This 39-year-old librarian expected student loan forgiveness, but made these three huge mistakes.
Here’s what you need to know.
Student Loan Forgiveness
Maija Meadows Hasegawa is a librarian at the Boston Public Library and shared her student loan forgiveness story with NBC10 Boston. With $80,000 of student loan debt and a master’s degree from Simmons University, Hasegawa sought student loan forgiveness through the Public Service Loan Forgiveness program. The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) nonprofit job who make 120 eligible on-time payments. She understood that so long as she made 120 monthly payments and worked in a public service role such as a librarian, she could receive student loan forgiveness. However, Hasegawa said she was surprised to learn she was rejected for student loan forgiveness when she thought had followed all the rules.
So, what went wrong?
Like many student loan borrowers, Hasegawa made three huge mistakes – and she’s not alone. Approximately 99% of borrowers have been rejected for student loan forgiveness. Why have so many people been rejected? There are many reasons, ranging from incomplete applications to failing to meet the program’s requirements. Here are three mistakes that Hasegawa made that prevented her from receiving student loan forgiveness – and what you can do to avoid them.
1. She assumed that her job qualified for student loan forgiveness.
Make sure that your employer is considered an eligible employer. In this case, Hasegawa’s employer, the Boston Public Library, was not initially an eligible employer. One way to check whether your employer is eligible is to contact the U.S. Department of Education. Another is to complete the Employment Certification Form. You should submit an Employment Certification Form to the U.S. Department of Education when you begin a job in public service, when you switch employers and annually to ensure you’re on track.
Advice: Focus on your employer, not the job.
2. She thought her student loans qualified.
Don’t play a guessing game. This may be surprising, but not all student loans qualify for public service loan forgiveness. First, only federal student loans (not private student loans) are eligible for student loan forgiveness. Second, only Direct student loans qualify for public service loan forgiveness. For example, if you have Perkins Loans, FFEL Loans or you borrowed student loans before 2011, you may need to consolidate these federal student loans into a Direct Consolidation Loan. You can consolidate federal student loans through StudentLoans.gov.
Advice: Consolidate your federal student loans, if necessary, into a Direct Consolidation Loan.
3. She assumed she didn’t need an income-driven repayment plan.
To be eligible for public service loan forgiveness, you must be enrolled in an income-driven federal student loan repayment plan. There are four types of income-driven repayment: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). You also must make a majority of the 120 required payments while enrolled in a federal student loan repayment plan.
Advice: Enroll in an income-driven federal student loan repayment plan.
What if you don’t work in public service?
Make a student loan repayment game plan. Understand your goals and timeline. If you want to pay off student loans faster and save money, consider student loan refinancing, which can save you substantial money in interest payments. With student loan refinance, you combine your existing private student loans, federal student loans or both into a new, single student loan with a lower interest rate and one monthly payment.
This student loan refinance calculator shows you how much you can save.