What You Need to Know About Public Service Loan Forgiveness

This federal program could erase your student debt, if you qualify

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It may be tough to attract recent graduates to certain professions like teaching, nursing, firefighting, nonprofit work, and the military. Many starting their careers would like to do these jobs, but they may not pay well or have few incentives. This is where Public Service Loan Forgiveness (PSLF) could play a part.

Back in 2007, President George W. Bush signed Public Service Loan Forgiveness into law, allowing those in qualifying jobs to have their federal student loan balances forgiven after making 10 years’ worth of payments.

Here’s what you need to know if you plan to take advantage of this program.

How to Qualify for Public Service Loan Forgiveness

The first cohort of those eligible for PSLF began applying in October 2017. However, as of June 2019, only around 1.1% of those who applied received forgiveness under the program.

Your application can be rejected if you don’t adhere to the strict guidelines. 

To qualify, you must have federal student loans—private student loans aren’t part of the program. Your loans must also be from the Direct program. Previous loans, such as those made under the Federal Family Education Loan (FFEL) program, aren’t eligible for PSLF.

If you have older loans that don’t qualify, you can consolidate them with a Direct Consolidation loan. However, realize that the 10-year clock resets from your student loan consolidation date. You won’t get credit for previous payments.

Finally, if you have Perkins loans, and hope for cancellation of those, keep them separate from your other federal loan consolidation. Perkins loans are eligible for 100% cancellation after at least five years of public service, so you can have those taken care of sooner.

Work That Qualifies You for PSLF

In order to receive Public Service Loan Forgiveness, you need to have a certain type of employer and work full-time for them. Employers that are generally eligible include:

  • Nonprofit organizations with 501(c)(3) status
  • Government organizations: federal, state, local, or tribal
  • The Peace Corps or AmeriCorps
  • Other nonprofits that have a primary purpose related to qualifying public service 

Full-time work equates to at least 30 hours a week for a qualifying employer. In some cases, you might still be eligible, even if you work two jobs—as long as both are for eligible employers and your hours add up to 30.

In order to create a record for the U.S. Department of Education (and yourself), fill out an employment certification form each year and send it to FedLoan Servicing. This creates a paper trail of your work history, which can make it easier to verify your work, and get your Public Service Loan Forgiveness approved faster.

Make 120 Qualifying Payments 

Finally, in order to receive PSLF, you need to make 120 qualifying payments. Qualifying payments are those that are:

  • No later than 15 days past your due date
  • For the full amount due
  • Made on or after Oct. 1, 2007
  • Made while working for a qualified employer
  • Made while on a qualifying repayment plan

You don’t have to make your payments consecutively, however. Maybe you make 50 payments with a qualifying job, quit, work someplace else for a couple years, and then start a new job that qualifies. The original payments still count for your total, and now you pick up where you left off.

As a result, you might take longer than 10 years to actually receive forgiveness. But once you make those 120 payments, you can fill out the application form.

It’s worth noting, however, that the best results for Public Service Loan Forgiveness come if you’re on an income-driven repayment plan. If you keep up with the Standard repayment plan, you’ll be finished in 10 years anyway—and won’t need the forgiveness. An income-driven repayment plan comes with lower payments that are considered qualifying, and you’ll likely end up paying for more than 10 years.

How to Apply

Applying for PSLF is fairly straightforward. Fill out and submit the Public Service Loan Forgiveness application provided by the U.S. Department of Education.

As part of the application, you’ll need to verify that your employers qualify. If you’ve been filling out the annual employment certification form, though, this is taken care of and you shouldn’t need to do it again.

Keeping up with the paperwork makes the whole process much easier.

You can review your qualifying payments each year using the National Student Loan Data System. You’ll see which loans you have, whether you’ve made your payments as agreed, and can verify where you stand. 

Once everything’s been submitted to FedLoan Servicing, you’ll need to wait for the application to be processed before the final decision.

Alternatives to Public Service Loan Forgiveness

If you don’t qualify for PSLF, you do have other options. Carefully consider them as you move forward, and see if there’s a way for you to reduce your student loan burden in other ways.

Participate in Other Loan Forgiveness Programs

Even if it’s not PSLF, you might be able to get a portion of your student loans forgiven with other programs. Check with state governments for separate programs, as well as military programs. Some organizations, like AmeriCorps, will pay off a portion of your student loans independent of PSLF. If you’re in a health services or teaching profession, there are numerous forgiveness programs available.

You might not have your entire remaining balance wiped out, but some forgiveness can go a long way toward helping you get rid of your student loan debt.

Stick With Income-Driven Repayment

Maybe you have a low-paying job that doesn’t quite meet the requirements of PSLF. You can still qualify for forgiveness on an income-driven plan. Depending on the plan, your remaining balance can be forgiven after 20 or 25 years. However, you need to be careful. With PSLF, you won’t be taxed on your canceled debt. You are taxed on the amount forgiven under income-driven repayment.

Refinance Your Student Loans

For those who make too much for income-driven repayment and just want to pay as little as possible and be done quickly, refinancing may be an option. You might be able to get a lower interest rate, and pay off your loans faster.

Realize, though, that if you refinance federal loans, you’re replacing them with a private loan. You’ll no longer be eligible for income-driven repayment or loan forgiveness. Plus, you’ll have to meet credit requirements.

The Bottom Line

Public Service Loan Forgiveness is meant to remove the disincentive to work in service jobs that don’t pay well. If you plan ahead and fulfill the requirements, you may be able to be free of student loan debt while doing a meaningful job you love.