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More info on public education forgiveness

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Joined 2013-01-07

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Hi Heather,

I was hoping you could clarify something for me when it comes to the public service loan forgiveness program.  I am a teacher who just graduated in summer of 2012 and I’m currently working in Chicago Public Schools as a cadre substitute teacher (I essentially work as a full time in-school sub).  I work a regular teacher’s hours M-F and the work is guaranteed.  When I asked the direct loans folks if this would count towards my PSLF starting this year, I was told that it would not because I am not officially a permanent full time teacher.  However, in my eyes this doesn’t make much sense since I am working full time and I’m still getting paid by the Chicago Board of Ed.  Have you heard of this type of situation before?  Any ideas how this type of position might fit into the PSLF?  Your help is greatly appreciated. 

_Mike

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Joined 2011-03-30

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Hi, Mike.  The question rides on your employment status.  I’m guessing you might be a self-employed contractor, the school system sends you a 1099 to show what they paid you (NOT a W-2), and you file a tax return?  If you are self-employed, your employment doesn’t qualify even though in my opinion it should.  The regulations are specific that government contractors do not count as government employees.  Possible next steps for you might include educating the school system about how you and the other subs are harmed by this employment arrangement.

Sorry, Mike!

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Hey Heather, thanks for the reply.  I actually received a W-2 so would that indicate I might be good to go?  I’m not paid as an independent contractor but rather as a cadre substitute.

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Joined 2013-01-31

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Hi Heather. My husband is a teacher and wants to do PLSF. US Dept of Ed told him he needs to take his consolidated Sallie Mae loans which are at 3% interest and consolidate them through Fed Direct instead. He will then qualify for PLSF. We are trying to figure out if this is a smart move. He has made all payments on time but is currently in deferment status. There is concern as to how it could affect us in terms of monthly payments until the loan is forgiven…how is rate calculated, what would payment be, is there a deferment allowed for up to 60 months like at Sallie Mae. His district is a financial mess and he has had furlough days and paycuts for the past four years and it is likely to continue for at least a few more years. We are definitely struggling financially. What is your opinion on moving consolidated Sallie Mae loans over to Fed Direct? Thank you!

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Jules,

Consolidating is the only way to make those FFEL loans eligible for PSLF.  The consolidation loan’s interest rate is based on the weighted average of the underlying loans, so essentially preserves the cost structure.  If an interest rate reduction was earned (for example through making on time or automated payments), that reduction would be forfeited.  There is also a rounding up to the nearest 1/8th of 1 percent.  Overall, not a big impact on interest to consolidate.  Payment options, deferment, etc options are essentially the same.

Good luck,
Heather

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Joined 2013-04-07

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Heather, are you sure about independent contractors not counting for PSLF? Looking over 685.219(a)(i)(B), it says “for *contractual* or employment period of at least 8 months”—wouldn’t that mean an independent contractor?

This is *super* important to me, since I have 220k in student loans. I’m choosing between a law job that might qualify for PSLF and a state job that definitely will. The law firm’s largest client is a municipal organization that it basically controls. That municipal group would hire me as an independent contractor so that I would potentially qualify for PSLF. Also, it’s a 501(c)(4), so it’s even more unlikely to qualify (I’m hoping for the public interest legal service provision). I’m thinking of doing this even though it’s somewhat risky, because it’d pay more over the long term than the state job.

I really appreciate the help. Really, there’s very little, updated resources about student loan programs and when I’ve contacted financial advisers, it’s obvious they don’t have much information either. Thanks!

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Sorry, Chrishhh, I lost track of this post.  The adjective “contractual” refers to the employment PERIOD, and is intended to encompass teachers who work full time during the academic year only.  It’s not that contractors can’t ever qualify, it is that the question turns on the entity that is the direct employer. 

Here’s an example of what I mean:
Jimmy does contract work for a 501(c)(3) but he is not employed by the c3.
Jimmy is self employed and he receives a 1099 from the c3.  Jimmy’s status as self-employed is a for profit designation (whether or not he makes any real profit) and his contract with the c3 does not serve to qualify him for PSLF.

Jimmy does contract work for the government but is not employed by the government.
Jimmy is employed by a private business that does work on contract for the government.  Jimmy’s work does not serve to qualify him for PSLF.

But if Jimmy does contract work for the government and is employed by a 501(c)(3) organization (like court appointed indigent defense for a state government while working in a not for profit charitable law firm), his contract work does not make him a government employee and does not matter, but his work for the 501(C)(3) qualifies him instead.

Make sense?

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Joined 2013-04-01

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Hi Heather,  I am hoping you can shed some light on my question as the people at edfinancial don’t seem to have the answers.  I am a public school teacher with high loan debt.  I am currently on IBR and my payments are reasonable and my loans are being serviced by edfinancial with my first payment starting an a few days.  I am on kwikpay and everything seems to be set up properly. 

I like Edfinancial because their system seems to be EXACTLY the same as what I had with DOE when they were servicing my loans.

I know that to get back on the PSLF plan I would have to change servicers to fedloans.  I have the form and will be getting it filled out by my principle this week.  I am a little worried about transferring to fedloans as I have heard they are somewhat unorganized (maybe this has changed recently?) and that I might have to reapply for IBR etc. 

There seems to be some question as to whether any payments I might make to edfinancial will count towards my PSLF plan after I transfer to fedloans?  The people at edfinancial said there MIGHT be a 15 day grace period (she didn’t seem well informed about the whole process), while the people at Fedloan said ANY payments made after -10-1-2007 will be included towards my PSLF?  I am not sure who to believe?  If Fedloans is correct I’d like to just stay with Edfinancial for the time being and transfer my loans a few years down the road to fedloans for the PSLF plan.

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Thanks for your service as a teacher!

Make SURE that your loans are Federal Direct Loans that are serviced by Edfinancial, rather than FFEL loans.  That’s critical.

That said, PSLF is earned by making on time payments under an income driven repayment plan on a Federal Direct Loan while working in a qualifying public service position.  It does NOT matter which of the many loan servicing companies has your Direct Loans.  What you are referring to is the fact that when a borrower files the Employment Certification form for PSLF, they are switched to Fedloan Servicing.  The idea is to get the folks they know are working towards PSLF with one servicer.  You don’t HAVE to do that, you could do it later, but to me it makes sense to get that employment certification going ASAP, even though it means switching servicers.  And yes, people have experienced issues upon being transferred, but filing that form and getting into Fedloan Servicing could actually mean you are less likely to get transferred again in the future.  Hard to say.  I feel like filing that form creates a paper trail you want and will ultimately need and that if it were me I’d go for it.  But you don’t have to and the payments you make (assuming they count to begin with) will not be lost.