Public Service Loan Forgiveness (PSLF) is, without a doubt, the most popular and effective Federal Student Loan Forgiveness Program out there. The proposed 2020 budget announced by President Trump in March of 2019, may bring about significant changes to the federal student aid program.
Through this article, it aims to familiarize readers with the brass tacks of PSLF. The article will also discuss how and why you should get enrolled in the program as soon as possible.
Why is Public Service Loan Forgiveness that significant? Well, PSLF provides complete federal loan forgiveness advantages in exchange for being eligible for a work in public service. In other words, this program enables you to clear your federal student loan debt by working in a public service sector for ten years. Bear in mind that these fields may include nursing, Government positions, teaching, etc.
In a nutshell, Public Service Loan Forgiveness Program is the best method for getting free of your federal student loan without repaying a cent back.
PSLF is indeed a simple program. To benefit from it, you have to agree to work in an eligible public sector job. At the same time, you should make monthly loan payments on time for ten years. Once these requirements are met, the Federal Government will cancel the rest of your loan balance.
In my opinion, the best side of PSLF is you do not have to pay for your loan debt in order to get free of it. On top of that, it is not difficult to qualify for this program. Here, your eligibility depends on your employment status. Also, you can work at a lot of various jobs through this program. That is why it is somewhat easy for you to benefit from this program.
To be eligible for PSLF, you should meet specific criteria. First and foremost, you must be employed in a public sector organization. Bear in mind that this work must be full-time work. Also, your federal loans should be direct loans. Any other types of federal loans should be consolidated to direct loans so that you qualify for PSLF. Further, keep in mind that you should make your payments under the income-driven plan. Lastly, you must make 120 loan payments to be eligible for PSLF.
One crucial nuance you should keep in mind regarding PSLF is not all loans qualify for it. You may dislike this idea, but it is what it is. Unfortunately, some of the very popular loans will not be eligible for the PSLF program.
The loans that are eligible for PSLF are the ones that are included in the Federal Direct Loan program. Unfortunately, if you got your loan under programs, such as the Perkins loan program, Stafford loan program, or others., you will not be able to benefit from PSLF.
But do not get discouraged so quickly. There is still good news for you. If your loans do not allow you to qualify for PSLF, you can consolidate your loans under the Federal Direct Loan program. By this, you will already be able to benefit from PSLF, as well. It is worth mentioning that, only the payments you made after consolidation will be counted as eligible for PSLF. So, after consolidation, you must make 120 payments to qualify for PSLF.
There are some considerations that you should pay attention to when making monthly payments. Otherwise, the payments you make may not count towards PSLF.
The first nuance is on-time payments. You have to make your payments on time in order to make those payments count. If you pay the monthly debt within 15 days from the pre-scheduled payments due date, they will count towards PSLF.
The second point you should take into account is the amount of payment. You have to make full payments every month so that they count. Any payment that is equal to or more than the amount you have to make each month is complete payment. In case you make a payment, which is less than the amount shown in your payback schedule, then that payment will not be considered eligible for PSLF. Nonetheless, if you make multiple payments during a month, the total of which equates or surpasses the demanded monthly payment, you still get credit for one payment. Also, note that you should not try to trick the system by making multiple payments in order to get credit for more payments. The maximum number of credits that you can receive for a month on account of payments, is one.
The last aspect you should be careful with is that your payments have to be scheduled. It means the payments you make should come under any of the income-driven plans. In case you make a payment when your loan is still in the grace period, or in-school status, they will not count as PSLF payments. Further, if you make payments when your loans are under forbearance or deferment period, it will still make you worse off. Beware of the importance of not making this mistake.
Another important aspect regarding qualifying payments is they should be made each month separately. You cannot make a lump-sum payment or make payments for the upcoming months that are unbilled yet. Bear in mind that such payments will not count towards your Public Service Loan Forgiveness payments.
You should also know that there can be two exceptions where you can make lump-sum payments. For this, you should be a part of either the Peace Corps or Americorps. Unfortunately, I cannot give you more information on this as only your employer would have more details to give you. If you work at either of the organizations mentioned above, you can try your chance.
The only payments that will qualify to PSLF are the ones that you make while working in a public service entity. Moreover, you should also be a part of such an organization both when applying for PSLF and receiving forgiveness grants.
As mentioned earlier, to be eligible for the Public Service Loan Forgiveness program, your federal loan should be under one of the income-driven repayment plans. The plans include graduated payback, extended payback, income-based payback, income-contingent payback, pay as you earn (PAYE), and revised pay as you earn (REPAYE).
Your repayment amount is typically small in the graduated payback plan, and it rises every two years. It has been designed in such a way so that you can finish paying back the total amount for ten years.
As explained by its name, in an extended payback plan, your repayment duration is prolonged. You may repay your loan debt in 25 years with this plan.
The income-based repayment plan is the next one that you can use to pay back your student loan debt. Here, your eligibility hinges on two factors; these are your income and debt amount. Depending on these two factors, you will have to spend 10-15 percent of your discretionary income on federal loan repayment. Bear in mind that in this plan, repayment duration will be 20-25 years.
In the income-contingent plan, the decisive factors for your repayment are your income, the number of people in your family, and tax filing status. You will have two options in terms of compensation. It is either paying back the full amount in 12 years, or repaying 20% of your discretionary income. You can go for whatever suits you best.
The last two options in terms of income-driven repayment plans are pay as you earn and revised pay as you earn. In Pay as you Earn Plan, your qualification will depend on your income and the amount of debt you owe. If you are found eligible, you will have to spend 10% of your discretionary revenue for payback. Also, your repayment duration will be 20 years. Likewise, you will have the same requirements in the revised Pay as you Earn Plan. The only difference will be the duration of payback, which will happen to be 25 years.
You should know that paying back your loan can cause you to lose the benefit of PSLF. For instance, if you decide to repay your loan debt under income-driven plans, and pay more than the required amount during some months never missing a single payment, you can end up paying the entire loan amount. As a result, there will be no remaining debt amount that would make you better off through PSLF. In such a case, there will be no sense of applying Public Service Loan Forgiveness Program.
You should carefully check how much money you should pay every month. Also, do not forget to check how much debt the amount is left after every monthly payment. Paying attention to these details consistently, will tell you whether you get any benefit of PSLF.
Further, you should be sure that you are eager to stay in a public service organization for ten years. Do not forget that this is a must-requirement for you to benefit from Public Service Loan Forgiveness. You do not want to lose the benefit just because of leaving halfway. So, think wisely before making a decision.
Some cases may differ depending on the factors that affect your eligibility for income-driven plans. But I strongly advise you to choose PAYE or REPAYE plan. Just remember that you aim to benefit as much as possible from Public Service Loan Forgiveness. And as you are already aware, making payments without analyzing the situation can deprive you of the PSLF benefits.
In PAYE and REPAYE plans, you will have to pay 10% of your discretionary income for your loan debts. And you will have to make these payments for 20 and 25 years respectively. It means you can pay less for a duration of ten years when being in the PSLF program. To make things more transparent, just think that you are enrolled in the PAYE plan right when you start working at a PSLF qualifying work. If you do this, instead of making monthly payments for 20 years, you will have to make the same amount of payments for ten years. As a result, you will benefit immensely from the PSLF program.
But do not let the above fact disappoint you. Even though leaving a qualifying position would erase the entire potential benefit you would get, you can hop in and out at times. For example, you can work in a qualifying job for some years and make 60 qualifying payments. Then you can leave and get engaged in something that does not qualify you for PSLF. Note that the payments you make in this duration will not count for PSLF. But when you again go to another qualifying position, your payments will start counting for PSLF. And once you make the remaining 60 counting payments, you will get rid of your federal loan. That said, you do not want to do that. As mentioned above, your payments when working in a non-eligible organization will not be considered qualifying payments for PSLF. What you want is to complete the qualifying 120 payments as soon as possible to get freedom from student loans.
Reading through this article, you should already know that not all jobs qualify for PSLF. But what are those that you can do to be eligible for Public Service Loan Forgiveness?
Well, the easiest way to benefit from PSLF is to work at a Government organization. If you work at any Governmental organization irrespective of your level and the type of organization, it should work. In other words, you can work at any Governmental agency, institution, or entity at any position. It will suffice for you to qualify for the PSLF program.
Another easy way to access PSLF is through not for profit organizations. However, such non-profit organizations should be tax-exempt by the Internal Revenue Service (IRS).
You can qualify for PSLF by working at some private entities that do not qualify for tax-exempt by IRS. For them to be eligible as qualifying organizations for PSLF, they should be involved in some particular type of public service.
The public services that count as qualifying work for PSLF are following:
Military service, public health services, public interest law services, public service for the elderly people, public service for people with disabilities, emergency management, public education services, school-based services, civil law or safety enforcement, and early childhood education.
There is also one condition that you should be aware of: Being a part of partisan political groupings or labor unions will not qualify you for PSLF benefits.
To be full-time employed, your employer should define you as a full-time employee in official documents. For instance, you may work for 45+ hours a week, yet may not be regarded as a full-time employee. In such cases, you will not qualify for PSLF benefits.
Furthermore, there are some other criteria you should meet to qualify for PSLF. When calculated on average per year, your weekly work hours should not be less than 30 hours. On top of that, these 30 hours cannot include any worship services or religious instruction.
Those working at public service entities on a weekly average of 30 hours for a minimum of 8 months with contracts, have to meet full-time standards, too. Such individuals have to get credit from their employers for a full year’s work. These nuances apply to teachers, also, who fulfill the same requirements.
Additionally, you can access PSLF through working at qualifying part-time jobs simultaneously. For this, you should complete 30 hours of combined work with eligible employers.
Also, working for an organization that has some relationship with religion will not count for accessing PSLF. Your tasks at work, the nature of your work, and all other factors do not make any difference as long as you are not part of a religious entity. That is why, as noted above, make sure you do not include any religion-related jobs to the list of PSLF qualifying jobs.
To monitor your qualification for PSLF, you will receive a Public Service Loan Forgiveness form from the Government. The form is also called Employment Certification form or Employment Certification for PSLF. To keep track of your progress, you need to download, print, fill it out, and submit the form. Submission of this form will provide you with the confirmation of your eligible employment and loan payments.
Ideally, you should submit this form once a year. But you can send it less frequently as well. What is essential is your Public Service Loan Forgiveness form has to contain all the necessary data covering the period. Another benefit of this form is it will prevent you from facing any types of problems while progressing towards your destination. That said, it is not mandatory to use this form. You will not receive any punishment if you do not use it. Yet it will help you become more organized along the way. More precisely, thanks to this form, you will know how many qualifications you have got and how much is left to reach the end of the PSLF journey. In a nutshell, it will help you get the PSLF benefit once you complete the payments and other requirements.
In case you do not want to submit this form, you will have to send separate forms for different employers asking for final clearance for PSLF. So, it may be useful through the entire process when it is easier to get the essential information.
I will make you acquainted with the exact steps that you should follow and get your Public Service Loan Forgiveness. The first thing you should do is fill out and submit Employment Certification for PSLF form to Fedloan Servicing. I recommend you to do it every year or every time you change jobs. By this, you will provide the Government with the credentials of your employer.
During the next step, Fedloan Servicing will review your form. They will check if your form has been filled properly. Also, when going through your form, they will come to a conclusion whether your employment makes you eligible for PSLF.
If your form is found to be incorrectly filled, Fedloan will inform you regarding that. They will give you another chance to fill out the form the correct way.
On some occasions, Fedloan Servicing will be unable to tell if you are eligible for PSLF or not. In such cases, they may ask you to provide some more documents proving that you indeed work in a qualifying organization. These can be an IRS form or some other materials that indicate you are part of the entity you have mentioned. The documents can also prove that your employer qualifies to be a public service organization.
When applying for PSLF, your loans should be serviced by Fedloan Servicing. In other words, your employment may qualify for PSLF, but it will not mean anything unless Fedloan services your loans. In this case, your loans that are not maintained by Fedloan at the moment will be transferred to Fedloan Servicing. As a result, a servicer will service all your loans. Once all your loans are in Fedloan, they will review all the payments you’ve made to other loan servicers in the past. Fedloan Servicing will check them to ensure they qualify as PSLF qualifying payments.
Finally, Fedloan will notify you whether your employment qualifies for PSLF. At the same time, they will tell you how many payments you have made that count. Likewise, you will know how many more payments are left for you to access the advantages of Public Service Loan Forgiveness.
Once you make the last – 120th payment, you should submit the PSLF application before the due date. Do not forget that you will have to be working for an eligible public service organization when submitting this application. You will also have to work in a qualified organization, and make 120 payments before even submitting this application. You will have to be working even after you submit. Unless the Federal Government will not provide you with forgiveness when they are in the process of reviewing your request. So, do not think of changing your workplace right away. You do not want to lose the entire benefit just because of a little impatience.
One of the best things about Public Service Loan Forgiveness is it does not add up to your taxable income. If you are not acquainted with it, let me make things more transparent. Many forgiveness programs cost you something in the end. It is because the Internal Revenue Service demands you to claim the forgiveness as “taxable income” the year you get it.
It would mean if you had $12,000 of the amount forgiven, you would have to add that amount to the taxable income for the same year. That is where most of the other forgiveness programs disappoint. Just imagine you have an amount of $70,000 forgiven, and $20,000 of it becomes taxable.
What deteriorates the situation is if the IRS demands that you pay the taxable amount as a lump sum. You cannot compare such a massive amount to small monthly payments that you make in student loans. Taxable income and the advantages of forgiveness programs are contradictory at best and ruthless at worst.
Public Service Loan Forgiveness is considered the most popular loan forgiveness program provided by the Federal Government. But is it really the ideal one for you? Well, in my humble opinion, it is. To make you more familiar, let’s get into the nuts and bolts of the program.
One of the ways to get your federal student loans forgiven is through permanent disability discharge (PDD). To be perfectly honest, it is something that I do not wish on anybody. You need to be totally and permanently disabled to benefit from this program. If you are really disabled and you think you are eligible for PDD, then you would need to show proof from one of three sources. These are:
By the way, you do not get your loans canceled right away when you show documentation from a physician. The physician should confirm that you have been physically or mentally impaired for at least 60 months. Or you should be expected to be in such a condition for at least 60 months in the future.
Long story short, there are many details here that you should prove even if you are truly disabled. Additionally, as you can see, it is impossible to get this forgiveness in normal conditions. I am sure that nobody would want to be disabled in order to get their loans forgiven. So, I believe you would accept that PSLF is comparably better than this method.
Teacher Loan Forgiveness is another forgiveness program that people can benefit from. Nonetheless, personally, I do not think it is as attainable and beneficial as Public Service Loan Forgiveness is. First, in the Teacher Loan Forgiveness program maximum of $17,500 can be forgiven. Apart from PSLF, you will be unable to get full forgiveness of your federal student loans. Second, it is not so easy to be eligible for this program. You should have previous teaching experience of five years. And that experience should be in a particular field. Also, you would have to teach in particular educational institutions, such as elementary school, secondary school, or an educational agency. Note that here you will be required to teach low-income students. Needless to say that you will not get a competitive salary package for this job.
To sum things up, this is not as desirable as an option as Permanent Disability Discharge. Yet it is not as good as PSLF either. To qualify, you should have previously worked as a teacher to be able to work as a teacher again. Further, a limited amount of your federal student loan will be forgiven different from Public Service Loan Forgiveness. Therefore, I firmly believe that PSLF is, without a doubt, the most ideal for everyone who targets to see forgiveness of their student loan debts.
Now you are aware of all the details of Public Service Loan Forgiveness. In addition to being the most ideal, it is also the most comfortable path towards loan forgiveness. It is also worth mentioning that President Trump was seeking to eliminate the forgiveness program in his 2020 budget announcement. But honestly, I do not think he will see this decision through. In 2018, there was much talk about the possible elimination of forgiveness programs, including PSLF, and that too never saw the light of day. For more information on student loans, I recommend you follow our site and be up-to-date on the latest news regarding student loans. If you liked this article, remember to share it with your friends.