On August 14, 2020, the Department of Education released initial details regarding new legislation that extends Public Service Loan Forgiveness (PSLF) eligibility to faith leaders. The changes stem from a 2017 Supreme Court ruling. Here’s what this policy change means for faith leaders with student loan debt.
Supreme Court ruling makes faith leaders eligible for PSLF
The Department of Education recently released its response to a 2017 Supreme Court ruling regarding religious liberties. In light of the decision, the Higher Education Act was amended to allow faith-based entities to participate in federal student aid programs, including Public Service Loan Forgiveness.
The court case itself had nothing to do with student loan aid. Missouri-based Trinity Lutheran Church Child Learning Center was denied grant funding from a statewide program designed for qualifying nonprofits. The Supreme Court ruled in favor of the child care center, saying that it was denied solely on its religious affiliation. The court ruled that the center’s denial of grant funding violated the Free Exercise Clause of the First Amendment.
The court ruling opened the door to other opportunities that religious organizations were previously exempt from participating in, like PSLF. In May 2017, the Attorney General issued an executive order instructing government departments to analyze and adjust policies to protect free speech and religious liberty. Starting in 2021, individuals will have the opportunity to apply for faith-based loan forgiveness through PSLF.
Important dates for faith leaders applying for PSLF
The official implementation date for changes made to federal regulations concerning religious leaders’ access to PSLF is July 1, 2021. All of the details regarding the qualifications and requirements for religious leaders haven’t been completely established yet. According to the Higher Education Act, documentation on these changes is required by November 1, 2020.
Secretary of Education Betsy DeVos recently exercised her authority to allow for the early implementation of these changes as early as August 14, 2020. Any early implementation is at the discretion of individual institutions or agencies.
Student loan forgiveness for faith leaders
Although the Department of Education has announced that faith leaders will be eligible for PSLF, the details are still murky. Official documentation isn’t required until later this year, so there are no qualifications currently listed for what constitutes someone as eligible for PSLF based on employment or affiliation with a religious organization.
It’s likely, though not confirmed, that individuals in established religious leadership positions would be eligible for PSLF, possibly including but not limited to:
Of course, this list leaves out many others who could be eligible, such as individuals who work for faith-based nonprofit organizations outside of the church. The criteria for getting PSLF aren’t likely to change, so religious leaders thinking about loan forgiveness will need to meet existing requirements.
What is PSLF?
Public Service Loan Forgiveness is a federal student aid program that allows select individuals to have their student loan debt forgiven tax-free after meeting specific requirements. Qualifying for PSLF takes at least 10 years to complete, so it’s not a minor commitment.
PSLF has always been about who your employer is, not your specific role within an organization. To qualify for PSLF, individuals must work for one of the following employers:
- Government organizations at any level (federal, state, local or tribal)
- Nonprofit organizations that are tax-exempt under Section 501(c)(3)
- Other nonprofit organizations that provide qualifying public services
- Americorps or Peace Corps
Nonprofit organization student loan forgiveness is what most religious organizations would fall under.
Individuals also need to be full-time employees, which is designated as 30 hours or more per week. You can also qualify if you work multiple part-time jobs at qualifying employers for 30 hours total or more weekly. Other program requirements include:
- Have Direct student loans in good standing (not in default)
- Be enrolled in an income-driven repayment (IDR) plan
- Make 120 qualifying student loan payments while employed by a qualifying employer
Loan payments do not need to be consecutive or all with the same employer. To best track qualifying payment progress, individuals should submit a PSLF Employment Certification Form annually.
Other details new applicants need to know about PSLF
PSLF is a complex program to navigate, which is why many early applicants were denied. The success rate for PSLF is on the rise, though, which bodes well for faith leaders who may qualify for the program now.
Here are other important details you need to know if you are applying for PSLF:
Loan servicer: Fedloan Servicing is the official loan servicer for the PSLF program. Your loans are transferred over to Fedloan Servicing once your PSLF application is processed if they are currently under another servicer.
Taxes: Loan forgiveness through PSLF is free from any tax penalties, which is one of the most attractive features of the loan forgiveness program.
Program tool: The Department of Education created the Public Service Loan Forgiveness Help Tool to help borrowers navigate the PSLF program more efficiently. You’ll need information about your loans and employer handy when using the tool.
PSLF is an excellent option for eligible borrowers to potentially eliminate tens of thousands of dollars in student loan debt. Access to this program should be a great help to people working for churches and other religious organizations.
If you think you will qualify under the new policy, stay alert for more clarification from the Department of Education in the coming months. If you need help navigating how to pay off your student loan debt, book a consultation with one of our knowledgeable student loan consultants. We can help you devise a customized repayment plan for your specific needs.