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What to know about Public Service Loan Forgiveness (PSLF)

Bankrate logo Bankrate 8/4/2020 Dori Zinn
a woman standing in front of a computer: Two nurses work on paperwork © Monkey Business Images/Shutterstock Two nurses work on paperwork

Some borrowers spend decades paying off student loans. However, there is a light at the end of the repayment tunnel, and you may even qualify for student loan forgiveness. One of these options, Public Service Loan Forgiveness, will forgive a portion of your loans after you've made a set amount of payments. Here's what it is and how to know if you’re eligible.

How does Public Service Loan Forgiveness work?

Public Service Loan Forgiveness (PSLF) is a federal student loan forgiveness program for government and nonprofit workers. If you work full time at the federal, state, local or tribal level of government, you might qualify for PSLF.

If you're eligible for PSLF, you'll need to make 120 qualifying payments on your Direct Loans. After that, PSLF will forgive your remaining balance.

Any loan under the Direct Loan program qualifies for PSLF; FFEL and Perkins Loans aren't eligible unless you consolidate them into a Direct Consolidation Loan.

How to qualify for Public Service Loan Forgiveness

Before your loans are forgiven, you first need to know if you qualify for PSLF. You'll need to work full time for a qualifying employer, have Direct Loans under an income-driven repayment plan and have made 120 qualifying payments.

Employment

Qualifying employment means that you work for any government agency at the federal, state, local or tribal level. You can also work for 501(c)3 nonprofit organizations or volunteer for AmeriCorps or Peace Corps.

This isn't limited to the job you do, but rather who you work for. Groups that do not count include:

  • For-profit organizations, even if those organizations are government contractors.
  • Partisan political groups and organizations.
  • Labor unions.

You'll need to work as a full-time employee or at least 30 hours per week (whichever is greater). You may qualify if you work multiple qualifying part-time jobs, as long as you average at least 30 hours per week with your employers.

Qualifying loans

Not all loans qualify for PSLF. All Direct Loans qualify for this forgiveness, but Federal Family Education Loans (FFEL) and Federal Perkins Loans don't. However, if you consolidate either FFEL or Perkins Loans (or both) into a Direct Consolidation Loan, they might become eligible.

Private student loans are not eligible for PSLF.

Qualifying payments

To be eligible for PSLF, you need to make at least 120 qualifying payments toward your student loans. If you consolidate your loans into a Direct Consolidation Loan, only payments made to that loan will count; in other words, payments made before you consolidate aren't eligible. They do not need to be consecutive payments.

Qualifying monthly payments must:

  • Be under a qualifying income-driven repayment plan.
  • Start after Oct. 1, 2007.
  • Total at least the full amount due on your monthly bill.
  • Be made on time (or not more than 15 days after your due date).
  • Be made while working full time at a qualified employer.

You can't make qualified payments while you're in school, during the grace period or during deferment or forbearance. Additionally, making higher monthly payments won't make you qualify for PSLF sooner.

How to get Public Service Loan Forgiveness

If you're looking to get PSLF, you should first check to see if you're eligible. You can complete an Employer Certification Form to see if you're making the necessary progress toward PSLF. Submitting the form every year helps the Department of Education determine if you're on track for forgiveness. If you don't submit the form annually, you'll still need to submit the Employer Certification Form when you apply for forgiveness. You’ll need to do this for each employer you worked for while repaying your student loans.

If you make 120 qualifying payments, it will take at least 10 years before you are eligible to receive PSLF. While you should get into a qualifying repayment plan as soon as possible, remember that payments while in school or during your grace period aren't eligible.

Once you're ready, you can complete the PSLF application. You can only submit this application after you've made 120 qualifying payments. You can either start the form online or download a copy to fill out by hand. In both cases, your employer must provide verification.

If your application is approved, you'll be notified that the remaining principal and interest balance on your student loans is forgiven. It’s best to continue making payments while your application is being processed. If you make payments after your 120th qualifying payment, you'll be refunded the overpayments.

If your application is denied, you'll get a notification on why it was denied. For instance, if you didn't work for a qualifying employer or didn't make qualifying payments, you could face PSLF rejection. In this case, you may want to apply for forgiveness through the Temporary Expanded Public Service Loan Forgiveness opportunity.

Alternative options to PSLF

If you don't qualify for PSLF and you're still looking to get loan forgiveness, you have a few options, including:

  • Income-driven repayment plans: These plans let you repay your loan or loans based on a percentage of your income and how many people live in your household. After 20 or 25 years, the remaining balance on your loans is forgiven.
  • Teacher Loan Forgiveness: This type of forgiveness is available to full-time educators who work at a low-income school or qualifying educational agency. You'll need to teach for at least five consecutive years. Both Direct Loans and Stafford Loans are eligible, up to $17,500.
  • Total and permanent disability: If you're totally and permanently disabled, your student loans might be able to get discharged.

While loans can also get discharged if the borrower dies, it's very rare for loans to get discharged in bankruptcy.

The bottom line

Public Service Loan Forgiveness is a great option for public service workers who are looking to get some of their student loans forgiven. Not everyone qualifies, but you can complete an Employer Certification Form every year to make sure you're on track. If you're not eligible, there are still forgiveness programs available, including income-driven repayment plans.

Featured image by Monkey Business Images of Shutterstock.

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