Recent PSLF Changes that Qualified Employers Should Know About
As you know, student loan repayment resumed this month, and borrowers should have set up their repayment plans by now. Understandably, this has dominated recent headlines, which has suppressed messaging about critical PSLF changes that benefit you and your staff as well. Here’s a brief summary of what’s new:
- Definition of Full-Time: This is now simply 30 or more hours per week, even if an employee is under 1.0 FTE for your specific organization. Previously, if an employee worked 32 hours a week but was .8 FTE for your organization, they did not qualify.
- Definition of Qualifying Employment: Now expanded to include contractors who provide services that by State law cannot be filled or provided by a direct employee. This is a significant change for hospital staff in California and Texas specifically.
- Late, Installment and Lump Sum Payments: Will now qualify for PSLF when you certify employment for these periods.
- Employment at Forgiveness: A borrower now needs only be working for a qualified employer when they apply for loan forgiveness, NOT during the review process.
Borrowers who have previously met the NEW definitions for full-time and eligible employment are encouraged to submit PSLF Forms all the way back to October 2007, even if past forms were previously denied due to the old rules.
Additionally, recent legislation has created tax-advantaged opportunities to assist your staff with their debt:
- Secure 2.0 takes effect in January, allowing you to make matching 401k/403b contributions for an employee based on verification of their making monthly student loan payments.
- Loan Repayment Assistance Program (LRAP): Using this strategy, 501(c)3employers can make unlimited, tax-free student loan contributions to their staff If your hospital is offering annual taxable student loan repayment, it is critical to align this benefit with PSLF to avoid overlap. Additionally, using LRAP, these payments can be tax-free, allowing you to reduce budget while still delivering a greater benefit.
One final note, just to be sure that when you’re evaluating student loan benefits, you are comparing apples-to-apples. Many retirement plan sponsors have added student loan resources to their arsenal, but they don’t offer a dedicated platform with tech-enabled monitoring and compliance for PSLF requirements, data aggregation or borrower support and advocacy.
If you’re not already familiar with BenElevate, schedule an introductory meeting anytime; at a minimum, we can answer any questions you and your team have about PSLF and evolving student loan programs.