What to know about Public Service Loan Forgiveness (PSLF)

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Many borrowers spend decades paying off their student loans, but some forgiveness plans can cut years off of that timeline. Public Service Loan Forgiveness (PSLF) is a student loan repayment program that wipes out the remaining balances on federal student loans once an eligible borrower makes 10 years of qualifying payments.

While the potential to have your student loans forgiven is certainly appealing, participants in the PSLF program must meet a specific set of requirements to qualify, and eligibility is strict. Here’s what to know about the program and how to simplify the loan forgiveness process.

What is Public Service Loan Forgiveness?

Public Service Loan Forgiveness (PSLF) is a federally sponsored student loan forgiveness plan. The PSLF program forgives remaining student loan balances for borrowers in the Direct Loan program after 120 qualifying monthly payments under an income-driven repayment plan.

During the repayment period, participants in PSLF must work full time for a qualifying employer. Qualifying employers include U.S. government organizations (federal, state, local or tribal) and not-for-profit organizations with a valid 501(c)(3) status from the Internal Revenue Service.

Any federal student loan under the Direct Loan program can qualify for forgiveness under PSLF. Federal Family Education Loans (FFEL) and Perkins Loans aren’t eligible unless they’re consolidated into a Direct Consolidation Loan first.

How does it work?

To begin working toward PSLF, borrowers must meet all of the requirements for the program from the start. Eligibility requirements include:

  • Full-time employment with a qualifying employer.
  • The right type of student loans (Direct Loans).
  • Enrollment in an income-driven repayment plan before you begin making qualifying payments.

To ensure that you’re set up for success with PSLF, the U.S. Department of Education recommends filling out a PSLF and Temporary Expanded PSLF (TEPSLF) Certification and Application (PSLF Form) every year or each time you change employers. The Department of Education uses the information on this form to let you know if the payments you’re making are eligible to count toward PSLF. If not, you’ll have to take steps to get on track toward PSLF before you can begin making any progress.

Once you’re on track for PSLF, you’ll need to make 120 qualifying payments. Afterward, any remaining loan balances you have will be forgiven. Best of all, you don’t have to pay income taxes on forgiven loan amounts.

Why should I care?

If you have a considerable amount of student loan debt, Public Service Loan Forgiveness (PSLF) could potentially save you tens of thousands of dollars. PSLF might also knock years (or decades) off of your repayment timeline.

Of course, you’ll need to jump through a few hoops to qualify for this loan forgiveness, but the payoff can be well worth it if you can be flexible with where you work in order to get out of debt as quickly as possible.

Keep in mind that you can repay your student loans on an income-driven repayment plan without pursuing PSLF, which is a better option for people who don’t want to work in a public service job. However, you’ll make payments on your loans for 20 to 25 years before your loans are forgiven if you choose this option.

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 make 120 qualifying payments.

Employment

Qualifying employment means that you work for any U.S. 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 the Peace Corps.

Groups that do not count as qualifying employers include:

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

Next, you’ll need to work either 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

All Direct Loans qualify for Public Service Loan Forgiveness, but FFEL and Federal Perkins Loans do not. However, there is a workaround. If you consolidate either FFEL or Perkins Loans (or both) into a Direct Consolidation Loan, they might become eligible.

Private student loans, which often come with lower interest rates for those with excellent credit, are not eligible for PSLF.

Loans eligible for PSLF Loans not eligible for PSLF
Direct Loans Private student loans
Direct Consolidation Loans Federal Family Education Loans (FFEL)
Federal Perkins Loans

Qualifying payments

To be eligible for PSLF, you need to make at least 120 qualifying payments toward your student loans. As you make those payments, you must be enrolled in an income-driven repayment plan that bases your payment size on your monthly income. The four most common income-driven repayment plans are:

  • Revised Pay As You Earn Repayment Plan (REPAYE Plan).
  • Pay As You Earn Repayment Plan (PAYE Plan).
  • Income-Based Repayment Plan (IBR Plan).
  • Income-Contingent Repayment Plan (ICR Plan).

If you consolidate ineligible loans into a Direct Consolidation Loan, only the payments you make toward that loan will count for PSLF purposes. Payments made prior to consolidation aren’t eligible.

It’s also important to point out that your payments don’t have to be consecutive to count toward PSLF qualification. If you work for a qualifying employer and later switch to a nonqualifying job, you will still get credit for the qualifying payments you already made. Later, if you start working for a new qualifying employer, you can pick up where you left off.

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.

Application

Once you’re ready, you can complete the PSLF application. You can submit this application after you’ve made 120 qualifying payments, but the Department of Education also recommends submitting the form as you’re working toward PSLF in order to complete your employer certification process. You should also submit the form annually or when you switch employers to make sure that you’re still on track for forgiveness.

You can either start the PSLF 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 with an explanation. 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.

What to watch out for

PSLF is an excellent loan forgiveness program for those who can make it work. However, a disproportionate amount of people who apply for PSLF do not qualify.

The numbers are startling when you take a closer look. According to the most recent data from the U.S. Department of Education, 227,382 borrowers have submitted PSLF applications. Yet only 6,493 of those applications were deemed eligible by the loan servicer. The other PSLF applications were deemed ineligible for various reasons, including:

  • Qualifying payments (59 percent).
  • Missing information (26 percent).
  • No eligible loans (11 percent).

With this data in mind, submitting an incomplete application or not meeting the specific criteria to qualify are the two primary mistakes to avoid when you apply for Public Service Student Loan Forgiveness. To avoid a snafu, the best thing you can do is fill out the PSLF and Temporary Expanded PSLF Certification & Application (PSLF Form) every year and any time you change employers. This form lets you verify that your payments are being counted toward PSLF, which can save you a lot of time and trouble in the future.

How does the coronavirus crisis affect PSLF?

In March of 2020, the Department of Education placed most federal student loans into a status of administrative forbearance. As a result, payments and interest have been put on hold for the majority of federal student loan borrowers.

The government also did a big favor for borrowers who are eligible to work toward PSLF (aka those with eligible loans who work for eligible employers). Each month during the administrative forbearance period, these borrowers may receive credit toward their 120 qualifying payments, even though no actual payment is required.

You should still submit a PSLF form during this period of federal student loan relief to verify that you’re working for an eligible employer — if your hours have been cut, you may not qualify during this time.

The bottom line

Public Service Loan Forgiveness can be 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 a PSLF form every year to see if you’re on track. If you’re not eligible, there are other forgiveness programs available that might be a better fit for you, including income-driven repayment plans.

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Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
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Student loans editor