Everyone wants their student loans forgiven. The perception is that very few qualify. But did you know that there is one broad, employment-based forgiveness program for federal student loans? Let me break down some key points of PSLF to help you figure out if you could qualify.
[ 1 ] Work in Qualifying Employment
First, you need to work for the right employer—a public service employer. What does that mean? Everyone has a different definition. Ours is based on who employs you, not what you do at work. Here’s what qualifies:
- Governmental organizations – Federal, state, local, Tribal
- 501(c)(3) organizations
- A not-for-profit organization that provides specific public services, such as public education or public health
Here’s what doesn’t qualify:
- Labor unions
- Partisan political organizations
- For-profit organizations
[ 2 ] Qualifying Employment Status
If you work at one of these types of organizations—great! Next, you need to work in a qualifying employment status, which means that you must be a full-time employee. For us, full-time means that you meet your employer’s definition or work at least 30 hours per week, whichever is greater.
[ 3 ] Have a Qualifying Loan
A qualifying loan is a Direct Loan. It’s that simple. Of course, it’s the government, so nothing is actually that simple. There are (or were) three big federal student loan programs:
- The Direct Loan Program
- The Federal Family Education Loan (FFEL) Program, and
- The Federal Perkins Loan Program.
If you’re not sure which loan program, I can’t blame you—I had 20 loans when I finished graduate school! You can log in to My Federal Student Aid to determine which program you borrowed from. Here’s a tip: if you see “Direct” in the name, it’s a Direct Loan. Otherwise, it’s not.
Don’t have a Direct Loan? Don’t despair! You can consolidate your federal student loans into a Direct Consolidation Loan and qualify for PSLF. Not having a Direct Loan is the biggest reason that borrowers aren’t on track for PSLF, so do your homework. If you need to consolidate, check the box in the application that says that you’re consolidating for the purposes of loan forgiveness. It will make your life easier.
[ 4 ] Have a Qualifying Repayment Plan
Next, you need a qualifying repayment plan. All of the “income-driven repayment plans” qualify. So does the 10-year Standard Repayment Plan, but if you’re on that plan, you should switch to an income-driven repayment plan right now, or you will have little or nothing to forgive after you meet all of the criteria.
If you’re consolidating, be sure to apply for an income-driven repayment plan because the Standard Repayment Plan for Direct Consolidation Loans almost never qualifies.
You can apply for an income-driven repayment plan on StudentLoans.gov.
[ 5 ] Make 120 Qualifying Payments
Lastly, you need to make qualifying payments—120 of them. A qualifying payment is exactly what you think it is. You get a bill. It has an “amount due” and a “due date”. Make your full payment by the due date (or up to 15 days later), and the payment qualifies. If you make a payment when you’re not required to—say, because, you’re in a deferment or you paid your student loan well in advance—then it doesn’t count. The best way to set yourself up for success is to sign up for automatic payments with your servicer.
Your payments do not need to be consecutive. So, if you make qualifying payments, stop, and then start again, you don’t start over.
I’m sorry to have to mention a random date, but a payment only qualifies if it was made after October 1, 2007, so nobody can qualify until 2017 at the earliest.
Okay, so do I qualify?
Now, let’s put it all together. For any payment to count toward PSLF, you need to meet all of the criteria when you make each payment. That means you need to be working for a qualifying employer on a full-time basis when you make a qualifying payment under a qualifying repayment plan on a Direct Loan.
I know all of you are still thinking—“that’s great, but do I qualify?” Here’s how you find out. Download this form. Fill it out. Have your employer certify it. Send it to FedLoan Servicing (one of our federal student loan servicers). FedLoan Servicing will figure this all out and let you know whether your employment qualifies, and how many qualifying payments you’ve made.
Submit the form early and often. We recommend once per year or when you change jobs. Why? Because it means that you won’t have to submit 10 years’ worth of forms when you ultimately want to apply for forgiveness. It also means that you can apply for forgiveness with confidence.
One more piece of good news: PSLF is tax-free.
Ian Foss has worked as a program specialist for the Department of Education since 2010. He’s scheduled to be eligible for Public Service Loan Forgiveness on October 6, 2021, if all goes according to plan.