The Public Service Loan Forgiveness program, or PSLF, allows borrowers who work in the public or nonprofit sectors to get their federal student loan balances forgiven after making 10 years’ worth of consecutive payments. Since its inception in 2007, more than 4.5 million borrowers have applied for relief, while over 2.3 million have gotten their student loan balances discharged.

In an effort to shed light on the impact student loan forgiveness has on borrowers, the Student Borrower Protection Center (SBPC) conducted a survey, coauthored by Daniel A. Collier, Ph.D. and Dan Fitzpatrick, Ph.D., among PSLF applicants and recipients. The survey highlights the correlation between forgiveness and borrowers’ financial outcomes, as well as their overall well-being.

The impact of PSLF on student loan borrowers

Biden’s student loan forgiveness announcement has sparked quite a debate around the impact that mass cancellation could have on borrowers. Using data from PSLF applicants, the SBPC examined how achieving relief, as well as how the number of remaining payments, relate to borrowers’ financial outcomes, as well as their overall well-being. These are some of the key findings:

  • Increase in homeownership. According to the report, 84 percent of borrowers whose balances were forgiven were homeowners. By contrast, only 64 percent of borrowers who are still in repayment are homeowners — that’s a 24 percent difference.
  • Stronger credit scores. The average PSLF applicant has a FICO score of 742 — higher than the national average, which is 714. However, PSLF applicants who got their loans discharged displayed FICO scores between 21 and 56 points higher than those who were still in repayment.
  • Lower levels of distress. Borrowers who had their loans forgiven displayed much lower levels of financial stress than those still in repayment. Using a 5-point Financial Stress scale, the SBPC found that those who had 37 to 60 remaining payments scored upwards of 3.5, while those who had their loans discharged scored a little over 2.6. Those with at least three or more years left on repayment also showed a higher need for psychological and socioeconomic support due to an increase in suicidal thoughts and non-prescription drug use.

When it comes to retirement and non-retirement savings between borrowers who are still in repayment and those who’ve gotten their loans discharged, the SBPC didn’t find much of a difference. Likewise, overall job and life satisfaction were consistent among both groups.

“It seems that it is not being on a path to forgiveness, but debt discharge, that provides observed benefits,” the report reads. “These preliminary findings help us better understand the benefits of realized debt cancellation and underscore the need to ensure that borrowers within PSLF enjoy reliable pathways to promised debt relief,” it concludes.

Who qualifies for PSLF?

To qualify for PSLF, you must meet the following requirements:

  • Work for a federal, state, local, or tribal government agency or not-for-profit organization
  • Be employed full-time at said agency or organization
  • Have federal Direct Loans (if some of your federal loans aren’t Direct Loans, you’ll have to consolidate these into a Direct Loan to qualify)
  • Be in an income-driven repayment plan
  • Make 120 qualifying payments.

How much does PSLF forgive?

When you apply for PSLF, any balance that’s left on your student loan account after you make the 120 qualifying payments is forgiven — regardless of the amount. Likewise, there are no income requirements to qualify, you just need to work for an eligible employer full-time, have federal Direct Loans and be enrolled in an income-driven repayment plan.

How long does PSLF take?

There’s no way to speed up the PSLF process, so at the very minimum, you’ll spend at least 10 years in repayment before you can qualify for loan forgiveness. Once you’ve made your qualifying payments, it’s up to your loan servicer to process your request, which can take several months. However, you won’t be required to make any payments during that time.