Public Service Loan Forgiveness - Do You Qualify?

Though having some of your student loans forgiven might sound too good to be true, the Public Service Loan Forgiveness (PSLF) Program makes this dream possible for some qualifying borrowers. If you are eligible, you could potentially save thousands of dollars on your student loans.

Still, applying for public student loan forgiveness is far from simple, easy, or guaranteed. We’ve put together some FAQs and must-know information to help you learn more about the criteria for potential student loan forgiveness, whether you might qualify, and how to get started.

First of All…Is the Public Service Loan Forgiveness (PSLF) Program Ending?

Not yet. However, the PROSPER Act, which was introduced in the House of Representatives in February of 2018, proposes to eliminate PSLF. This and other potential threats to federal student loan forgiveness may be discouraging. However, that doesn’t mean you shouldn’t keep working toward loan forgiveness for the time being, as long as it makes sense for your personal and financial situation.

How Does Loan Forgiveness Work?

The Public Service Loan Forgiveness (PSLF) Program was designed to offer some debt relief to students who work full-time in public service. In a nutshell, you may be eligible to have the remainder of your federal Direct Loans forgiven after you have made 120 qualifying monthly payments under a qualifying repayment plan, while working for an approved employer.

How Do You Qualify for Student Loan Forgiveness?

There are a few major criteria for potentially having the balance of your federal Direct Loans forgiven. They include:

  1. Your employer. It doesn’t matter what job functions you perform, as long as you work for a qualifying employer. (We’ll learn more about qualifying employers later.)
  2. Whether or not you work full time. You must either meet your employer’s definition of full-time employment or work at least 30 hours per week, whichever is greater.
  3. What kind of loan you have. Only non-defaulted student loans borrowed under the William D. Ford Federal Direct Loan (Direct Loan) Program qualify for forgiveness. Private loans and other kinds of federal loans are not eligible.
  4. The number of qualifying payments you have made. You must make 120 qualifying payments before the balance of your loans is forgiven. Only payments made after Oct. 1, 2007 can be counted. (We’ll learn more about what counts as a qualifying payment, later.)
  5. Your repayment plan. Not all repayment plans qualify for the Public Service Loan Forgiveness Program. You’ll need to select an income-driven repayment plan, which bases your monthly payment on how much you earn.

What Counts as a Qualifying Employer for Public Student Loan Forgiveness?

There are all kinds of employers you might be able to work for, like the U.S. military, public schools, and many not-for-profit organizations. Let’s learn more about employers who count, and those who don’t.

Qualifying employers include the following:
  1. Government organizations at the federal, state, local, or tribal level
  2. Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
  3. Not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code may also qualify, if their primary function is to provide a qualifying public service, like education, emergency management, or public healthcare. Visit StudentAid.gov for the full list of qualifying services.  
  4. AmeriCorps or Peace Corps (You must be a full-time volunteer in one of these organizations. Other kinds of volunteer positions do not qualify.)

Employers who don’t qualify include the following:

  • Labor unions
  • Partisan political organizations
  • For-profit organizations
  • Not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code and do not provide a qualifying public service as their primary function
  • Government contractors

What Kinds of Student Loans May Qualify for Forgiveness?

The following loan types are eligible:

A word of warning about Federal Direct Consolidation Loans: If you begin making qualifying payments on a Direct Loan and later decide to consolidate it, you will lose credit for the payments you’ve made so far. You will have to start from the beginning and make 120 qualifying payments on your new Federal Direct Consolidation Loan.

What Counts as a Qualifying Payment?

You must make 120 qualifying monthly payments in order to be eligible for student loan forgiveness. Payments qualify when they have been paid:

  • After Oct. 1, 2007
  • Under a qualifying repayment plan
  • For the full amount due
  • No later than 15 days after the due date
  • While you are employed full-time by a qualifying employer

And, keep in mind that you cannot make qualifying payments while you are still in school, during your grace payment, or when your loan is in deferment or forbearance.

What Counts as a Qualifying Repayment Plan?

You must choose an income-driven repayment plan. These are plans that base the size of your monthly student loan payment on your income and family size. There are currently four types of income-driven repayment plan:

  • 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)

Each plan has different criteria, as well as potential pros and cons. Learn more about types of repayment plans.

I’m on My Way to Qualifying for Federal Student Loan Forgiveness. What’s My Next Step?

You’re working in public service. You’re making your payments on time. That’s awesome, but there are still some steps you need to take to make sure you are on the right track (and avoid an unpleasant surprise in the event your employer, payments, or repayment plan don’t qualify for PSLF).

Every year, and when you change employers, you should complete and submit the Employment Certification for Public Service Loan Forgiveness form. After the U.S. Department of Education receives your form, they will you let know if your employer is eligible, and whether you are making qualifying payments. Remember that if you don’t regularly submit these forms, you’ll be in the dark about whether you are successfully working toward loan forgiveness.

When Are Student Loans Forgiven?

After at least 120 months, or ten years, you can apply to have the remaining balance on your student loans forgiven. Once you have made your 120th qualifying monthly payment, you can submit a PSLF application (and hopefully celebrate the forgiveness of your remaining debt).  

It may take some time for your application to be processed. Remember, you must be working for a qualifying employer at the time you submit the application for forgiveness, as well as at the time the balance on your loan is forgiven.

Could Public Service Loan Forgiveness Be Ideal for You?

Public Service Loan Forgiveness is complicated, takes at least ten years, and isn’t the perfect fit for everyone. But, it could potentially save you some money and reward you for your valuable public service. It’s important to learn as much as you can about loan forgiveness and to be proactive in researching and documenting your steps as you work toward potential eligibility.