What is Public Service Loan Forgiveness?
The PSLF program is a federal program that forgives up to 100% of your federal student loan debt if you work in a qualifying public service job. The program was created in 2007, as a way to help people in lower-paying government jobs to able to manage their student loan debt.
|Benefits of PSLF|
|Forgiveness After 10 Years (Is Retroactive)|
|100% Federal Student Loan Forgiveness|
|Forgiven Balance Not Taxable|
|Payments Based on Income|
Who Qualifies for Public Service Loan Forgiveness?
To qualify for PSLF, you must be employed full-time with an organization that is considered “qualifying employment”. Note that generally, the type or nature of your employment with the organization does not matter.
|Federal, State, Local Government|
|Non-Profit in Public Services||Maybe, see below.|
- Emergency management
- Military service
- Public safety, or law enforcement services
- Public health services, public education or public library services
- School library and other school-based services
- Public interest law services
- Early childhood education
- Public service for individuals with disabilities and the elderly.
The following organizations are not considered qualifying employment by PSLF:
- For-profit organizations, including for-profit government contractors
- Labor unions
- Partisan political organizations
- Non-profit organizations that are not exempt under Section 501(c)(3) and which don’t provide a public service.
In addition to qualifying employment, to qualify for PSLF, you must be employed full-time with that organization while making payments on your student loans. Full-time employment for PSLF is defined using your employer’s definition of full-time employment or at least 30 hours per week—whichever is greater.
- The type of work you do for your employer does not generally matter for PSLF purposes.
However, when determining full-time public service employment at a not-for-profit organization, you may not include time spent participating in religious instruction, worship services, or any form of proselytizing.
For teachers of other employees of a public service organization that is under contract for at least 8 out of 12 months, you meet the full-time standard if you work at least 30 hours per week during your contractual period.
What Types of Loans Qualify?
Only the following types of loan qualify for PSLF:
- Direct Subsidized / Unsubsidized
- Direct Consolidated Loans
- Direct PLUS
- Direct Stafford Subsidized / Unsubsidized
Private loans, loans in default, and federal loans not listed above do not qualify for PSLF.
What if My Federal Loans Don’t Qualify?
Fortunately, there is a way to convert your federal loans into Direct Loans so that they can qualify under PSLF. The Direct Loan Consolidation program works by taking all of your federal student loans and consolidating them into one new Direct Loan.
If you do not have Direct Loans but want to apply for Public Service Loan Forgiveness, you will need to consolidate your loans in this way. Consolidating your federal student loans is free if you apply on your own online at StudentLoans.gov or via paper application, or you can hire a private company to help you through the process.
Making 120 Qualifying Payments
One of the biggest reasons PSLF forgiveness is left unutilized every year is because qualified applicants fail to make qualified payments. If you think you’re qualified for PSLF, make sure you check in every year to make sure the payments you’re making on your student loans are qualified.
To qualify for loan forgiveness under PSLF, you must make 120 qualified payments that meet the following payment requirements:
- Payment was made after October 1, 2007;
- Payment was made on time (no more than 15 days after the due date);
- Payment was made in full (for the full amount shown on your bill). Payments that are made in a lump sum or in advance are not counted as qualifying payments;
- Payment was made while you were employed full-time with a qualified employer; and
- Payment was made under a qualifying repayment plan (see below).
PSLF And Qualified Repayment Plans
For your monthly student loan payments to count towards PSLF, they must be made under a qualified income-driven repayment program provided by the federal government. This is another way in which many people miss out on their opportunity to earn loan forgiveness through PSLF.
The loan repayment programs that qualify you for PSLF are the following:
- IBR (Income-Based Repayment)
- ICR (Income-Contingent Repayment)
- PAYE (Pay As You Earn)
- REPAYE (Revised Pay As You Earn
Any payment made under a Standard Repayment Plan or Graduated Plan will not count toward the 120 monthly payments needed to qualify for PSLF.
Temporary Expanded Public Service Loan Forgiveness
For a limited time, you could still be eligible for Public Service Loan Forgiveness even if some—or all—of your payments disqualify you under the standard requirements.
The Temporary Expanded Public Service Loan Forgiveness opportunity offered by the U.S. Department of Education temporarily amends the current program to include more borrowers.
The TEPSLF opportunity expands the list of repayment programs under which you can make your 120 required payments. While PSLF only accepts payments made under an IDR plan, TEPSLF also allows the following types of repayment plan:
- Extended Repayment Plan
- Graduated Repayment Plan
- Consolidation Graduated Repayment Plan
- Consolidation Standard Repayment Plan
If you’ve made payments that don’t qualify for PSLF, or if you’ve been denied PSLF because of nonqualifying payments, it’s important to learn more about the Temporary Expanded Public Service Loan Forgiveness opportunity and find out if you qualify.
Temporary Expanded Public Service Loan Forgiveness is a limited opportunity and will be distributed to applicants on a first come, first served basis, so it’s important to apply as soon as possible if you’re eligible.
Other Benefits of Enrolling in the Income-Based Programs
Under the income-based programs, your payments are calculated based on your income, not on how much you owe. This can often provide borrowers relief from large payments they are otherwise unable to make. In some cases, for those with very low income, the monthly payment could be as low as $0.00 per month depending on the income and family size of the applicant. The payment, regardless of how low it is (even $0.00), would count towards your forgiveness.
An Example of How Public Service Loan Forgiveness Can Work
A borrower is earning $40,000 per year with a family size of 4. The loan balance is $48,000, with an interest rate of 6.875%. The borrower could qualify for an income-based payment of $52/mo. After making 120 qualifying payments, this borrower would have paid $6,240 in student loan payments, and the balance of $48,000 – $6,240 = $41,760 would be forgiven.
This does not include interest that would also be forgiven and assumes that the personal income and family size did not change for ten years.
Public Service Loan Forgiveness Quick Checklist:
- Full forgiveness of Federal Student Loans after 10 years (120 qualified payments)
- Government or Non-profit employment 501(c)(3)
- Must be in the Direct Loan Program making income-based payments
- Forgiveness is non-taxable
Consider consolidating your loans to ensure you are making qualified payments
Public Service Loan Forgiveness FAQ
How Much Can Be Forgiven?
Currently, there is no maximum amount that can be forgiven under PSLF.
Is Public Service Loan Forgiveness Taxable?
No. Any amount forgiven under PSLF is not considered taxable income, making PSLF very different from income-driven repayment plans without PSLF.
What If I Have Two Jobs in Public Service?
If you work in two separate public sector or non-profit jobs, you are considered to meet the requirement for full-time employment if the combined hours at both positions is 30 hours or more per week.
Do Payments Have to Be Made Consecutively?
No. You must make 120 qualified payments for PSLF to work, but they do not have to be made consecutively. For that reason, it will take at least 10 years to qualify for PSLF, but it could take longer.
Is PSLF Being Cancelled? What Should I Do?
PSLF has been the topic of some controversy lately, and recent news may dissuade borrowers from attempting to apply or qualify for PSLF. However, having the right information can allow you to still benefit from this program.
Are the Qualifying Payments Retro-Active?
Yes! If you meet all the qualifying criteria of PSLF and have been making qualifying payments for ten years, you could qualify for loan forgiveness right now. There is no requirement to enter the PSLF program, only that you apply at the end of your ten years of qualifying employment, payments and having the correct loan types (see above).
PSLF In The News
The Department of Education is currently questioning the validity of many previous approvals for Public Service Loan Forgiveness submitted by FedLoan Servicing, even stating that borrowers may, in fact, see their approvals rescinded in the near future. Additionally, the current presidential administration could be making changes to the program.
This could result in many borrowers currently working in the public sector having their forgiveness benefits denied even after meeting all program requirements.
FedLoan PSLF Employer Certifications Wrongly Denied
With the filing of a lawsuit against the U.S. Department of Education by the American Bar Association (ABA) in late 2016 and 2017, it was discovered by many public service employees that they may not in fact qualify for the PSLF program. The ABA sought to hold the Dept. of Ed accountable for FedLoan employer certifications (which serve to inform federal employees whether or not their employer is qualified for PSLF qualifying employment).
As a result, the Department of Education has clarified that these letters from FedLoan are not binding, and the only way to find out if you qualify Public Service Loan Forgiveness is by submitting an official application. You can do so via studentaid.gov.
How To Apply For Public Service Loan Forgiveness
If you think you may qualify for PSLF, now is the time to act. Huge numbers of people who could take advantage of this great benefit are missing the opportunity by not making the correct qualifying payments. When it comes to applying for the Public Service Loan Forgiveness program, you have two different options.
- Apply On Paper – You will need to mail this application to U.S Department of Education, FedLoan Servicing, P.O. Box 69184, Harrisburg, PA 17106-9184. The easiest way to do the latter is to create an account on myfedloan.org and upload the form there.
- Apply Online – If your student loans are with Fedloan Servicing, you can submit your application online through their portal.