Are Your Employees Eligible for Loan Forgiveness?
Last month LendEDU reported that almost half of all college students surveyed believe they will be entitled to student loan forgiveness. Most of them will be disappointed to find out that this isn’t true. Public Service Loan Forgiveness (PSLF) was designed only for those employed in certain professions. Generally, employment with the following types of organizations qualifies for PSLF:
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- Government organizations at any level (federal, state, local, or tribal)
- Other types of not-for-profit organizations that provide certain types of qualifying public services
Contrary to popular belief, this program doesn’t simply wipe out college loan debt. The PSLF was designed to forgive the remaining balance on Direct Loans after 120 qualifying monthly payments have been made while working full-time for a qualifying employer.
If you’re a non-profit and a qualifying employer, you need to be prepared to assist your employees and understand the information being requested. If you’re not a qualifying employer, you also need to be prepared to share this information with your employees as the misconception about who is eligible seems, at least according to this recent survey, to be overwhelming!
The process for borrowers begins with employer certification. If you’re like many employers, you have not yet prepared to handle employee requests for loan forgiveness. October of 2017 is the date when the first borrowers will become eligible for PSLF, but many employees are submitting requests ahead of time to find out how close they are to qualifying.
At minimum, we suggest a few simple steps to prepare for employee requests related to the PSLF:
- Develop a written process that outlines how you will handle employee requests.
- Make sure your payroll and HR staff are familiar with the employment certification form which can be found here.
- Designate a person responsible for the completion of the forms and determine who is permitted to sign as the employer’s “authorized official.”
PSFL Program is not new, but this is the first year that employees can begin receiving loan forgiveness. Don’t wait until October, when the Program is sure to receive increased media attention, to consider how you will respond to employee requests!