Student loan forgiveness might sometimes seem too good to be true in this turmoil of an era of hefty student loans with repayment prolonging into another era. But there are legitimate ways to get forgiveness through free government programs.
Forgiveness is definitely achievable and is a fantastic option if you can make use of it, but this route does require you to do your due diligence on your loan situation on the front end to verify your eligibility to ultimately achieve forgiveness successfully. This is where technicalities do matter, and knowing your full loan situation is imperative.
Here we will talk about loan forgiveness for government employees, and how providing service in the public sector can help you be eligible for loan forgiveness.
Table of Contents
- What is loan forgiveness?
- Public Service Loan Forgiveness(PSLF) for Government Employees
- Important terminology
- Types of federal loans that qualify for PSLF
- How to apply?
- Documentation requirements
- PSLF Help Tool
- PSLF in the News
- Other options apart from Forgiveness
What is Loan Forgiveness?
The practice wherein the federal government cancels all or a part of an educational loan, under certain specific circumstances. This practice is termed as Loan Forgiveness. When the cancellation is done on a student loan then it is called student loan forgiveness. In order to qualify, you must either have performed volunteer work, military service, taught or practiced medicine in certain types of communities or have met other criteria specified by the forgiveness program.
The above option is only available to borrowers with federal student loans. Some programs have very specific requirements that make them difficult to qualify for, but income-driven repayment plans are open to most borrowers.
Loan Forgiveness Programs for Government Employees - Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program (PSLF) is a United States federal program that was created under the College Cost Reduction and Access Act of 2007 (CCRAA) designed to forgive student loan debt for employees of certain public and non-profit jobs to give them a way out.
This sounds like a fair-enough deal as all you have to do is work for the government or a non-profit organization for ten years and all your remaining federal student loans are theoretically forgiven, so long as you’ve made 120 qualifying timely monthly payments under a qualifying repayment plan, while working full-time for a qualifying employer/organization during those ten years.
Who is the target audience for PSLF?
This kind of program is specifically designed for students interested in pursuing a career in public service or to enter relatively low-paying careers like firefighting, teaching, government, nursing, public interest law, and the military.
For most borrowers, this means you’ll need to work for 10 years before receiving loan forgiveness from PSLF. It goes without saying that after those 10 years of repayment, the loan balance will become a lot smaller than it was when it has begun. But if a lot is owed in student loans, the forgiveness that comes from PSLF could be a huge financial relief.
Who are the participating agencies for PSLF?
As of March 31, 2019, fewer than 1% of applications (as reported by the Department of Education – 864 borrowers) for debt forgiveness have been approved.
Whether a federal agency provides loan repayment assistance is subject to the discretion of the individual agency. Participating agencies include:
the Agency for International Development (AID),
Government Accountability Office (GAO),
Government Printing Office (GPO),
National Aeronautics and Space Administration (NASA),
National Institutes of Health (NIH),
Office of Personnel Management (OPM),
Securities and Exchange Commission (SEC),
Small Business Administration (SBA),
U.S. Department of Commerce,
U.S. Department of Defense (DoD),
U.S. Department of Education,
U.S. Department of Health and Human Services (HHS),
U.S. Department of Homeland Security (DHS),
U.S. Department of Justice (DoJ),
U.S. Department of State,
U.S. Department of Veterans Affairs (VA) and
U.S. Geological Survey (USGS), among several dozen other federal agencies.
The U.S. Departments of Defense, Justice, and State collectively account for three-fifths of the federal government’s loan repayment assistance.
If you’re going after this program, make sure you understand each and every nook and corner of the Public Service Loan Forgiveness qualifications.
And for that purpose, to make it easier for you to make a decision, we have analyzed all the possible aspects to consider.
Worried about your tuition? Learn more about student loans
Glossary to get you Acquainted with PSLF (as per the official website)
1. Qualifying payments are separate, on-time, full monthly payments made on an eligible loan after October 1, 2007, under a qualifying repayment plan while employed full-time by a qualifying employer.
2. On-Time payment is a payment made no more than 15 days after the due date for the payment.
3. Eligible loans are loans made under the William D. Ford Federal Direct Loan (Direct Loan) Program that are not-defaulting.
4. A Qualifying employer includes the government, a not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code, or a private not-for-profit organization that provides certain public services. Serving in an AmeriCorps or Peace Corps position is also qualifying employment.
5. Government includes a Federal, State, local or Tribal government organization, agency or entity; a public child or family service agency; or a Tribal college or university.
6. A private not-for-profit organization is an organization that is not organized for profit, is not a labor union, is not a partisan political organization, and provides at least one of the following public services as its primary purpose:
public interest legal services,
early childhood education,
public service for individuals with disabilities and the elderly,
public library services,
school library services, or
- other school-based services.
7. AmeriCorps position means a position approved by the Corporation for National and Community Service under Section 123 of the National and Community Service Act of 1990 (42 U.S.C. 12573).
8. Peace Corps position means a full-time assignment under the Peace Corps Act as provided for under 22 U.S.C. 2504.
9. An employee means an individual who is hired and paid by the qualifying employer.
10. Full-time means working for one or more qualifying employers for the greater of:
(i) An annual average of at least 30 hours per week or, for a contractual or employment period of at least 8 months, an average of 30 hours per week; or
(ii) Unless the qualifying employment is with two or more employers, the number of hours th1e employer considers full time.
11. An authorized official is an official of a qualifying employer who has access to the borrower's employment or service records and is authorized by the employer to certify the employment status of the organization's employees or former employees or the service of AmeriCorps or Peace Corps volunteers.
12. Early childhood education includes licensed or regulated childcare, Head Start, and State-funded pre-kindergarten.
13. Law enforcement means crime prevention, control or reduction of crime, or the enforcement of criminal law.
14. Military service means service on behalf of the U. S. Armed Forces or the National Guard.
15. Public education includes services that provide educational enrichment or support directly to students or their families in a school or a school-like setting.
(i) Public interest legal services refer to legal services that are funded in whole or in part by a local, State, Federal, or Tribal government.
(ii) Public health includes nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics.
How to qualify for PSLF?
PSLF is a great option a borrower can go for, but it has a very approval rate. Here are the qualifications required for PSLF -
1. Work for a government agency or for certain types of non-profit organizations
Qualifying employment for the PSLF Program is not about the specific job that you do for your employer, that doesn’t primarily matter. Rather, it is about who your employer is.
Employment as a member of the U.S. Congress is not qualifying employment.
Members of Congress are not eligible for this student loan repayment program, just as they are not eligible for public service loan forgiveness. Congressional staff (but not interns), however, are eligible for these programs.
There is a $60,000 cap on loan forgiveness in the U.S. House of Representatives ($10,000 per year) and a $40,000 cap in the U.S. Senate ($6,000 per year).
2. Be an employee of a qualifying employer
You may physically perform your work at a qualifying or non-qualifying organization, as long as you are an employee of a qualifying employer. If you are working at the location of or with an organization under contract with your employer, the organization that hired and pays you must be a qualifying employer, not the organization where you perform your work.
3. Have Direct Loans (or consolidate other federal students loans to qualify)
Only Direct Loans are eligible for PSLF. If you borrowed before July 1, 2010, some or all of your loans may have been made under an older federal student loan program called the Federal Family Education Loan (FFEL) Program. Read more below about actions you can take to make your FFEL Program loans eligible for PSLF.
4. Repay your loans on an income-driven repayment plan (IDR)
A qualifying repayment plan generally includes all of the income-driven repayment (IDR) plans, and the 10-Year Standard Repayment Plan. However, so as to benefit from PSLF, you need to enter an IDR plan
Income-driven repayment plans are repayment plans for federal student loans which base your monthly payment on your income and family size, instead of your loan debt. These repayment plans are qualifying repayment plans for the purpose of PSLF, and are the best option for borrowers seeking PSLF.
IDR plans include
The revised pay as you earn (REPAYE) plan
The pay as you earn (PAYE) plan
The income-based repayment (IBR) plan
The income-contingent repayment (ICR) 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
The Standard Repayment Plan with a maximum 10-year repayment period and any other Direct Loan repayment plan if payments are at least equal to the monthly payment amount that would be required under the Standard Repayment Plan with a 10-year repayment period.You can make qualifying monthly payments only during periods when you are required to make a payment. Therefore, you cannot make a qualifying monthly payment while your loans are in
an in-school status
the grace period
a deferment or
If you wish to make qualifying payments, but you’re in a deferment or forbearance, you can contact your federal student loan servicer to waive the deferment or forbearance.
For details regarding repayment using an AmeriCorps Segal Education Award, or a Peace Corps transition payment, visit the website to understand the ins and outs included.
Learn more about IDR Plans
5. Make 120 qualifying payments
To qualify for PSLF, you must make 120 on-time, full, scheduled, separate monthly payments for a period of 10 years on your Direct Loans under a qualifying repayment plan after October 1, 2007. In such a way, the balance of the borrowers' eligible student loan is forgiven without any tax implications.
On-time payments are those that are received by your servicer no later than 15 days after the scheduled payment due date.
These 120 qualifying monthly payments need not be consecutive. For example, if you have a period of employment with a non-qualifying employer, you will not lose credit for prior qualifying payments you made.
Prepayments towards PSLF
If you make a monthly payment for more than the amount you are required to pay, you should keep in mind that you will anyways receive credit for only one payment per month, no matter how much is paid by you. It’s a wrong notion that you can qualify for PSLF faster by making larger payments. However, if you do want to pay more than your required monthly payment amount, you should contact your servicer and ask that the extra amount not be applied to cover future payments.
Otherwise, you may end up being paid ahead, and you can’t receive credit for a qualifying PSLF payment during a month when no payment is due. On the other hand, if you make a payment that is less than what you are required to pay for that month, that month's payment will not count as one of the required 120 qualifying payments.
In another case, if you make multiple, partial payments in a month and the total of those partial payments equals or exceeds the required full monthly payment amount, those payments will be counted as one qualifying payment.
If you were an AmeriCorps or Peace Corps volunteer, you may receive credit for making qualifying payments if you make a lump sum payment by using all or part of a Segal Education Award or Peace Corps transition payment.
The best way, though, to ensure that you are making on-time, complete payments is to sign up for automatic debit with your loan servicer.
6. It is to be noted that you must be employed full-time by your employer
Generally, you must meet your employer's definition of full-time. However, for PSLF purposes, that definition must be at least an annual average of 30 hours per week. For purposes of the full-time requirement, your qualifying employment at a 501(c)(3) organization or a not-for-profit organization does not include time spent participating in religious instruction, worship services, or any form of proselytizing.
If you are a teacher or in another position under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year's worth of employment.
Borrowers who are employed part-time
If you are employed in more than one qualifying part-time job simultaneously, you may meet the full-time employment requirement if you work a combined average of at least 30 hours per week with your employers.
Vacation or leave time provided by the employer or leave taken for a condition that is a qualifying reason for leave under the Family and Medical Leave Act of 1993, 29 U.S.C. 2612(a)(1) and (3) is equivalent to hours worked in qualifying employment.
Employment falling in the following categories qualifies for PSLF:
Government organizations at any level (federal, state, local, or tribal)
Private Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if they provide certain types of qualifying public services
Service in an AmeriCorps or Peace Corps position
Be that as it may, if you perform work of a religious nature as part of your job at a qualifying organization, that does not count toward the total hours
Who does not qualify for PSLF?
Government contractors will not qualify on the basis of their government contracts. Instead, they must independently be a qualifying employer.
Another example is the national labs. Employees at national labs such as a Department of Energy or National Nuclear Security Administration Lab, do not qualify on the basis of managing a lab for the government; rather, the managing entity of the lab must be a qualifying employer.
What are the private organizations that qualify for PSLF?
Furthermore, a private not-for-profit organization that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying organization if it provides certain specified public services.
These services include emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest legal services; early childhood education; public service for individuals with disabilities and the elderly.
The organization must not be a business organized for profit, a labor union, or a partisan political organization.
What Types of Federal Loans Qualify for PSLF?
Let us see further on which types of federal student loans qualify for PSLF.
There are only certain federal student loans that qualify, not all, so first and foremost, one should be sure that their loan meets the requirements.
Public Service Loan Forgiveness eligible loans are:
Federal Direct Subsidized Stafford/Direct loans
Federal Direct Unsubsidized Stafford/Direct loans
Federal Direct PLUS loans
Federal Direct consolidation loans
How to Apply for PSLF?
If you have made 120 qualifying payments, you should fill out and submit the PSLF application. Those interested in receiving PSLF should regularly submit the "Employment Certification Form" for PSLF. This form will be used by the Department of Education's contractor, FedLoan Servicing, to determine whether an individual's employment and payments qualify for the program.
You can use the PSLF Help Tool to assist you in starting the PSLF application that you will eventually print, complete, and submit
The PSLF application can also be downloaded wherein you must complete all sections on your own before submitting the same
Either way, the information provided on the form will be used to let you know if you are making qualifying PSLF payments. This will help you determine if you are on the right track as early as possible.
If you do not periodically submit the Employment Certification Form, then at the time you apply for forgiveness you will be required to submit an Employment Certification Form for each employer where you worked while making the required 120 qualifying monthly payments.
If you need help completing this form, call:
TTY: dial 711, then enter 800-699-2908.
Things to keep in mind when applying for PSLF
Even though the application process can prove to be draining at times, and sometimes a little stressful and confusing, leaving no inch for any mistake, we have compiled a summarized list of things that each one should learn, and remember.
When submitting the PSLF application, it's better to be as thorough as possible and includes a PSLF application for each qualifying employer.
The current process is a bit strenuous, and it is very much possible Congress will make it easier in the future especially looking at the woes of previous applicants, but for now, this seems to be what is required.
Immediately follow up with your loan servicer if you receive confusing or contradictory information
Immediately escalate disputes if your loan servicer does not address your concerns adequately (This can be done via management, in writing, or by filing complaints with the U.S. Dept. of Education's Ombudsman or FSA Feedback division)
Staying on track and keeping a record check of the program in details and your payments is very essential so as not to skip any vital step
Another requirement that seems to be tripping up many applicants is that only payments to federal loans that are already within an income-based repayment plan qualify. So if you’ve worked for the government for ten years, but many of your loans were from the private sector, then you might not qualify.
If you or your employer is unsure about any aspect of the program, consult the guide compiled by the Consumer Financial Protection Bureau for answers to your questions.
The Paperwork Involved in Applying for PSLF
Taking a glance at the first graduating class of PSLF recipients, the paperwork seems to be a major hurdle.
For instance, 25% of the 58,000 applications processed through March 31, 2019, 25% were denied due to missing or incomplete information on the applicants’ employment certification forms.
So it becomes a requirement to re-submit your Employment Certification Form every time you change jobs within the qualifying sector. Experts also recommend resubmitting your Employment Certification Form every other year, even if you’re at the same job, just to make sure you haven’t missed out on anything in terms of the paperwork involved. That will turn out to be a very sorry situation.
This form verifies that your employment is eligible under the program, and parts of it will need to be filled out by your employer. While submitting it on an annual basis isn’t a requirement, it is helpful for your servicer to track your eligibility.
Make sure to keep copies of your form each year. You should also keep copies of pay stubs and W-2 tax forms in case you need them for verification later.
Procedure after the Employment Certification Form has been received
The following actions are subsequently taken after the Employment Certification form has been received:
Employment Certification Form will be reviewed to ensure that it is complete and to determine whether your loans and employment qualify for the PSLF Program.
You will be notified if the form you submitted is incomplete or if we cannot determine, based on the information provided on the form, whether your employment qualifies. Additional information or documentation may be asked to be provided to help determine whether you were employed by a qualifying employer.
If we determine that your employer is not a qualifying employer, we will notify you that your employment does not qualify. If you believe there is additional information that would establish the eligibility of your employer, you will have the opportunity to provide that information.
If it is determined that you do not have eligible loan types, we will notify you that your loans do not qualify.
At the same time, if we determine that your loans and employment do qualify, we will notify you.
If we determine that your employment qualifies, and if some or all of your federal student loans that are owned by the U.S. Department of Education are not already serviced by FedLoan Servicing, those loans will be transferred to FedLoan Servicing. You will receive a notice if your loans are transferred.
If we determine that your employment qualifies, we will then review your payment history (including any payments you made to another federal loan servicer before your loans were transferred) to determine how many payments made during the period of employment certified on the Employment Certification Form are qualifying monthly payments for PSLF. We will then notify you of the total number of qualifying payments you have made, and how many payments you must still make before you can qualify for PSLF.
Here, bringing it to your notice that there is one exception to loan qualification -
If ineligible loans have been consolidated into a direct consolidation loan, then they will automatically become eligible. However, only payments made toward the new direct consolidation loan will count toward your 120 payments. As a result, you need to be careful with your qualifying payments.
The ten-year requirement for PSLF
Along the way, one of the hindrances most applicants face is that you have to work for a long ten years for a designated organization.
The crux here is that it’s important to consider both your long term earnings and your loans. If you know for sure that you’re interested in working in public service or for the government for the next ten years, signing up to participate in PSLF is a no-brainer. If you’re not sure, and you have a public service job, it may still make sense to sign up—so long as you don’t let the program limit your future job choices.
If your employer qualifies, he is required to fill out an Employment Certification Form to confirm its status. After sending the Employment Certification Form to FedLoan Servicing, the government contractor who oversees the PSLF program, your loans will be transferred to FedLoan moving forward.
This Employment Certification Form is available here :
All the applicants must duly note that there is no application fee to complete any forms associated with PSLF. You may be contacted by private companies that offer to help you apply for PSLF, for a fee. These companies have no affiliation with ED or ED's federal loan servicers, including FedLoan Servicing.
Public Service Loan Forgiveness (PSLF) Help Tool
The PSLF Help Tool will
help you understand more about the PSLF Program and what you need to do to participate and possibly have your loans forgiven;
help you assess whether your employer qualifies for PSLF;
help you assess whether your loans qualify for PSLF;
help you decide which PSLF form to submit; and
use the information we have about your federal student loans to explain other actions you should or must take if you want to receive PSLF.
At this time, the PSLF Help Tool doesn’t permit you or your employer to electronically sign the forms that the tool will generate for you. Therefore, to complete the PSLF Help Tool process, you will need to print the PDF document that the tool generates, sign it yourself, have your employer sign it, and then submit the form to FedLoan Servicing as instructed on the printed PDF document.
You can then easily avail the help tool available on the website – studentaid.ed.gov
Who should use the PSLF help tool?
Every borrower who is interested in participating in the PSLF Program should use this tool. After using this tool and submitting your Employment Certification Form (ECF), you should use this tool annually and also when you switch jobs to ensure you are staying on the right track. Once you believe you have made 120 (10 years) qualifying payments, you should use this tool again to complete your PSLF Application for Forgiveness .
PSLF in the News
Public Service Loan Forgiveness began in 2007, which means that the first batch of borrowers became eligible for relief in 2017.
But less than 1% of borrowers who have applied for PSLF have had their loans discharged as of March 2019, according to data from the Department of Education.
|Public Service Loan Forgiveness Program Data||As of 6/30/2018||As of 9/30/2018||As of 12/31/2018||As of 3/31/19|
|Borrowers submitting applications||28,081||41,221||53,749||73,554|
|Total applications submitted||32,601||49,669||65,500||86,006|
|Status of processed applications|
|Approved by PSLF servicer||289||423||610||864|
|Denied for not meeting program requirements||20,521||32,409||42,560||56,353|
|Denied for missing information||8,103||11,892||15,123||18,785|
|Status of loan discharge|
|Borrowers with discharges processed||96||206||338||518|
|Dollar value of loans discharged (in millions)||$5.52||$12.32||$21.13||$30.68|
Source: U.S. Department of Education Office of Federal Student Aid
2017 was the first year borrowers could potentially see balances forgiven when this program was enacted in 2007. Congress enacted the program with the goal of helping people pursue often low-paying government and public service jobs by allowing them to discharge the remainder of the federal student debt after 10 years.
What are the options apart from Loan Forgiveness?
And if PSLF doesn’t seem like such a good idea on closer inspection, then we have listed a few other options for you to check out for student loan forgiveness, as well as strategies to make repayment easier or cheaper, such as refinancing. You are definitely not alone if you don’t meet PSLF’s strict requirements. The other options available to you are:
1. Explore other paths to forgiveness
PSLF isn’t the only federal student loan forgiveness program although it’s one of the most popular. However, watch out for loan forgiveness scams.
2. Stay on an income-driven repayment
All four income-driven plans will forgive your remaining balance after 20 or 25 years, depending on the plan. However, unlike with PSLF, the forgiven amount is not tax-free.
3. Consider refinancing
Student loan refinancing can save you money and help you become debt-free faster by lowering your interest rate. However, once you refinance federal loans, they’re no longer eligible for forgiveness programs or income-driven repayment so think vigilantly before finalizing any decision. Nevertheless, you need stable finances and good credit to qualify.
To put it in easy words, PSLF really is "for real" and can work. But it is not an easy process, nor is it stress-free. So if you are on track for PSLF and nearing your 120th payment, buckle up. And if it works out as it has for many others, it is a relief long remembered whose sigh is audible to us as well.
The Public Service Loan Forgiveness program has proven to be a great lifeline for millions of student loan borrowers working in traditionally lower-paying, high-need fields in positions that often require a college or graduate degree.
PSLF is not a waste of time – due diligence is key. Off late, the media has done quite a job scaring people out of trusting that PSLF program will do what its designed for – provide loan forgiveness for public service employee borrowers by having their remaining loan balances written off after 10 years.
This program is most valuable if you have high loan balances relative to your salary. If your loan balances are low, however, then it’s unlikely that you’ll have much of your debt remaining to be forgiven after a decade has passed. Likewise, if you earn a lot and don’t qualify for reduced payments, you might have already paid off most or all of your loans in 10 years.
Along with crunching the numbers, don’t forget to take your career plans into account. If you’re drawn to a career in public service, this program could be the right move. On the other hand, it’s also not worth committing a decade of your life to a career path that’s not the right fit just for the sake of loan forgiveness.