The opportunity to erase student debt is available through the Public Service Loan Forgiveness program for federal loan borrowers who work in public service fields. They can receive loan forgiveness by working for at least 10 years in qualifying fields, such as firefighting, teaching, military, government and nursing.
What is Public Service Loan Forgiveness?
Eligible borrowers have been sending in employment verification since the program began in 2007. Since it takes at least 10 years of payments to qualify for forgiveness, the first batch of eligible federal loan borrowers could submit an application to have their loans discharged this year, as of Oct. 1.
Your remaining federal loan balance will be forgiven if you work full time for a nonprofit or the government for at least 10 years. You’ll save the most money on Public Service Loan Forgiveness if you opted to repay your loans on an income-driven plan for those 10 years. Otherwise, on a standard repayment plan, you’ll likely have paid off the debt by the 10-year mark.
You’ll save the most money on PSLF if you opt to repay your loans on an income-driven plan for those 10 years.
As of March 23, 2018, borrowers on the extended or graduated repayment plans who were previously told they would not qualify for PSLF are eligible to apply through Temporary Expanded Public Service Loan Forgiveness. Contact your student loan servicer, the company that manages your federal loans, to let it know you’re interested in the program if you haven’t already — and to make sure you meet the rest of the qualifications. You will likely be able to submit an application by late May.
PSLF is worthwhile for graduates who plan to pursue a career in public service anyway, says Kristin Bhaumik, assistant director for special programs in the University of Michigan’s office of financial aid. “Ten years is a very long time for most people to plan out their future just for loan forgiveness,” she says.
Who qualifies for PSLF?
Eligibility in the program depends less on the type of work you do, and more on who your employer is. Qualifying employers include:
- Government organizations at any level
- Not-for-profit organizations that are 501(c)(3) tax-exempt
- AmeriCorps or Peace Corps
- Other types of not-for-profit organizations that are not 501(c)(3) tax-exempt if their primary function is to provide certain types of public services
You must be working full time with your qualifying employer, which amounts to at least 30 hours per week. If you work part time for two qualifying employers and your time equals at least 30 hours per week, you may be eligible.
To receive loan forgiveness, you also have to make at least 120 on-time qualifying payments on your loans, but they don’t have to be consecutive. Only the payments you make while you are employed full time with a qualifying employer will count. For example, if you make 120 payments, but 20 of those payments were made when you weren’t working full time for a qualifying employer, you’ll have to make an additional 20 payments while meeting the PSLF employment standard to be eligible for forgiveness.
To receive loan forgiveness, you have to make 120 on-time qualifying loan payments.
Employers that wouldn’t qualify include labor unions, partisan political organizations, for-profit organizations and for-profit government contractors.
Which loans are eligible for PSLF?
Only federal direct loans are eligible for the program, but you can consolidate other types of federal student loans to make them eligible for PSLF. Consider keeping your Perkins loans separate if you qualify for Perkins loan cancellation. Private student loans are not eligible for federal consolidation or forgiveness.
How to apply for PSLF
Let your loan servicer know you’re interested in the program and confirm that you qualify. The company will tell you if you must consolidate your loans to make them eligible and what initial paperwork you need to fill out.
You and your employer should fill out the employment certification form annually, or whenever you change jobs, to make sure you’re on track for forgiveness. Send the form to FedLoan Servicing, which oversees the program. You’re not required to submit the form every year, but it’s a good idea to do so for your records. You can also apply for forgiveness once you’re eligible and certify your employment retroactively.
The Public Service Loan Forgiveness application is available on the government student aid website. You can track how many qualifying payments you’ve made using FedLoan Servicing.
Unlike some other forgiveness programs, if approved for PSLF, you won’t owe taxes on the amount forgiven.
Consider potential changes to PSLF
The fate of Public Service Loan Forgiveness for future borrowers is often in flux. If you’re in high school or college now, keep tabs on legislative proposals that might affect the availability of the program in the future. If you’re already in repayment and are making progress toward PSLF, there’s no need to panic when you see headlines about the program’s potential elimination — you’re likely to be grandfathered in.