Public Service Loan Forgiveness eliminates student loans once the borrowers make 120 qualifying payments. However, the program ended up being more complex than expected. Around 99% of applicants failed to get forgiveness when they finally applied after at least ten years of the repayment period. Common failure reasons include lack of qualifying payments, ineligible loans, and employment, or missing information.
Hence, borrowers need to be aware of Public Service Loan Forgiveness details before applying to avoid failure. Unfortunately, this program has an extensive list of requirements which makes it hard to understand. This guide highlights 16 things to consider before applying for PSLF to maximize applicants’ chance for forgiveness.
What is Public Service Loan Forgiveness?
Before highlighting essential details, first, let’s understand what the Public Service Loan Forgiveness is.
PSLF is one of the forgiveness opportunities provided by the federal government for federal loans. It covers Direct loans. Unfortunately, it is not possible to forgive your FFEL, Perkins, or private student loans. However, in some cases, consolidation can help to become eligible.
PSLF benefits borrowers serving in public organizations- federal, local, state, tribal organizations, and non-profit establishments. The general rule is that if you make 120 payments while serving in public jobs, you will get rid of the remaining debt. Hence, it will take a minimum of 10 years to eliminate your student loans.
It is possible to work part-time and full-time for this program. However, in the case of part-time work, you need to serve in more than one position. In this way, you can fulfill the full-time job requirement.
All your payments should be made on time, in total amount, and under Income-driven repayment plans. You can submit an Employment Certification Form regularly to get your payments checked and counted. In this way, you will be informed about your progress. In case of any problems like miscounting, you will also detect the problem quickly.
Submit Employment Form Regularly
The 120 qualifying payment period is extended. It takes at least ten years for borrowers to qualify for Public Service Loan Forgiveness. Through this period, the borrowers can change employment several times. Besides, it can be hard to monitor all the payments and ensure the debtors are on the right track.
The employment form or PSLF form aims to ease this process. Once you submit the employment form, the loan servicer checks your progress. If there is anything wrong with your progress, you will be informed. It is advisable to submit this information:
- When you get your first public job
- Annually from that time
- When you change employer
If you miss the submission of forms, you will not lose eligibility. Instead, you will be required to submit one form per qualifying employment at the time of application. However, the risk of non-submission is that you will not be informed about progress. Besides, if you are on the wrong track, then you will discover that the payments you made do not count after a long time. So, submit employment forms regularly to avoid all these risks.
Common Mistakes on Certification
Sometimes borrowers submit an Employment Certification Form, but these forms get rejected. There exist several reasons why rejection might occur.
First, many borrowers miss providing necessary information such as the Employer’s Identification Number. This information can be found on the Tax Statement. Before submission, make sure you include all essential details.
Next, borrowers can provide inconsistent information. What you put in your previous certification should match the following ones. For example, one of the typical inconsistencies is the employment start date. Make sure all information matches.
Additionally, when corrections are necessary, you need to be careful. The person who makes corrections should put initials after the change. It can be the borrower or the employer changing the information. Besides, each certification form should include a signature from an authorized person. This person can be someone from Human Resources. If you are not sure, ask your employer.
Consolidation can be Necessary.
Public Service Loan Forgiveness only covers Direct loans. Therefore, if you have other types of loans, such as Perkins and Federal Family Education Loans, those will not qualify for the forgiveness. However, you might become eligible if you consolidate your loans. Consolidation happens when several loans are grouped together into a single loan.
Keep in mind that your payments before consolidation will not qualify to 120 payment requirements when you consolidate a loan. For example, let’s say you make ten payments before loan consolidation. None of them will be included once you consolidate the loans. Therefore, you have to make sure that your loans are consolidated before starting repayment. You can also check the Help Tool to identify if you need consolidation.
Income-Driven Repayment is a Must
One of the main mistakes Public Service Loan Forgiveness applicants make is enrolling in the wrong repayment plan. Your payments will only count for 120 payment requirements if you repay under Income-driven repayment plans. Sure, Standard repayment also qualifies, but it eliminates your debt in 10 years. So, even before you need to apply for PSLF, your debt will be gone.
Income-driven repayment plans have different categories. For example, you can choose to Pay as You Earn, Income-based, Income-contingent, etc., to make plans that fit your budget.
In general, Income-driven repayment plans are based on your earning level and family size. Hence, those are the most affordable repayment plans available to borrowers.
Recertification of Income-Driven Repayment Plan
Borrowers should also be informed that Income-driven repayment requires recertification every year. You need to submit information regarding your income and family size each year to get your payments calculated. This process is necessary because your family size can get larger, or your income level might change.
Not recertifying Income-driven plans can result in losing the eligibility for these repayment options. Hence, your payments will not qualify for Public Service Loan Forgiveness. Therefore, keep in contact with your loan servicer so that you do not miss the recertification deadline.
TEPSLF, or Temporary Expanded Public Service Loan Forgiveness, is available to borrowers who fail PSLF. However, with one condition- you should fail only because one or more of your payments were made with the wrong repayment plan. In this case, borrowers can apply for TEPSLF and still get forgiveness.
Yet, the funding for this program is limited. In 2018, Congress allocated a $350 million budget for borrowers who failed because of a wrong repayment plan. If you act fast, you can get forgiveness. But, once the budget ends, you will not be able to apply for this opportunity.
Still, we would advise you to check if your repayment plan is eligible for forgiveness from the very beginning.
Deferment does not Help.
Student loan forbearance or deferment helps borrowers to stop repayment for several months. If you apply for forbearance, you do not make payments, but the interest continues to accumulate. Another disadvantage of such a non-repayment period is that these months will not count for 120 qualifying payment requirements. Hence, you will achieve Public Service Loan Forgiveness in more than ten years.
So, we have two recommendations for you. First, if you struggle with repayment, contact your loan servicer. Income-driven repayment plans are extremely affordable. However, its Income-based repayment option can be more suitable. Hence, ask your lender if a different type of Income-driven plan can be more affordable for you.
Second, even if deferment is available, such as when you are still in graduate studies, you can ask to waive this benefit. In this way, you can make payments and progress toward the PSLF.
Keep in mind that current loan forbearance due to COVID-19 is an exception. You are not required to make payments till 2022, but these months still count for PSLF. So, you do not need to worry about losing time.
No Sooner Qualification
One of the main disadvantages of Public Service Loan Forgiveness is that it takes a long time. While programs like Teacher Loan Forgiveness require only five years, PSLF is granted in a minimum of 10 years.
Some borrowers want to shorten this period. Hence, they think that if they make payments in higher amounts, they might qualify sooner. However, this method does not work.
Let’s say your monthly payment is $100. If you make a $100 payment per month, you get one credit toward 120 qualifying payments. If you make $200 in one month, you will still get one credit. However, the excess of the required amount will apply to the next month. Hence, you do not need to make payments next month. Yet, you will receive one more credit when it’s time for payment (which you do not need to make) during next month. So, do not try to get qualified sooner as there is no way for it.
When applying for forgiveness, many borrowers are concerned about taxability. For example, imagine you pay 10% income tax. If you get forgiveness for $20,000, you will be required to pay an additional $2,000 as income tax which can be prohibitive for many borrowers.
Luckily, you do not need to pay income tax for any debt amount canceled through Public Service Loan Forgiveness. PSLF is not a taxable income under Internal Revenue Code.
No Consecutive Payments
Public Service Loan Forgiveness is applicable for borrowers who work in the public sector. Jobs in federal, state, local, tribal, or non-profit organizations make borrowers eligible. Besides, during the progress period, you need to be working for a qualifying employer at the time of application.
Yet, you do not need to work for a single employer for at least ten years. You can change your employers several times. However, make sure you submit employment certification so that the loan servicer is informed about the change.
Additionally, your payments do not require to be consecutive. For example, after making 60 payments, you can start working for a private organization. Then, your progress for PSLF will be stopped. Your following payments will not count for forgiveness. Moreover, you will not lose your earned credits toward 120 credits. Once you find another job with qualifying employment, your progress will resume, and you will make the 61st payment.
Only Qualifying Payments
What makes Public Service Loan Forgiveness hard to achieve is its extensive eligibility requirement. Even a payment requirement has several conditions. Besides that, you need to check factors for qualifying employers and loans. So, the process is confusing.
As said before, 120 qualifying payments are required before applying for forgiveness. These payments should be made on time- within 15 days. Moreover, you need to pay the total amount you see on the bill.
Keep in mind that only payments after 2007 October are counted. Unfortunately, it is one of the main failure reasons because people assume that their payments before 2007 are also counted.
Additionally, all payments should be made with Income-driven repayment plans. You can choose any type of Income-driven repayment. If you fail, you can still apply for TEPSLF, but as mentioned, it has a limited funding option.
Besides, you need to be working for a qualifying employer throughout the whole repayment period. Sure, you can change employers or work for an ineligible employer for some time. However, 120 payments will be achieved only with qualifying employers. In addition, even when you are done with repayment, you need to work with an eligible employer at the time of application.
When Biden was running for elections, his Education plan noted that Public Service Loan Forgiveness needs to be updated. He believes that this program is overly complex, which does not let many borrowers enjoy the benefits.
Hence, he proposed a new method for PSLF. Instead of waiting for ten years, he recommended getting $10,000 forgiveness per service year. The borrowers could apply five times, which means total forgiveness would be $50,000.
There is still no exact decision made for any changes. However, the government has already started to make progress. Recently, a request for information regarding PSLF was announced. In addition, the borrowers are asked to provide comments on the program’s effectiveness.
On the one hand, the officials collect information from the borrowers. On the other hand, they work with experts to determine how to change the program. Hence, changes can be expected in the short term.
The government tries to help borrowers take the proper steps. It is possible to find a Help Tool on the official Student Aid website, which serves multiple purposes. For example, you can determine if your employer or loans qualify for the program by using this tool and providing the necessary information. Besides, it gives more details on how you can get your student loans forgiven.
Private Loans are not Covered.
If you have private loans, keep in mind that PSLF does not apply to these loans. Even worse, there is no federal program benefiting private loan borrowers. Such debtors facing financial struggles should contact their lenders to learn about their options. Yet, it is hardly possible to get forgiveness for such loans.
The best you can do for your private loans is refinancing. Student loan refinancing can help you reduce interest and save money from monthly payments. Private refinancing companies provide this service, and they require a high credit score and stable income for this opportunity.
If you do not qualify for Public Service Loan Forgiveness, you can try some other options. The federal government provides multiple forgiveness and discharge options. For example, if your school is closed, you can get rid of the debt through Closed School discharge.
Alternatively, if you provide teaching services, you can apply for Teacher Loan Forgiveness. In case you were misled by your school, Borrowers’ Defense to Repayment can be helpful. You can check our top forgiveness programs for more information.
Get Expert Help
If you are lost among all these requirements of Public Service Loan Forgiveness and want to avoid mistakes, getting expert help can be a good idea. Student debt specialists, like those in Forget Student Loan, have years of experience helping struggling borrowers. They follow the programs closely and know the best options that can eliminate borrowers’ loans. Besides, they analyze each debtor’s finances to develop a suitable debt resolution strategy.
Getting expert help ensures that you avoid any common mistakes and maximize your chance to get rid of the debt quickly. We also provide a free consultation to make expert help more accessible for debtors.