Applying for Public Service Loan Forgiveness: 5 Tips for Success
Public Service Loan Forgiveness (PSLF) is a program that could eliminate some of your federal student loan debt if you meet all the requirements. This program was created to benefit individuals whose debt would be unaffordable without loan payments tied to income because they are working in lower-paying, but vitally important public sector jobs such government service or non-profit work.
There are some steps you can take to protect yourself from any surprises and set realistic expectations about how PSLF can work for you. Follow these five tips to better understand the program requirements and improve your overall PSLF experience.
There are several requirements you must meet to move toward your goal of receiving public service loan forgiveness. Before you plan on receiving PSLF, read all the requirements carefully to make sure you are eligible under each category (employer, loan type, repayment plan and qualifying payments).
This requirement is about who your employer is, not your job title. You must work full-time for a qualifying employer to be eligible for PSLF. You are generally considered to work full-time if you meet your employer’s definition of full-time which must be at least 30 hours per week.
Repayment Plan Requirements:
To benefit from PSLF, you are required to repay your federal student loans under an income-driven repayment (IDR) plan. If you’re on the 10-year Standard Repayment Plan you’ll have no balance left to forgive after you’ve made 120 qualifying payments. Income-driven repayment plans require you to update (or “recertify”) your income/family size each year.
If any payment doesn’t check all these boxes, it won’t count toward your 120 qualifying payments needed to receive PSLF. So stay on top of it. Your 120 qualifying payments don’t have to be consecutive. If there’s a period when you’re working for a nonqualifying employer, you won’t lose credit for the qualifying payments you made before that period.
You can’t make a qualifying payment while your loans are in any of these statuses: in-school status, the grace period, deferment or forbearance.
Overpayments can negatively impact and complicate your qualifying payment count.
You can’t qualify for PSLF faster by making larger payments. If you pay more than your required monthly payment amount, the extra amount you add may end up counting as pre-payment, instead of an overpayment. If that payment is applied to cover future payments, you can’t receive credit for a qualifying PSLF payment during a month when no payment is due.
Only non-defaulted federal Direct student loans are eligible for PSLF. If you borrowed before 2011, there’s a good chance that some or all of your federal student loans are not Direct Loans and would need to be consolidated to qualify.
To check what kind of loans you have, log in to “My Federal Student Aid” at StudentAid.gov/login.
FFEL and Perkins Loan borrowers: You must consolidate your loans in order to make qualifying payments. Any payments you made on the FFEL or Perkins Loans before you consolidated them don’t count.
Be aware that even though you may be working for a qualifying employer, other factors such as your salary, family size, and loan balance can impact your progress toward PSLF. For example, Nancy and Ben have the same employer but that doesn’t mean they both qualify for PSLF. Their different incomes and loan balances impact the amount eligible for forgiveness.
While you’re enrolled in one of our income-driven repayment plans, the amount you pay each month is determined by your income. If your income increases over the course of your public service career, this may impact your monthly payment and your eligibility to receive PSLF after making 120 qualifying payments.
Below is chart which estimates forgiveness amounts based on adjusted gross income and overall federal student loan balance:
These numbers are just estimates and not based off your loan interest rate.
The best way to validate if you’re on track for PSLF is by submitting an Employment Certification Form (ECF) every year or when you change employers.
The information you provide on the ECF determines if you are on the right track for forgiveness. If you’re not fulfilling a qualification for PSLF, further detail will be provided in a response letter.
Double check that your ECF has all the required fields completed and there are no inconsistencies!
After you make your 120th qualifying monthly payment, you will need to submit the PSLF application to receive loan forgiveness. You will not automatically receive PSLF after you’ve made 120 qualifying monthly payments.
If you leave your job at a qualifying employer after meeting the PSLF eligibility requirements but before you apply for loan forgiveness, you will not be eligible for forgiveness since you must be working for a qualifying employer at the time you apply for and receive forgiveness. However, you could regain eligibility if you later find full-time employment at another qualifying employer and then apply for loan forgiveness.
Loan amounts forgiven under the PSLF Program are not considered income by the Internal Revenue Service. Therefore, you may not have to pay federal income tax on the amount of your Direct Loans that is forgiven after you have made the 120 qualifying payments.
In case there are any discrepancies during the PSLF process, you’ll want to save all of your paperwork and communication related to your PSLF journey. Things such as copies of your Employment Certification Form, response letters from FedLoan Servicing, and employment documentation should be kept in a safe place.
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