Public Service Loan Forgiveness Program (PSLF) encourages work in public service. If you’re looking for the opportunity to better manage your debt while helping others, PSLF might be for you!
Public Service Loan Forgiveness Program: What Is It?
In this article:
- How Do I Qualify?
- Which Loans are Eligible for Forgiveness?
- What are On-Time, Full, Scheduled, Monthly Payments?
- Which is a Qualifying Repayment Plan?
- What is Qualifying and Full-Time Employment?
- When Should I Make My 120 Qualifying Payments?
- How Can I Track My Eligibility?
- What Should I Do after Getting PSLF?
How Do I Qualify?
You must make 120 on-time, full, scheduled, monthly payments on your Direct Loans. Only payments made after October 1, 2007 qualify.
These payments must be under a qualifying repayment plan.
You must work full-time at a qualifying public service organization.
Which Loans are Eligible for Forgiveness?
Only loans you received under the William D. Ford Federal Direct Loan (Direct Loan) Program will be eligible.
The following loans are not eligible for the public service loan forgiveness program:
- Federal Family Education Loan (FFEL) Program
- Federal Perkins Loan (Perkins Loan) Program
- Any other student loan program
If you have FFEL Program or Perkins Loans, then merge them into a Direct Consolidation Loan to take advantage of PSLF.
Payments on a Direct Loan do not count once it’s merged into a Direct Consolidation Loan. Once merged, you must make another 120 payments.
You should learn more about merging your public loans.
If you don’t know what type of federal student loans you have, check the National Student Loan Data System.
You can browse through the database.
What are On-Time, Full, Scheduled, Monthly Payments?
Payments made 15 days after the scheduled payment due date are not on-time.
Furthermore, payments less than the required amount are not full. So these late, incomplete payments are not part of the required 120 qualifying payments.
Several payments totaling the required monthly payment are considered as one payment.
Scheduled payments are those made after you’ve been billed for the month’s payment.
Notably, they do not include payments made during the following periods:
- During the grace status
- During the deferment or forbearance period
Advance payments do not count as qualifying payments. Lump sum payments do not qualify as well. If you are with AmeriCorps or the Peace Corps, there are special rules for lump sum payments.
Which is a Qualifying Repayment Plan?
The public service loan forgiveness program considers the following three repayments plans:
- Income-Based Repayment (IBR) Plan
- Pay As You Earn Repayment Plan
- Income-Contingent Repayment (ICR) Plan
The 10-Year Standard Repayment Plan also qualifies. PSLF also considers any plan with repayments amounts like the above-mentioned plans.
Before selecting a repayment plan, it’s important to understand its implications and costs.
If you make the required 120 qualifying payments of the 10-Year Standard Repayment Plan, there will be no remaining balance.
The longer you make PSLF-qualifying payments, the lower your remaining balance.
Under the IBR, Pay As You Earn, and ICR plans, your monthly payment amount will likely be lower. It will also result in a longer repayment period.
As a result, additional interest will accrue on your loan. So, you will be left with a higher loan balance that could be forgiven.
If you are not ultimately eligible for PSLF, you may face difficulty. You must repay the entire balance of your loan, including accrued interest.
What is Qualifying and Full-Time Employment?
Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization. The Internal Revenue Service (IRS) must designate it tax-exempt.
For public service loan forgiveness purposes, the type of employment does not matter.
A non-tax exempt, non-profit private organization can still qualify. It just needs to provide certain public services, such as the following:
- 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 organization must also not be a labor union or a partisan political organization.
You must meet your employer’s definition of full-time.
However, for PSLF purposes, that must be at least be 30 hours per week. This does not include time spent participating in religious instruction, or religious services.
If you work under contract for at least eight out of 12 months, you should still meet 30 hours per week. You must also receive credit from your employer for a full year’s worth of employment. You can work in multiple qualifying part-time jobs provided you work at least 30 hours per week..
When Should I Make My 120 Qualifying Payments?
You must make your payments while you work full-time at the qualified organization.
In addition, you should be an employee once you apply for the program.
You should still be working there once forgiveness is granted.
How Can I Track My Eligibility?
The Employment Certification for Public Service Loan Forgiveness form (Employee Certification form) helps you with this.
It will take you at least ten years to complete the 120 payments. Therefore, a process will also guide you in this program.
The form allows you to get your certification of employment from your employer. The process allows you to receive confirmation of qualifying employment. You’ll also receive confirmation of your Direct Loan payment eligibility.
Use of this form and process is not required. But to track your progress in meeting the PSLF eligibility, follow the steps below:
- Complete the Employee Certification form annually and whenever you change jobs. It must also have your employer’s certification.
- Submit the completed form to FedLoan Servicing (PHEAA), the PSLF servicer.
- FedLoan Servicing (PHEAA) will review your Employment Certification form.
- FedLoan Servicing (PHEAA) will notify you if information is incomplete and give you an opportunity to provide additional information.
- When PHEAA can’t make a decision, they may ask you to give more information, like an IRS Form W-2, pay stubs, or other documents.
- Should you qualify, all federally held loans will be transferred to PHEAA.
- PHEAA will ultimately notify you if you are qualified, and tell you how many payments qualify, and how many payments you need to make.
What Should I Do after Getting PSLF?
After making the 120th qualifying payment, you have to submit the PSLF application to receive loan forgiveness.
The application was made available in October 2017.
When you submit the application, you must be working at a qualified public service entity.
Still have questions about the public service loan forgiveness program? Watch the video below!
The public service loan forgiveness program provides a great opportunity for those with debt. It lets you help society while easing the burdens of your student loans. So, check out this plan to see if it’s right for you!
Do you have any more questions about the public service loan forgiveness program? Then comment them below!