Written by Kevin P. Gilmore
From the Director
For many years, the federal government has provided a means for borrowers to receive forgiveness of student loans if they worked in certain types of public service after graduation. In 2021, federal legislation passed to expand what are defined as “qualified employers” of the Public Service Loan Forgiveness (PSLF) program to include tax-exempt organizations, which covers ministers and other church staff under Section 501(c)(3) of the Internal Revenue Code.
This program forgives the remaining balance of a loan after the borrower has made 10 years (the equivalent of 120 months) of payments under a qualifying repayment plan, while working full-time for a qualifying employer. Debt forgiveness typically creates taxable income to a borrower, but under this program it is considered non-taxable.
We know outstanding student loan debt is a major barrier for many ministers in planning for retirement. This program provides an opportunity for some to take a major step forward in improving their financial position by eliminating remaining student loan balances.
The program has limitations, requirements, and qualifiers, so it would not be possible to cover all circumstances in this article. I encourage ministers to visit Federal Student Aid to learn more. This website also addresses the issue of how payments temporarily deferred during COVID affect eligibility. Student loan repayments were scheduled to restart on May 1, 2022.
The PSLF program qualifies eligible payments as being made under what is known as an Income-Driven Repayment (IDR) plan based on a borrower’s income level. But in October 2021, the U.S. Department of Education announced a limited time waiver (through October 31, 2022). This allows participants to count loan payments made before entering the PSLF program toward the 120 monthly loan payments required for forgiveness. Again, church employees should visit the website for details.
For those not aware of the financial benefits provided by the Nazarene COMPASS Initiative, it offers assistance with ways to reduce student (and other) debt and provides tools needed to plan for retirement and enjoy the benefits of living under financial freedom. Learn more about the program here or read this article featured in P&B eNews.
The recent changes to the PSLF, including the temporary payment waiver qualifier, and the COMPASS Initiative, are opportunities for ministers to reap significant benefits that may not be available in the future, so please act now to determine how these programs may help you.
Kevin P. Gilmore is executive director of Pensions and Benefits USA for the Church of the Nazarene.