Getting Out of Student Loan Debt: Public Service Employees in NJ

Are you working as a New Jersey firefighter, police officer, teacher, nurse, principal, or hospice care worker? Employees working these jobs, along with many others, have one major thing in common: a motivation to serve others. When people have access to services and education, even if they cannot afford them, society benefits. You’re playing a role in the well-being of society. Though it may seem like you could earn more money in another field, there are unmatched benefits to working as a public service employee.

Unbelievably, 40 million Americans have student loans to pay off; there’s a high chance that you’re one of those 40 million. The good news for you is that if you’re a public service employee, you could be eligible for student loan forgiveness. That sounds awesome, right?

In 2007, Congress formed the Public Service Loan Forgiveness Program (PSLF) to embolden individuals to enter the public service work force and to continue working as public service employees. Again, although these jobs may not be the highest paying, they are absolutely necessary, which is what Congress wanted to reinforce. To qualify for this program, your job must be in a nonprofit organization, the government, or a specific not-for profit program.

How can you qualify for student loan debt relief – is it enough to simply be a public service employee?

It’s necessary to be employed full-time by a public service program, and under certain repayment plans, it’s required that you have made at least 120 payments on the eligible federal student loans. Every payment must meet or exceed the required amount and must be paid on time, meaning no later than 15 days after the due date. October 2017 was the first month that any remaining loan balances were eligible to be eliminated. This program is not unique to New Jersey, but all New Jersey public service employees can apply to the program, as long as all stipulations are met.

In addition to the public service jobs already listed, employees in the following sectors can also benefit from the PSLF Program:

  • Government organizations
  • Non-profit, tax-exempt organizations (listed under 501(c)(3) of the Internal Revenue Code
  • Private, non-profit organization that provides any of the following services:
  • Law Enforcement
  • Military Service
  • Public Safety
  • Public interest law services
  • Early childhood education
  • Public services for the elderly and disabled individuals
  • Public library services
  • Public education
  • Public health (nurse practitioners, nurses, full-time health professionals in healthcare practitioner occupations)
  • Emergency management

How do you know what loans fall under the PSLF Program?

All non-defaulted loans under the William D. Ford Federal Direct Loan Program meet the requirements. Basically all Direct Subsidized and Unsubsidized Loans as well as Direct Consolidation Loans are eligible. In addition, Direct PLUS Loans for parents and graduate or professional students fall under the PSLF Program.

To enroll in the PSLF Program, you need to print and complete the Public Service Loan Forgiveness Employment Certification Form, and Section 4 must be filled out by your employer. Once the form is completed, send it in to the U.S. Department of Education FedLoan Servicing. Each year, the form needs to be resubmitted.

If you have student loans and you meet the requirements for eligibility under the PSLF Program, don’t hesitate to enroll. You could potentially save a substantial amount of money each month – freeing up that capital to pay for your monthly expenses.

Image: “Teachers Union” by Kevin Dooley – licensed under CC 2.0

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How Your SSDI Benefits May be Affected by Past Due Student Loans

In the past several years, there seems to be a growing trend, and one that is less than ideal. More and more recipients of Social Security are also carrying significant federal student loan debt. This obviously presents a problem since both sources of money flow from the federal government. With more student loan debt, the federal government will continue to fall deeper into debt. How exactly will your Social Security Disability Income (SSDI) benefits be influenced by past student loans?

According to a report released by the Government Accountability Office, the number of people whose Social Security benefits have been offset rose from 31,000 in 2002 to 155,000 in 2013. That’s almost a five-fold increase! The report also tells us that only about 36,000 of the 155,000 individuals are age 65 and older. We can conclude that there are many individuals whose SSDI is being affected by their student loan debt. Did you know it’s possible that your student loan debt could be forgiven? Before making any rash decisions, it’s necessary to check out how your taxes will be influenced if you were to receive a TPD discharge.

In order for an individual to have any of their loans forgiven by the Social Security Administration (SSA), the individual needs to qualify for Total and Permanent Disability (TPD) discharge. Monitored by Federal Student Aid, which is a facet of the U.S. Department of Education, TPD discharge equates to an individual not having to pay back the funds that they owe for their education.

Which loans fall under TPD discharge?

·        William D. Ford Federal Direct Loan Program loans

·        Federal Family Education Loan (FFEL) Program loans

·        Federal Perkins loans

·        Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligations

Who qualifies for TPD discharge?

Unfortunately, TPD requirements are more difficult to meet than the eligibility requisites for Social Security. Just because you have been approved for SSDI benefits does not mean that you will be eligible for TPD discharge. Here are the rules, which were updated in 2010.

·        You must not be able to complete any “substantial gainful activity” that could provide an income. This activity is includes physical and intellectual activities. The inability must be due to a medically determinable physical or mental health impairment that has lasted for at least 60 months, is anticipated to last for 60 months, is expected to lead to death, or is correlated with 100% military service disability.

·        Social Security does not guarantee disability benefits for military service disability.

If an individual receives the Social Security disability award within the five to seven year review date, they will be part of a group known as “Medical Improvement Not Expected (MINE),” which should qualify them for a federal loan discharge.

To complete a TPD Discharge Application, you must have your medical doctor verify that you are disabled. Once your physician has filled out sections regarding your diagnosis, the severity of the problem, and any limitations experienced as a result, you can submit the application to your loan servicer. It’s required that you submit an application for each individual loan holder.

Please don’t hesitate to ask us if you need help with your TPD application or if you aren’t sure if you’ll qualify.

The Best Tips for Paying off Student Loans Quickly

At the time you applied for and were granted a federal student loan, there’s very little chance that you were thinking about how long it would take you to pay it back. We’re all a bit naive and wet behind the ears when just starting our college studies. Buoyed by the prospect of a “well paying job” after your time at university, you, like many others, most likely figured that paying back your student loan debt would be a piece of cake.

As we all know, student loans are a whole lot less fun after college ends. No one likes the harsh reality of knowing that a large portion of your (newly acquired) paychecks will go toward paying back your student loans. Real life take home pay is usually a lot less than you thought it would be, and subtracting even more money from your net income can feel almost physically painful.

On top of how depressing it can be to fully realize just how much you owe, it can feel like you’ll be paying for your student loans forever. However, there are things you can do to make sure that feeling doesn’t become your reality.

Stop deferment as soon as possible

As a general rule, most student loans, both federal and private, will continue to accrue interest while in deferment. This means the longer you put them off, the more you’re going to owe.

Avoid income-based repayment plans

Also known as ‘pay as you earn’ or ‘income contingent’ plans, these repayment methods are geared toward college graduates who can demonstrate at least a partial financial hardship. In theory, limiting how much borrowers have to repay each month based on how much money they’re earning might sound like a good idea. The problem with dramatically lowering your monthly loan payments again lies in the staggering amount of interest that will be tacked onto the total amount due.

Be aware of income taxes if considering loan forgiveness programs

There are currently a number of federal and New Jersey loan forgiveness programs available for borrowers who have made a set number of payments over a given time period (usually 10, 20 or 25 years). While just knowing that the remainder of your loan will eventually be forgiven can be a light at the end of a tunnel, you may have to pay income tax on the amount that is forgiven.

If you’ve deferred your loan several times and then paid the lowest payments possible via income-based repayment, the interest will have been compounding for a long time. That interest will be added to the remaining balance, which may be a significant sum by the time you qualify for forgiveness. While you will be able to celebrate the debt forgiveness, you’ll still need to foot the hefty NJ income tax bill.

Refinance and consolidate your student loans

One of the best steps to take when trying to get a handle on your student loan debt is to lower your interest rate. You should first consolidate (combine) any loans that are eligible for refinancing. If your original student loan interest rates were high, you’ll save a lot of money over the course of your repayment plan by refinancing to get a lower rate. This can also shorten the length of time required for you to pay back your loans and, in turn, lower the amount of income taxes you’ll owe on any remaining balance if you qualify for forgiveness.

Earmark your yearly tax refund for student loan repayment

Each time you receive extra money, whether from your tax refund, a lawsuit settlement, an inheritance, etc., resist the urge to spend it frivolously and instead apply as much of the total windfall to your student loan balance. You can do the same every time you receive a raise at work, too. Set aside the extra income and pay that much above and beyond your monthly minimum loan payment.

Look for employment opportunities that offer loan forgiveness

The Public Service Loan Forgiveness Program forgives student loan debt in teaching and certain public and nonprofit jobs. You’ll have to meet a whole host of requirements in order to have your loans forgiven through your job, but it is something extremely well worth looking into.

In addition to the above strategies to get out of student loan debt quickly, you should consistently re-work your budget so that you can trim as much excess spending as possible. This will allow you to put more of your income toward repaying your debts faster. Your budget will only be stilted temporarily – so remind yourself that the end justifies the means.

 

Image: “Calculator and Money” by Reyner Media – licensed under CC by 2.0