The Public Service Loan Forgiveness (PSLF) program was created by Congress in 2007 to encourage individuals to work in public service jobs. As an incentive, if a person works full time in a public service job for ten years and makes 120 payments on eligible loans over those ten or more years, any remaining balance of the loans will be forgiven. The first eligible cancellations of loan balance will not occur until October 2017.
Requirements for Public Service Loan Forgiveness
1. You must have the right kind of loan.
a. The loan must be an eligible direct loan made under the Direct Loan Program to be entitled to forgiveness. So, direct Stafford/Ford loans, direct PLUS loans and direct consolidation loans are eligible. With parent PLUS loans, it must be the parent – not the child – that must be employed in the public service job.
b. You may “convert” some ineligible loans into eligible loans by consolidating the loans into a loan under the Direct Loan Program. These loans include Federal Family Education Loan (FFEL) program loans (Stafford loans, PLUS loans and consolidation loans (excluding joint spousal consolidation loans), Perkins loans and certain health professions and nursing loans.
c. The proposed loan to convert cannot be in default. If a default has occurred, the borrower will need to take steps to bring the loan out of default status before consolidation.
2. You must make the right kind of payment.
a. Eligible payments only include those made under the following repayment plans: Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE) or the 10-year standard repayment plan.
b. Of course, it doesn’t make sense for the borrower to be in the standard repayment plan since, theoretically, the entire loan balance would be paid in full after ten years of payment.
3. You must have the right kind of job.
a. Borrower must work for a governmental organization, which includes federal, state and local governmental bodies; or
b. Borrower must work for a non-profit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, which includes many not-forprofit private schools, colleges and universities; or
c. Borrower must work for a private, non-profit organization – cannot be a labor union or a partisan political organization – that provides one or more of the following public services: Emergency management, military service, public safety, law enforcement, public interest law services, early childhood education, public health, public service for the disabled and elderly, public education, public library services and school library or other school-based services.
d. Borrower must be employed at the time loan forgiveness is applied for and at the time the remaining balances are forgiven.
4. You must make the required number of payments.
a. One-Hundred and Twenty separate payments must be made on an eligible direct loan after October 2007, when the program began. Payments that were made prior to program do not count.
b. The borrower must be employed by the public service organization at the time the payment is made. For example, if the borrower has a break in service from a public service organization and then become re-employed by such an organization again, the payments made during the break in service do not count toward the 120 required payments.
c. The required 120 payments do not need to be consecutive – as in the example above – but the qualifying payments must be made timely. A timely payment is a payment of the full scheduled amount within 15 days of the due date.
Keep Records of Eligibility
Ten years is a long time to keep track of the information needed to demonstrate eligibility for forgiveness. The Department of Education created an Employment Certification Form to help employees monitor and report information. Borrowers can complete and submit the form periodically to FedLoan Servicing, which is the servicer for the Public Service Loan Forgiveness program. There is currently no requirement to submit quarterly, annually or after any set time period. A borrower can actually wait until after all payments are made to submit the certification form. It is recommended, however, that borrowers submit the form at least annually.
If you’re a student loan borrower and you want to learn more about the Public Service Loan Forgiveness program, its requirements and your eligibility, give us a call at (239) 362-2755. We’ll provide you with the student loan help you need. We will review your situation in depth and get you on track.