One of the most popular student loan programs out there is the Public Service Loan Forgiveness (PSLF) program — and it’s no wonder why. The program promises big rewards for student loan holders in the form of forgiving thousands of dollars in debt.
Yet, as with a lot of programs, the application requirements can be confusing. Additionally, there are questions about how long the program will remain intact.
Finally, you need to ask yourself if pursuing PSLF makes sense in your financial situation. Don’t fear—we’ve made it easy for you.
Here’s what you need to know to apply for the public service loan forgiveness program.
EXCLUSIVE: Get our PSLF Checklist to see if you qualify.
What Public Service Loan Forgiveness is worth
As of the writing of this blog post, the value of loan forgiveness is limited only by the amount of eligible loans that you’ve accumulated. (See below to learn about which loans are eligible.)
Of course, you’ll have to make 120 qualifying payments as part of the deal, so your balances could be significantly lower by the time you’re eligible. In many cases, it makes sense to get on an income-driven repayment plan. Otherwise, over the course of standard repayment, you’d be rid of your student loan debt after 10 years anyway.
Another consideration is that PSLF might not remain intact forever. There are various proposals on the table, ranging from President Trump’s budget to the PROSPER Act, that would end PSLF going forward.
1. Is Public Service Loan Forgiveness the right option for you?
Before you decide to go all-in with this program, be sure to consider how much in student loans you might have left to be forgiven after 10 years of repayment.
This program is most valuable if you have high loan balances relative to your salary. If your loan balances are low, however, then it’s unlikely that you’ll have much of your loans remaining to be forgiven after 10 years of payments.
If you earn a lot, then you might not qualify for reduced payments, which could also result in your having to pay off large amounts of your student loan balance in 10 years.
You can figure out where you stand by comparing different student loan repayment plans and calculating what your remaining balance will be after 120 payments. You can also check out our student loan calculators to make the math easy.
Not sure that Public Service Loan Forgiveness is the best option for you? Answer a few questions below and we can help point you towards a solution! Otherwise scroll down to read on.
2. What is the Public Service Loan Forgiveness Program?
The Public Service Loan Forgiveness Program is a federal program designed to forgive student loan debt for employees of certain public and nonprofit jobs.
The program applies to student loan debt holders in specific fields of work, with specific types of loans, and who make qualifying payments.
3. What are the requirements for eligible payments?
Right now, you’re probably saying, “Show me the money!” But it takes some work first.
To qualify, you need to meet two basic criteria: first, you need to be enrolled in a qualifying repayment plan, and second, you must have made 120 monthly payments.
The payment plans that qualify are:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Standard repayment
- Any other payment plan with monthly payments that equal or exceed standard repayment monthly payments
No matter which plan you’re on, you’ll have to have made 120 monthly payments on time and in full to qualify. Additionally, only payments made after October 1, 2007 count as qualifying payments.
For many debt holders, REPAYE, PAYE, IRB, and ICR likely make the most sense for maximizing the amount forgiven at the end of the 120-month period. These plans are most feasible because they typically lower monthly payments, meaning you’ll have a larger balance remaining at the end of the period.
Additionally, the Standard repayment plan is designed to pay off your student loans in 10 years. So if you stay on this plan, there simply won’t be anything left to forgive after 10 years of payments.
With this in mind, the Department of Ed. notes that you must make the majority of your 120 payments under an income-driven plan in order to be eligible for PSLF. With this in mind, they say: “if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.”
4. Which types of employment qualify for public service loan forgiveness?
The Public Service Loan Forgiveness Program is available only to employees of:
- Federal, state, local, or tribal government organizations
- A 501(c)3 nonprofit
- A not-for-profit that’s not 501(c)3 designated but meets other requirements related to public service
- AmeriCorps, in a full-time capacity, or the Peace Corps
What your specific job is typically doesn’t matter as long as the organization or agency falls into one of the above categories. However, if you perform work of a religious nature as part of your job at a qualifying organization, that doesn’t count toward the total hours.
You also don’t need to work for the same employer during the entire 120-month period. However, you must work an average of at least 30 hours per week each year, or at least the number of hours that your employer considers to be full-time work.
5. Which loans are eligible?
Loan eligibility is another area in which you have to be careful. Not all federal student loans qualify, so be sure that yours meet the requirements.
Public Service Loan Forgiveness eligible loans:
- Federal Direct Subsidized Stafford/Direct Loans
- Federal Direct Unsubsidized Stafford/Direct Loans
- Federal Direct PLUS Loans
- Federal Direct Consolidations Loans
Note that all of the above loans originate from the Direct Loan Program.
All Federal Perkins Loans and Federal Family Education Loans (FFEL) are not eligible for forgiveness.
Yet, there is one exception to loan ineligibility: if they’ve been consolidated into a Direct Consolidation Loan. If so, then they will become eligible. However, only payments made toward the new Direct Consolidation Loan will count toward your 120 payments. So, beware: this kind of “reconsolidation” can reset the count if you’ve made qualifying payments in the past.
Keep in mind that Perkins Loans can be eligible for other loan forgiveness programs, including Perkins Loan Cancellation.
What to do right now
Since this program didn’t begin until 2007, the first cohort is just being evaluated for PSLF right now. There are reports indicating that some borrowers have received notice of loan forgiveness, but the Department of Education says that fewer than 1,000 borrowers are likely eligible from this first round of applicants.
Here’s what to do if you’ve been making qualifying payments for 10 years:
First, complete the Employment Certification for Public Service Loan Forgiveness form each year. This form verifies that you have completed employment required for the program each year. Completing it requires you to fill in some parts and your employer to fill out the rest. While this isn’t a requirement, it is helpful for your servicer to track your eligibility.
In the case that you or your employer is unsure about any aspect of the program, then consult the guide compiled by the Consumer Financial Protection Bureau for answers to your questions.
Once it’s time to submit your application, keep in mind that at that time you’ll need to be working at one of the qualifying organizations above.
Additionally, realize that you submit everything at once — your whole 10-year employment history. Having filled out the employment form and tracked your payments each year can help the Department of Education make a decision faster.
Make sure to keep copies of your form each year just in case. You should also keep copies of pay stubs and W-2 tax forms in the case that you need them for verification later.
If you are interested in influencing policy, contact your representatives to let them know how you feel about PSLF. You can keep up with legislation related to student loans by following our bill tracker.
Public Service Loan Forgiveness calculator
Curious about how much debt you could have forgiven with PSLF? We developed a Public Service Loan Forgiveness calculator to help you estimate how much you could save through the program. Plug in your info below to find out.
Keep in mind, this calculator serves as an estimate only and doesn’t guarantee your eligibility or amount of debt to be forgiven. To learn more about how it works, check out our Public Service Loan Forgiveness calculator page.
Public Service Loan Forgiveness Calculator
Jeffrey Trull contributed to this article.
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