Public Service Loan Forgiveness (PSLF) Guide

Overview

Imagine all your debt were gone—totally off your back forever. Sounds good, right? Public Service Loan Forgiveness (PSLF) could get you there, but you’ll need to meet a few requirements to make it happen. Let’s go over the basics of Public Service Loan Forgiveness to find out whether it could work for you.

What is Public Service Loan Forgiveness?
Public Service Loan Forgiveness (PSLF) is a government program designed to forgive the debts of borrowers working in public sector and non-profit careers after 10 years.

How does it work?
The PSLF program forgives the remaining balance on your federal Direct Loans after you’ve made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. We’ll go into more detail on what “qualifying” means for each of these elements below.

 

Eligibility

To be eligible for PSLF, you’ll need to meet all of the following requirements:

You have federal Direct Loans
Only federal Direct Stafford Loans qualify. Federal Family Education Loans (FFEL) and Perkins Loans do not qualify unless you consolidate them into a Direct Consolidation Loan.

  • If you consolidate your FFEL and/or Perkins Loans into a new Direct Consolidation Loan, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments that you need to be eligible for PSLF. Any payments you made on your FFEL or Perkins Loans before you consolidated them don’t count.
  • If you’re thinking of consolidating both Direct Loans and other types of federal student loans to take advantage of PSLF, it’s important to understand that consolidating your existing Direct Loans with the others will mean losing credit for any qualifying PSLF payments you made on your Direct Loans before consolidation. In this situation, you may want to exclude your existing Direct Loans from the consolidation and consolidate only your other federal student loans.

You’re employed by a qualifying public service employer

  • Qualifying public service employers include the government or a tax-exempt 501(c)(3) non-profit.
  • Your employer must consider you a full-time employee, or you must be working at least 30 hours a week.
  • Serving as a full-time AmeriCorps or Peace Corps volunteer counts as qualifying employment for PSLF.
  • If you work for one of these types of employers, you do not qualify for PSLF:
    • Labor unions
    • Partisan political organizations
    • For-profit organizations (including for-profit government contractors)
    • Non-profit organizations that aren’t tax-exempt under Section 501(c)(3) of the Internal Revenue Code and don’t provide a qualifying public service as their primary function

You’re enrolled in an income-driven repayment (IDR) plan (or a 10-year standard repayment plan that doesn’t end in debt forgiveness)

  • There are pros and cons to enrolling in an income-driven repayment (IDR) plan, so make sure you learn more about them in our IDR guide before enrolling. Here are the different kinds of income-driven repayment plans:
    • Revised Pay As You Earn (REPAYE)
    • Pay As You Earn (PAYE)
    • Income-Based Repayment (IBR)
    • Income-Contingent Repayment (ICR)
  • Although a 10-year standard repayment plan is a qualifying plan, you will not receive forgiveness unless you’re enrolled in an income-driven repayment plan. This is due to the fact that, under a 10-year repayment plan, you will have paid off your loan balance in 10 years. You should only stay in the 10-year standard repayment plan if you’re not sure whether you plan to work in the public or non-profit sector for 10 years but still want for your payments to count toward your 120 qualifying monthly payments.

You make 120 qualifying monthly payments

  • A qualifying payment is a payment that you made:
    • after Oct. 1, 2007;
    • under a qualifying repayment plan;
    • for the full amount due, as shown on your bill;
    • no later than 15 days after your due date; and
    • while you are employed full-time by a qualifying employer during periods you’re required to make a payment. You can’t make a qualifying payment while your loans are in an in-school status, or in the grace period, in deferment, or in forbearance
  • Your 120 qualifying monthly payments don’t have to be made consecutively. If there’s a period of time when you’re not working in the public sector, you won’t lose credit for prior qualifying payments.
  • In general, you can’t qualify for PSLF faster by making larger payments. There are some exceptions, though: if you’re a volunteer with AmeriCorps or the Peace Corps, you can use your Segal Education Award or Peace Corps transition payment to make a single “lump-sum” payment that may count for as many as 12 qualifying PSLF payments. If you have lump-sum payments made on your behalf under a student loan repayment program administered by the U.S. Department of Defense, you could also get credit for more than one qualifying PSLF payment.

 

Advantages and Disadvantages

Now you know whether you’re eligible for Public Service Loan Forgiveness, but is it right for you? Let’s break down the benefits and drawbacks of the program.

Advantages
Your loans are forgiven. After 10 years of working at a qualified public sector employer, your loans are completely forgiven. If you plan to work in the public or non-profit sector for at least 10 years, PSLF may be the cheapest way to take care of your loans. And the 10 years don’t even have to be consecutive, so if you switch to the private sector or take a couple years off, you can still qualify for PSLF.

Disadvantages
Relying on PSLF can limit your career options. To take advantage of PSLF, you’ll have to work in the public sector for 10 years, which could keep you from going after different types of jobs. Luckily, the 10 years in the public sector don’t need to be consecutive. You can still have your loans forgiven, as long as you make 120 monthly payments while you’re working full-time at a qualifying employer in the public sector and you’re working at a qualifying employer at the time the remaining balance on your loan is forgiven.

The future of the program is uncertain. PSLF is a federal program, so which way the political winds blow may affect whether the program is still around when your loans need to be forgiven. Our best guess, however, is that it will still be around. While we like to think that major changes to programs like these will be made in phases so that no one enrolled in the programs is hurt, it’s hard to know for certain if the program will be around to forgive your loans.

 

Apply

When to apply
If you’re a recent graduate, it’s best to apply after you’ve made at least one payment on your loan. Otherwise, you can apply whenever works for you.

How to apply
To apply, just fill out and submit the employment certification form by using our tool.

  • Submitting the form is a way to check that you’re actually eligible for PSLF. If you’re not eligible, the Department of Education will let you know the reasons why.

You need to submit this form each year and every time you switch employers to make sure your employment is verified and counted. It’s a good idea to set a recurring calendar reminder to make sure you submit you the form every year.

Getting loan forgiveness
After you make your 120th qualifying monthly payment, celebrate! After that, you’ll need to submit the PSLF application to have your loans forgiven.

  • Note that this is different from the previous employment certification form that you have been filling out.
  • You’ll have to be working for a qualifying employer in the public sector when you submit your application for forgiveness and at the time the remaining balance on your loan is forgiven.
  • The IRS doesn’t consider the amount forgiven under the PSLF program to be income, so you won’t have to pay income tax on the amount of your loans forgiven.