subsidized Loans, Direct Unsubsidized Loans, and Graduate PLUS Loans made to students.

PAST PAYMENT CREDIT

For a limited time, you may receive credit for past periods of repayment on loans that would otherwise not qualify for PSLF.

If you have FFEL, Perkins, or other federal student loans, you’ll need to consolidate your loans into a Direct Consolidation Loan to qualify for PSLF both in general and under the waiver. Before consolidating, make sure to check to see if you work for a qualifying employer.

Past periods of repayment will now count regardless of whether you made a payment, made that payment on time, for the full amount due, on a qualifying repayment plan.

Periods of deferment or forbearance, and periods of default, continue to not qualify.

Note: The qualifying employment requirement has not changed.

CHANGES WITH WAIVER

Changes with waiver until October 31, 2022

* Receive credit for periods of repayment on Direct, FFEL, or Perkins Loans
* Periods of repayment under any plan count
* Periods of repayment on loans before consolidation count, even if on the wrong repayment plan
* Periods of repayment where your payments were made late or for less than the amount due count
* Periods of repayment on loans before consolidation count, even if paid late, or for less than the amount due
* Need to be employed full time for a qualifying employer in order to receive credit
* Can receive forgiveness even if not employed or not employed by a qualifying employer at the time of application and forgiveness
* If you received Teacher Loan Forgiveness, the period of service that led to your eligibility will count toward PSLF (if you certify employment for PSLF for that period)

THINGS TO CONSIDER

Once you submit the PSLF form, the company that services your loan may change. If you don’t know who services your student loans, you can find out by visiting the U.S. Department of Education’s Federal Student Aid website. Through this website you can access information about your federal student loans, including your federal student loan servicer.

Keep proof of your payments. Every time you make a payment, you should have the option of a PDF or email confirmation. The previous month’s payment should also be reflected in your account statements. Save those!

Check your payment tally. The PSLF Help Tool helps you stay on track to 120 qualifying payments. Each time you submit your PSLF certification form, you will receive a count of the number of qualifying payments you have made. Make sure it matches your records. You do not have to make the 120 qualifying payments consecutively.

Lump-sum payments. You can make future payments (or prepayments) to your qualifying federal student loans, and they will all be counted toward your PSLF qualifying payment count if all other program criteria are met. Prepayments will count for up to 12 months or the next time you’re due to recertify for your income-driven repayment (IDR) plan, whichever is sooner.

The California State Loan Repayment Program (SLRP)

A doctor in a hospital helps an older adult in a wheelchair
What is SLRP?

The California State Loan Repayment Program (SLRP) increases the number of primary care physicians, dentists, dental hygienists, physician assistants, nurse practitioners, certified nurse midwives, pharmacists, and mental/behavioral health providers practicing in federally designated California Health Professional Shortage Areas (HPSA).

Check if your eligible here.

Provider Eligibility Requirements

  • Be a U.S. citizen (U.S born or naturalized)
  • Possess a valid and unrestricted license to practice your profession in California
  • Be free from judgments arising from federal debt
  • Not have any other existing service obligations with other entities
  • Not be in breach of any other health professional service obligation
  • Be current on any child support payments
  • Be employed at or have accepted employment at a SLRP approved Practice Site (See Practice Site Eligibility section for more details)
  • Commit to providing a 2-year full-time (40 hrs./week) or a 4-year half-time (20 hrs./week) service obligation (See service commitment and awards section for more details)

Eligible Disciplines

SLRP participants must possess an active and valid license (without restrictions or encumbrances) to practice in one of the following eligible disciplines:

    • Medicine (MD/DO)
    • Dentist (DMD/DDS)
    • Primary Care Nurse Practitioner (NP)
    • Primary Care Physician Assistant (PA)
    • Certified Nurse-Midwife (CNM)
    • Registered Dental Hygienist (RDH)
    • Health Service Psychologist (HSP), formerly Clinical or Counseling Psychologist
    • Licensed Clinical Social Worker (LCSW)
    • Licensed Professional Counselor (LPC)
    • Licensed Marriage and Family Therapist (LMFT)
    • Psychiatric Nurse Specialist (PNS)
    • Pharmacists (PharmD) (Please review Additional Pharmacist Guidelines)
    • Substance Use Disorder Counselor

Approved Primary Care Specialties

FOR PHYSICIANS

  • Family Medicine
  • General Internal Medicine
  • General Pediatrics
  • Gerontology
  • General Psychiatry
  • Obstetrics/Gynecology

FOR NURSE PRACTITIONERS AND PHYSICIAN ASSISTANTS

  • Adult
  • Family
  • Pediatrics
  • Psychiatry/mental health
  • Geriatrics
  • Women’s health

Site Eligibility Requirements

Be located in a federally designated HPSA.

  • Be a public or private not for-profit out-patient facility.
  • Match the SLRP award, on a dollar-for-dollar basis, in addition to the provider’s salary.
  • Pay the provider a prevailing wage.

Debt Eligibility

QUALIFYING EDUCATIONAL LOANS

Qualified Lender: Qualifying commercial lending institutions are those subject to examination and supervision by an agency of the United States, or by the state in which the institutions have their place of business.

Loans (government and commercial) obtained from a qualifying lender for undergraduate and graduate health profession degrees.

NON-QUALIFYING EDUCATIONAL LOANS

The following types of debt are not eligible for loan repayment under SLRP:

  • Interest incurred on educational debt
  • Loans in default
  • Loans repaid in full
  • Credit card debt
  • Primary Care Loans
  • Personal lines of credit
  • Residency

Award Amounts

Service years and award amounts for full-time/half-time initial and extension grants may vary from year to year; the amounts are subject to change based upon federal requirements.

Full-Time Maximum Award (2-year initial obligation)

  • Initial Obligation: $50,000.00
  • Extension Year 1: $20,000.00
  • Extension Year 2: $20,000.00
  • Extension Year 3: $10,000.00
  • Extension Year 4: $10,000.00

Half-Time Maximum Award (4-year initial obligation)

  • Initial Obligation: $50,000.00
  • Extension Year 1: $10,000.00
  • Extension Year 2: $10,000.00
  • Extension Year 3: $5,000.00
  • Extension Year 4: $5,000.00

Each site is required to match the awarded grant, on a dollar for dollar basis, up to $25,000 per provider.  The award amount may vary due to the amount of provider’s debt.  The provider will need to consult with the practice site to determine if the site will provide the matching award.

Contact Information

The SLRP application cycle opened on July 15, 2022, and closes on September 15, 2022.

Resources for Student Borrowers in California

The California Department of Financial Protection & Innovation works to ensure that student borrowers who have fallen behind on payments have the information they need to get back on track, a crucial part of an equitable economic recovery.

California Student Borrower Bill of Rights

The California Student Borrower Bill of Rights was established by California Assembly Bill 376. These rights
apply to all Californians with federal and/or private student loans.

Know Before You Owe

Understand the basics about student loans, including different kinds of loans, interest, the difference between servicer and lender, and more!

Helpful Events from the California DFPI

The California Department of Financial Protection and Innovation hosts events that can help student borrowers, including webinars, podcasts, and other helpful resources. Check their page for the latest!

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