Public Service Loan Forgiveness (PSLF) Guide

Public Service Loan Forgiveness

At a Glance

If you’re struggling with student loan debt and you work in the public service sector, you might be able to get on a repayment plan that allows you to take advantage of Public Service Loan Forgiveness. Here’s what you need to know about the program—and how it might be able to help you get rid of your federal student loans.

Student loan debt in the United States has surpassed $1.5 trillion and affects millions of Americans. It’s not uncommon to see older Americans struggle with their federal student loans along with private debt.

Many borrowers are looking for ways to better manage their student loan debt. The good news is that there are ways to take advantage of a repayment plan and special loan programs that can help you obtain student loan forgiveness if you aren't able to keep up with monthly payments. For employees who work in certain civic service professions, Public Service Loan Forgiveness (PSLF) is one option. Here’s what you need to know.

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Understanding Public Service Loan Forgiveness

Back in 2007, during the George W. Bush administration, Congress approved Public Service Loan Forgiveness and President Bush signed it into law. The idea of the Public Service Loan Forgiveness Program was to encourage more graduates to engage in work that benefits society. The PSLF program is administered by the Department of Education, and the first cohort of eligible applicants began applying in the fall of 2017.

With PSLF, employees in certain professions can apply to have their loan balances forgiven after they’ve made 120 qualifying payments. So, basically, if you’ve been making payments on qualifying loans for 10 years, you can apply to have your remaining balance paid off. With PSLF, it’s your employer that matters. You might qualify if you work for:

  • A federal, state, tribal, or local government organization
  • A non-profit organization that qualifies as 501(c)(3)
  • A not-for-profit that doesn't have tax-exempt status, but still has a purpose of providing qualifying public service

You can also use full-time work with the Peace Corps or AmeriCorps as qualifying employment for the purpose of PSLF, according to the U.S. Department of Education.

As long as you meet the definition of a full-time employee and you make payments on a qualifying repayment plan like the standard repayment plan, you can work toward PSLF. Your 120 qualifying payments don’t even have to be consecutive.

If you’re working in a public service job with low pay, you can be on income-based repayment, stay current, and after making your qualifying payments, your remaining loan balance can be forgiven. This can be beneficial by helping you afford to do work for the good of the community without being in debt for decades.

However, there are some things to keep in mind about PSLF before you decide to move forward. Let’s take a closer look.

Can You Really Get Public Service Loan Forgiveness?

While PSLF is supposed to relieve the pressure on public servants and non-profit employees in terms of loan repayment, numbers recently released by the Department of Education are less than encouraging. In September 2018, the Education Department released data indicating that less than 100 people had received loan forgiveness.

In 2017, the Consumer Financial Protection Bureau released a report indicating that some servicers automatically put borrowers into deferment or forbearance, instead of helping them get on an income-driven repayment plan that would help them make qualifying payments on their federal student loans.

As a result, it can be challenging to meet the requirements, especially if it turns out you’ve got a loan type that doesn't meet the requirements. Additionally, it’s important to pay attention to Congress, since some legislation, like the Prosper Act, would effectively get rid of some special loan programs, including PSLF.

What Loans Qualify for Public Service Loan Forgiveness?

Only federal student loans are eligible to be forgiven under the PSLF program. This program is not an option if you have private loans. However, it’s important to note that not all federal loans and federal student aid are eligible. If you have loans under the now-defunct FFEL program, payments made on that debt won’t count. Nor will your payments on Federal Perkins Loans. Only Direct loans are eligible for forgiveness.

You can combine your old, non-qualifying loans into a Direct Consolidation loan and those payments will qualify. However, once you get a Direct Consolidation loan, the clock pretty much starts over again. You need to make 120 qualifying payments in the new program in order to reach a point to apply for PSLF. A qualifying payment is any payment that meets both principal and interest charges and is received by your student loan servicer on time.

If you are having trouble making your student loan payments, call your servicer and ask to be placed on an income-driven repayment plan. Don’t let them put you in deferment or forbearance. These solutions only put off when you make payments. But if you’re on an income-driven plan, your payments “count” toward the 120 needed for PSLF as long as you’ve got a job with a qualifying employer.

Some common public servants are teachers, military service men and women, government workers, nurses, and public health services workers. Working for a labor union or a partisan political organization, even though these are non-profits, won’t help you qualify to receive Public Service Loan Forgiveness benefits.

Applying for Public Service Loan Forgiveness

You can apply for Public Service Loan Forgiveness online at the Department of Education’s website. Borrowers apply only once when they think they’ve met the requirements. The process of approval can be lengthy because the Department of Education has to review your employment history and payment history and verify that you’ve met all the requirements.

One way to speed things along is to use the Employment Certification Form, which was introduced in 2012. You are not required to submit the form, but the Department of Education recommends that you submit the form annually or after changing public service jobs.

After you submit the form, your student loan servicer will review and respond to your certification request. Your servicer will determine how many qualifying payments you’ve made and how many payments you must make in the future. All of the information is kept in the National Student Loan Data System. You can go there to see which loans you have and determine if you’ve been making qualifying payments.

If you regularly fill out the form, it will be much easier to apply for PSLF—and receive it in a timely manner once you’ve made your 120 qualifying payments.

Pros and Cons of PSLF

Pros

First of all, there are no fees to apply for federal student loan forgiveness. Don’t use a “service” that charges a fee; instead, go to the Department of Education to apply. There are no fees when it comes to consolidating federal student loans or applying for any special loan programs offered by the government.

There is plenty of help available if you need it. Ask your student loan servicer to help you navigate the paperwork to get in a repayment plan that allows you to make eligible payments. Student loan servicers work directly with the Department of Education to help you manage your loans. Take advantage of the customer support they offer.

Another pro of PSLF, in addition to having your balance discharged, is the fact that there aren’t tax consequences. Some forms of student loan forgiveness come with a higher tax bill, but PSLF is designed to provide forgiveness without the amount being seen as income. However, it’s still a good idea to consult with a tax professional before moving forward.

Cons

There are downsides to PSLF, however. First of all, private student loans aren’t eligible for federal forgiveness programs. The only way to get private student loans forgiven is to work with the private student loan lender and servicer who originally offered the loans. However, most lenders are reluctant to offer this type of discharge.

Another con to PSLF is the fact that you might be able to make a lot more money in the private sector. Even on an income-driven repayment, you’re still accruing interest. You could even end up owing more after 10 years. With a private sector job, you might be able to make enough money to pay off your student loans quicker—without the need for PSLF.

Finally, relying on Public Service Loan Forgiveness can be a risk. The Department of Education might not grant it to you, or Congress may change the law. Even though policymakers insist they’d grandfather in participants, it’s never a sure thing.

Deciding if PSLF is Right for You

While Public Service Loan Forgiveness can be beneficial to some borrowers, it isn’t for everyone. Carefully consider your situation to determine if it might make sense in your circumstances. If you’re not sure you want to stick with a low-paying qualifying job for 10 years, or if you have private student loans, PSLF might not be right for you.

There are other options available to help you to better manage your student loan debt. Consider student loan consolidation through a private student loan lender. There are a number of student loan refinancing companies who can refinance federal and private student loans at rates.

To qualify for student loan consolidation with a private lender you must pass a credit check and meet specific income requirements. Each lender has different requirements and options available. You should compare all of your options before refinancing or consolidating.

However, if you know you want to work for the government or in the non-profit sector, PSLF can be a great choice. Understand the implications, look into different special loan programs, and figure out the best course of action for you.