Do 1099 Independent Contractors Qualify for PSLF?

[remapthesoul]

Hi everyone,

I've been going for PSLF since residency and have about 4.5 years left (eligible Sept 2021), so was alarmed and then subsequently relieved when reading about the new budget proposal. Big thanks to those who did some legwork on the actual document language to find that grandfathering looks to be in order!

So with a paranoid state of mind, I've been going back and reading my original loan MPN and the PSLF FAQs to see if there's any way I can try to prevent being disqualified from forgiveness, when I realized that there is no exact wording (to my knowledge) that states a 1099 independent contractor does or does not qualify for PSLF. I've been working for a county hospital since graduating residency as a 1099 sole proprietor thinking that it qualifies as government/non-profit employment, but technically I'm not "employed" by the county. My ECF's have all been approved thus far, but as we learned from the lawyers suing Dept of Ed, the forms probably can't be relied on.

Will this ultimately disqualify my eligibility? The wording is somewhat vague, but as far as I can tell, as long as you work 30hr/week for a government/non-profit, you should qualify. Am I interpreting that correctly? Thanks for your help.

[East coast]

"To qualify for PSLF, you must be an employee of a qualifying organization. An employee is someone who is hired and paid by the organization. You may physically perform your work at a qualifying or non-qualifying organization, so long as your employer is a qualifying organization. If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work. The type or nature of employment with the organization does not matter for PSLF purposes."

I suspect the answer is no you're not eligible, but have u filed the employment certification form to get a response from the source?

[remapthesoul]

I have submitted the employment certification form, which have come back stating that I've made qualifying payments, so that's why I've assumed this whole time that I'm ok. However, in light of the Dept of Ed stating that they don't stand by the ECF's from FedLoan, I don't know if it can be trusted. Can you tell me the source that you quoted from? Thank you.

Edit: Thanks again for your response. Reading your quote again, it would seem that I do qualify: "If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work." In my case, the organization that hired and pays me is the county, which would qualify as a government organization. Am I interpreting that correctly?

[jfoxcpacfp]

remapthesoul wrote:

Edit: Thanks again for your response. Reading your quote again, it would seem that I do qualify: “If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work.” In my case, the organization that hired and pays me is the county, which would qualify as a government organization. Am I interpreting that correctly?

Click to expand...

Yes, but you must be contracted to work for an employment period of at least 8 months and work for an average of 30 hours per week during that period. Be sure that your employer will verify this and/or that your contract with a qualifying entity stipulates as such.

[remapthesoul]

Thank you, Ms. Turner, for your reply. I have a 3 year contract (up for renewal this year) with the county and it does state that I perform full time work.  

[yanita]

hello remapthesoul, I am in the EXACT same situation as you are, except that my contract has been year long each of the three years that I have been here. I was initially reassured that county govt is a qualifying entity and as long as we are working >30hrs week our payments would be qualifying payments. I just wanted to reach out to learn if you have found anything to the contrary, because I have momentary freakouts about whether or not ultimately all of our payments will be honored as qualifying, and have never seen postings by someone in my shoes. also, should we run into problems down the line praps we can combine forces... yana

[yanita]

It appears that the gov't has NARROWED the definition of "employee" to mean ONLY workers paid with W-2 forms.

are there others out there who are 1099 contract workers contracted as individuals DIRECTLY with 501c3 or gov't hospitals? ie getting check FROM qualifying institution, but getting the "wrong" tax forms? i wonder who this is affecting? with 2.5 years left and crushing debt, i am pretty devastated...

[kbarnes]

Hey Yanita, I am in the same exact situation. I'm a 1099 at a 501c3 hospital. Small hospitals in Cali do not 'employ' physicians because it isn't allowed by state law. All of the docs in my hospital are 1099. I've been told countless times by FedLoans that my employment is certified and even submit my tax returns to them every year! Nobody has ever said I don't qualify because I'm a 1099. I didn't know any of this until I stumbled across this forum and am freaking out! I only have 10 months to go before before I've made 120 payments .

[jfoxcpacfp]

yanita wrote:

It appears that the gov’t has NARROWED the definition of “employee” to mean ONLY workers paid with W-2 forms.

are there others out there who are 1099 contract workers contracted as individuals DIRECTLY with 501c3 or gov’t hospitals? ie getting check FROM qualifying institution, but getting the “wrong” tax forms? i wonder who this is affecting? with 2.5 years left and crushing debt, i am pretty devastated…

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Can you provide some more information and/or substantiation? Interested to learn about this change.

[yanita]

so where i got this was actually from the other commenter here, and this is from the first page of the new PSLF "tool" - lets see if can paste this in:

hrm. i can't paste screen shot. here's the website for tool:

https://studentloans.gov/myDirectLoan/pslfFlow.action#!/pslf/1

 

and question number one:

Employment Eligibility

First, we'll start by helping you determine whether you work or worked for an employer that qualifies for PSLF.

Select the type of employer you work or worked for.

Remember, eligibility for PSLF is not based on the job that you do for your employer. Instead it's based on who your employer is.

Be sure that you answer this question about your legal employer, which is the organization that issues your Wage and Tax Statement (W-2) each year. If you do not receive a W-2 from an organization, but instead receive another type of tax form, such as 1099, we do not consider you an employee of the organization for the purposes of PSLF.

If you don't know what type of employer you work or worked for, ask your employer before proceeding.

A government organization

A 501(c)(3), not-for-profit organization

A not-for-profit organization that is not a 501(c)(3) organization

AmeriCorps or Peace Corps

None of the above

[The White Coat Investor]

I'm not surprised at all to see Yanita's clarification. In fact, I fully expected it.

I keep hearing gray areas/rumors that ICs may be able to get PSLF, but I sure wouldn't count on it. There's enough squirrellyness around PSLF for real employees, why make it easy for them to deny you? I don't think I would go for PSLF if I were an IC. I think anyone who has been advising people to go for PSLF because their business contracts with a 501(c)3 has been giving out bad advice.

[ChadCFP]

This forum post caught me by surprise yesterday because we have always been under the impression that IC will NOT qualify for PSLF, but after reading some of the comments, I was thinking I was missing something. So I opted to sleep on it and circle back this morning with fresh coffee. It seems like Yanita has done some excellent investigator work to confirm our past thinking. We followed the "where the check" comes from rule in regards to being a W2 employee.

Now, in full disclosure, all our physicians going for PSLF are in academia and any of our 1099 physicians were either paid up with student loans or private and paying aggressively. Due to this, we never had any complicated case studies besides the one-off question here and there.

IF, you were still tempted to go for PSLF as an IC, I would really start to build up the PSLF side fund asap. This is the worst part about PSLF, making "bad" debt repayments for years and not knowing if you will qualify or not.

Great question from remapthesoul and great responses from Yanita!

This may be a great question or confirmation for Adam Minsky. Adam is a student loan attorney in Mass & NY, very knowledgeable.

Heather Jarvis also addressed this question in 2015 (which seems like decades ago in PSLF world). Cliff notes: The IC is a for profit business and not a c3, even though your work is with a c3. The way around this would be if you were an IC for some business AND a W2 for a c3.

 

[jfoxcpacfp]

The White Coat Investor wrote:

I’m not surprised at all to see Yanita’s clarification. In fact, I fully expected it.

I keep hearing gray areas/rumors that ICs may be able to get PSLF, but I sure wouldn’t count on it. There’s enough squirrellyness around PSLF for real employees, why make it easy for them to deny you? I don’t think I would go for PSLF if I were an IC. I think anyone who has been advising people to go for PSLF because their business contracts with a 501(c)3 has been giving out bad advice.

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Agree. Unfortunately, the previous ambiguity implied that IC workers would qualify.

[yanita]

Agree, previously the language was that to qualify any person would have to be working full time and employed by qualifying employer. I asked and asked, and agree there were differing opinions in the ether regarding whether my "employment" was to my county hospital, or to myself. But when I called the dept of education, I got the answer "don't worry about W2 vs 1099, as long as check comes from county and loan provider is accepting the ECF you're fine."

What can I do? I am a "real" employee. Almost 8 years of "bad" debt payments now with probably only the first five years of residency "counting" - I"m now talking to my county hospital to find out if they can hire me as W-2.

If there is any way to argue my case I am (along with other county workers, who work ridiculous hours in a messy system because we came to medicine to give our most underserved communities a shot at good care) a poster child for the PSLF.  And this world of debt and money - I don't understand it. I just want to live simply and take care of patients.

[ChadCFP]

Yea, it is a tough one. I don't think any of us will be able to provide a good solution since we are all rolling the same dice. I am sorry, I know this situation sucks.

I said this earlier, but this may be a great question or confirmation for Adam Minsky. An attorney who understands student loans in and out and works with more complicated cases may be your best bet. At least for better confirmation of the possibility. From there, you can work on a course correction game plan if needed. It will also help once you get an answer from your current county hospital.

If this doesn't pan out, I am sure you know this, but if you are working in a health shortage area there are other forgiveness options. If that is an option for you, take advantage of it.

 

[yanita]

Thanks, and thanks for the recommendation for Adam Minsky. Will reach out... At least I do love my job. And appreciate your help here. If I find any definitive news out, for better or worse, will make sure to post.