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The Public Service Loan Forgiveness program explained

What is it?

The Public Service Loan Forgiveness program is a US government program that was created to help professionals out of their student debt burden by encouraging them to work in lower-paying jobs in the public sector or qualifying nonprofits for 10 years. The program allows direct borrowers who make all of their payments under a qualifying repayment plan for 10 years to have the remainder of their balance forgiven. The payments must be on-time, in full-payment, and must total at least 120 payments before qualifying for forgiveness. The program was introduced in 2007 under the College Cost Reduction and Access Act (CCRAA).

How to qualify?

The program has many requirements that make the application process complex and as a result, many applicants are being denied. The reasons for rejecting applicants seem to be endless, but having your loans forgiven is not impossible if you follow these steps:

  • Work full-time for a government agency or a qualifying nonprofit organization.
  • Have direct loans (or consolidate other federal students loans to qualify).
  • Make payments on an income-driven repayment plan.
  • Make 120 qualifying payments.

Qualifying employment

Under the PSLF program requirements, the type of job you do does not matter but rather who your employer is. The following types of organizations are considered qualifying employers:

  • Federal, state, local, or tribal government organizations.
  • Tax-exempt nonprofits under section 501©(3).
  • Nonprofits that are not tax-exempt under section 501©(3), if their primary purpose is to provide a qualifying public service.
  • AmeriCorps or the Peace Corps.

When working for these employers, you must meet at least 30 hours of work per week. Working part-time for two qualifying employers and averaging 30 hours per week, is also considered full-time under the PSLF.

Have direct loans or consolidate

Only Direct Loans received under the William D. Ford Federal Direct Loan (Direct Loan) Program are eligible for PSLF. If you have other loans that don’t qualify for forgiveness, you have options - you may consolidate your other loans such as the Perkins loans or Federal Family Education loan into a Direct Consolidation Loan in order to become eligible. However, any advance made towards forgiveness will be erased when you consolidate. Therefore, it is recommended that, if you qualify towards Perkins loan forgiveness to keep chasing that option and don’t consolidate your Perkins loan.

Income-driven repayment plan

All the income-driven repayment plans qualify for PSLF. The 10-year Standard plan also qualifies for PSLF, but by the time you have made 120 payments under the standard repayment plan, you would have cleared all your debt. Which is why if you are seeking loan forgiveness you should enter the income-driven repayment plan.

Make 120 qualifying payments

The PSLF program asks that you make 120 qualifying monthly payments in order to receive forgiveness. A qualifying monthly payment must be made:

  • Under a qualifying repayment plan.
  • For the full amount.
  • After Oct. 1, 2007.
  • Within 15 days of the due date.
  • While you are working full-time for a qualifying employer.

Making larger payments to accelerate the process does not count towards PSLF and you will only receive credit for one payment per month, regardless of how much you pay.
The payments do not need to be consecutive, you can switch between qualifying and non-qualifying employers, or pause through forbearance, and when you resume payment you get to keep the progress made.

After you make your 120th payment you must submit the PSLF application, along with an employment certification form for each employer you had while making the qualifying payments. You must be working for a qualifying employer at the time of submission.

But there is one problem.

Less than 1% of applicants are being accepted. Data from the Department of Education reveals that 864 loans have been forgiven as of March 2019 out of 86,006 applications, with a total value forgiven of $30.68 million.
In order to fully qualify for the program, applicants must meet a myriad of technical requirements that make it hard to navigate the rules and stay on the right path. Many have been the reasons to reject applicants such as not having enough payments, working for employers that don’t qualify, making payments on ineligible loan programs, among many others. Critics say that the government has failed to provide a clear process to qualify - and that companies handling the student loans payments gave borrowers inaccurate information. Some applicants have found out they are not eligible only after the 10 years have passed.
This is causing outrage throughout the country, especially amongst professionals who have dedicated their careers to public service such as teachers, social workers, public defenders, physicians and all other professionals who qualify for the program. The American Federation of Teachers (AFT), which is the second largest teachers union in the country is suing Secretary Betsy DeVos and the Department of Education for mismanaging the program. The lawsuit claims the Education Department is violating federal law and the Constitution by neglecting to create a clear process in order to navigate the program and ensure whether a borrower qualifies for the benefit or not. Additionally, teachers claim that the Education Department ignored their complaints and provided inaccurate information.
Advocates of the program claim the reason the number of rejected applications have been so high is because the program had little publicity and was not well-known at the time it launched in 2007. Additionally, the first batch of qualified applicants were approved not too long ago in 2017. Experts expect the number of approved applications to increase significantly in the coming years when the program reaches a mature stage and borrowers become well-aware of the rules and understand the fine print. This will happen when the government increases its efforts to provide more information and transparency about the program - making a clear process regarding which steps to take and how - leaving no room for error, especially when people have dedicated 10 years of their life to this program.

Looking to get your loans forgiven under the PSLF?

This help tool provided by the Education Department will help you understand the program in order to qualify and possibly have your loans forgiven.

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