IBR & PSLF in the NYT

[OrionGrad]

I just saw this Q & A article in the New York Times about IBR/Public Service Loan Forgiveness, and though I'd post a snippet of it here in case anyone is interested.

Q. I’m graduating from medical school in a few weeks and have a large amount of debt waiting for me. Our financial aid office has been talking about a program that will forgive your loans if you work for 10 years in a non-profit setting (i.e. university hospital). I understand that during those 10 years, you need to be making payments under the IBR program. My question is how likely is it that this program will actually work? According to my school, there isn’t even a formal application process or a way to officially enroll in the program. Any advice or information you have about this would be great. Thanks! –SM, Philadelphia

A. For people working in a wide range of government or nonprofit jobs, Public Service Loan Forgiveness (PSLF) could be a big help. Created at the same time as IBR, it will forgive remaining debt – including interest – after 10 years of qualifying payments on federal Direct student loans. SM from Philadelphia correctly pointed out that there’s no formal application process or form to fill out yet. While this can be nerve-wracking, this is a real program that people can count on.
Here’s how it works: You have to be making the right kind of payments on the right kind of loan while working full-time in the right kind of job. There are more details at www.IBRinfo.org, but briefly, the “right kind of payment” is IBR, Income-Contingent Repayment (ICR), or the 10-year payment. The “right kind of loan” is a federal Direct student loan. If you have a federal loan from a private lender like Sallie Mae, you can consolidate – or reconsolidate – into a Direct loan to take advantage of this program.
Delores will be glad to hear that the right kind of job is based on your employer, not your occupation. The public service loan forgiveness program covers all jobs in federal, state, local, or tribal government, including a public school, college, or hospital, as well as most nonprofit organizations.
If you think you might be able to benefit from this, save your paystubs and other documentation of your employment. For more information, see the Department of Education’s Web site.

Via the NYT

Has anyone spoken to someone directly and asked if residents are considered "employees" by this definition? For example, I know my dh wasn't eligible to participate in the 403b program (the non-profit employers version of a 401K) as a resident b/c he was a "resident" ... not an "employee". The info linked sure does sound as though residents should count, but I can totally see the hospitals figuring out how to wriggle out of allowing it.

[SuzySunshine]

Has anyone spoken to someone directly and asked if residents are considered "employees" by this definition? For example, I know my dh wasn't eligible to participate in the 403b program (the non-profit employers version of a 401K) as a resident b/c he was a "resident" ... not an "employee". The info linked sure does sound as though residents should count, but I can totally see the hospitals figuring out how to wriggle out of allowing it.

THAT is why someone needs to officially define resident and make it universal. DH does get to participate in his 403b. Every institution seems to be different.

[MarissaNicole]

Click here and scroll down.

Q21 How do I know if my employer is a “public service organization” that is an eligible employer for the PSLF Program?
A21 The term “public service organization” covers a broad range of employers, including any federal, state, or local government organization or agency and most charitable non-profit organizations. (February 3, 2010)

Q23 What private non-profit employers qualify as eligible employers for the PSLF Program?
A23 Eligible non-profit employers include those that have received a 501(c)(3) designation from the IRS. These include most private schools, colleges, and universities, as well as thousands of other organizations, agencies, and charities. Your employer will easily be able to tell you if it has the required IRS designation. The IRS has a searchable database of 501(c)(3) organizations at http://www.irs.gov/app/pub-78/. (February 3, 2010)

Q25 What types of public service jobs will qualify me for loan forgiveness under the PSLF Program?
A25 The specific job that you perform does not matter, as long as you are employed by a public service organization. For example, if you are a full-time employee of a public school system, your employment would meet the requirements for PSLF, regardless of your position (teacher, administrator, support staff, etc.). (February 3, 2010)

Q26 What is considered full-time employment for PSLF?
A26 Generally, this means you are working an average of at least 30 hours per week or the number of hours the employer considers full-time. For more detailed information about what is considered full-time employment for PSLF purposes, see the definition of “full-time” in the PSLF regulations at 34 CFR 685.219(b). (February 3, 2010)

Q34 If I receive my pay in the form of a stipend, will my employment qualify for PSLF?
A34 The determining factor for PSLF eligibility is whether you made each of the required 120 payments while you were employed full-time by a public service organization. The form of payment you received from the public service organization does not matter. (February 3, 2010)



It looks like they don't define "employee" but rather refer to it as someone working for at least 30 hours - and if you ask me residents do that. When read together to me that says it doesn't matter what classification you are (resident or employee), you need to collect a paycheck from a 501(c)3. But that being said, the government will interpret it how they want to. Not to mention they will probably change the rules 203 times.

[Pollyanna]

THAT is why someone needs to officially define resident and make it universal. DH does get to participate in his 403b. Every institution seems to be different.

I agree. We are not able to participate in the 403b program, which also effects when dh is vested in the university. We basically do not get to count the 7 years he will work for the university during residency and fellowship. Also didn't someone post something about hospitals might not fall under non-profit status? A case in Illinois I think? I don't know but I highly doubt physicians will ever just get their loans forgiven. There will be some type of salary cap so if you make over a certain amount you won't qualify for the program.

[MarissaNicole]

I agree. We are not able to participate in the 403b program, which also effects when dh is vested in the university. We basically do not get to count the 7 years he will work for the university during residency and fellowship. Also didn't someone post something about hospitals might not fall under non-profit status? A case in Illinois I think? I don't know but I highly doubt physicians will ever just get their loans forgiven. There will be some type of salary cap so if you make over a certain amount you won't qualify for the program.

Yes, in Illinois they are trying to take away NFP status for hospitals that don't meet certain thresholds as far as providing a certain amount of charitable care.

We are most likely going to enter the IBR thing, but we are not expecting or relying on qualifying for the loan forgiveness. The whole IBR is a perfect example of something that looks really good on paper but in practice there are just too many unknowns and cracks which leave room for interpretation and confusion. I think its frustrating that our guidance counselors are recommending it, because people are going to RELY on it and then be screwed when they change the rules.

[oceanchild]

I've said it a million times already, but I maintain that this is a good program even if the forgiveness never materializes. I would rather be making payments than sitting here accruing interest and making no payments, and IBR makes the payments more reasonable.

Anyway, I would think that adding an income cap would require a legislative change, whereas the definition of an employer or a nonprofit are things that be changed through federal rulemaking authority. That's a big distinction.

Thanks for posting both the article and those rules though. We're getting a lot more clarity on this than we had even a few months ago.