What to know about Public Service Loan Forgiveness (PSLF)

Public Service Loan Forgiveness (PSLF) is a federal student loan forgiveness plan. The PSLF program forgives remaining student loan balances for borrowers in the Direct Loan program after 120 qualifying monthly payments under an income-driven repayment (IDR) plan.

During the repayment period, participants in PSLF must work full-time for a qualifying employer. Qualifying employers include U.S. government organizations (federal, state, local or tribal) and not-for-profit organizations with a valid 501(c)(3) status from the Internal Revenue Service.

If you qualify, this program can save hundreds or thousands of dollars on your student loans, so it is worth finding out if you are eligible.

How PSLF works

To begin working toward PSLF, borrowers must meet all of the requirements for the program from the start.

To ensure that you’re set up for success with PSLF, the U.S. Department of Education recommends filling out a PSLF and Temporary Expanded PSLF (TEPSLF) Certification and Application (PSLF Form) every year or each time you change employers. Both forms are included on the same application, which can be found on the Education Department’s website.

The Department of Education uses the information on this form to let you know if the payments you’re making are eligible to count toward PSLF. If not, you’ll have to take steps to get on track toward PSLF before you can begin making any progress.

Once you’re on track for PSLF and qualify for the program, you’ll need to make 120 qualifying payments. Afterward, any remaining loan balances you have will be forgiven. Best of all, you don’t have to pay income taxes on forgiven loan amounts.

Why PSLF can be beneficial for borrowers

If you have a considerable amount of student loan debt, Public Service Loan Forgiveness could potentially save you tens of thousands of dollars. PSLF might also knock years (or decades) off of your repayment timeline.

Keep in mind that you can repay your student loans on an income-driven repayment plan without pursuing PSLF, which is a better option for people who don’t meet the career requirements. Under the IDR plan, your monthly payments will be adjusted based on your annual income and family size, but you’ll make payments on your loans for 20 to 25 years before your loans are forgiven.

How to qualify for Public Service Loan Forgiveness

Before your loans are forgiven, check to see if you qualify for PSLF. You’ll need to work full time for a qualifying employer, have Direct Loans under an income-driven repayment plan and make 120 qualifying payments to get the remainder of your loans forgiven.

Employment

Qualifying employment means that you work for any U.S. government agency at the federal, state, local or tribal level. You can also work for 501(c)(3) nonprofit organizations or volunteer for AmeriCorps or the Peace Corps.

Groups that do not count as qualifying employers include:

• For-profit organizations, even if those organizations are government contractors.
• Partisan political groups and organizations.
• Labor unions.

You’ll need to work either as a full-time employee or at least 30 hours per week (whichever is greater). You may qualify if you work multiple qualifying part-time jobs as long as you average at least 30 hours per week with your employers.

Qualifying loans

All federal Direct Loans qualify for Public Service Loan Forgiveness, but FFEL and Federal Perkins Loans do not. However, there is a workaround. If you consolidate either FFEL or Perkins Loans (or both) into a Direct Consolidation Loan, they might become eligible. Private student loans aren’t eligible for PSLF.

Qualifying payments

To be eligible for PSLF, you need to make at least 120 qualifying payments toward your student loans. Typically, as you make those payments, you must be enrolled in an income-driven repayment (IDR) plan that bases your payment size on your monthly income.

The Biden administration is temporarily allowing otherwise-qualifying payments made toward Perkins Loans and FFEL loans to be counted. However, the borrower must consolidate to an eligible loan type by June 30, 2024.

The four most common IDR plans are:

• 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).

Your payments don’t have to be consecutive to count toward PSLF qualification. If you work for a qualifying employer and later switch to a nonqualifying job, you will still get credit for the qualifying payments you already made. Later, if you start working for a new qualifying employer, you can pick up where you left off.

Qualifying monthly payments must:

• Start after Oct. 1, 2007.
• Total at least the full amount due on your monthly bill.
• Be made on time (or not more than 15 days after your due date).
• Be made while working full-time at a qualified employer.

You can’t make qualified payments while you’re in school, during the grace period or during deferment or forbearance. Additionally, making higher monthly payments won’t make you qualify for PSLF sooner.

How to apply for PSLF

First, you need to complete the PSLF application. You can submit this application after you’ve made 120 qualifying payments. However, the Department of Education recommends instead submitting the form while you’re working toward PSLF to complete your employer certification process.

Make sure you continue making payments while your application is being processed. If you get approved after making the 120 payments and have overpaid, you’ll be refunded for the qualifying payments.

You should also submit the form annually or when you switch employers to ensure you’re still on track for forgiveness. You can either start the PSLF form online or download a copy to fill out by hand. In both cases, your employer must provide verification.

If your application is approved, you’ll be notified that the remaining principal and interest balance on your student loans is forgiven.

If your application is denied, you’ll get a notification with an explanation. For instance, if you didn’t work for a qualifying employer or didn’t make qualifying payments, you could face PSLF rejection.

How to avoid mistakes when applying for PSLF

PSLF is an excellent loan forgiveness program for those who can make it work. A disproportionate amount of people who applied for PSLF in the past were not cleared for forgiveness, which was why the temporary waiver was implemented.

Many PSLF applications were previously deemed ineligible for forgiveness based on various reasons. Common reasons for rejection included ineligible payments, missing information on the application or loans that were ineligible to begin with.

To increase your chances of approval, the best thing you can do is apply and fill out the PSLF and Temporary Expanded PSLF Certification & Application (PSLF Form) every year and any time you change employers. This form lets you verify that your payments are being counted toward PSLF. Be sure to include all required information for your employer, including an Employer Identification Number (EIN).

Another smart step is to keep your application information and employment dates consistent from year to year. Also, maintain a track record of on-time payments through a qualifying repayment plan.

The bottom line

Public Service Loan Forgiveness can be a great option for public service workers who are looking to get some of their student loans forgiven. Not everyone qualifies, but you can complete a PSLF form annually to see if you’re on track. If you’re not eligible, there are other forgiveness programs and repayment options available through the federal government that you may be able to take advantage of.