Federal student loan borrowers who are employed by a government or not-for-profit organization, may be eligible for loan forgiveness under the Public Service Loan Forgiveness Program (PSLF).
The PSLF Program forgives the remaining balance on federal Direct Loans after the borrower has made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
What federal student loans are eligible for PSLF?
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans
A qualifying loan for PSLF is any loan made under the William D. Ford Federal Direct Loan (Direct Loan) Program in good standing (not in default).
Loans under other federal student loan programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program do not qualify for PSLF, but they may become eligible if consolidated into a Direct Consolidation Loan. However, only qualifying payments made on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments made on the FFEL Program loans or Perkins Loans before consolidation do not count.
Only federal student loans can be forgiven under the PSLF. Private student loans are not eligible.
What Are Qualifying Monthly Payments?
A qualifying monthly payment is a payment made”
- After Oct. 1, 2007 (the first-time borrowers can qualify for PSLF was 2017);
- Under a qualifying repayment plan;
- For the full amount due as shown on the bills;
- No later than 15 days after the payment due date; and
- While the borrower is employed full-time by a qualifying employer.
Qualifying monthly payments can only be made during periods when the borrower is required to make a payment. Therefore, the borrower cannot make a qualifying monthly payment while the loans are in”
- In-school status,
- A grace period,
- A deferment, or
- A forbearance.
The 120 qualifying monthly payments do not need to be consecutive.
What is a Qualifying Repayment Plan?
Qualifying repayment plans include all of the income-driven repayment plans (plans that base the borrower’s monthly payment on income).
Even though the 10-year Standard Repayment Plan is also a qualifying repayment plan for PSLF, the borrowers cannot receive PSLF unless he or she enters an income-driven repayment plan. If the borrower is in repayment on the 10-year Standard Repayment Plan during the entire time he or she is working toward PSLF, the borrower will have no remaining balance left to forgive after the 120 qualifying PSLF payments.
What is Qualifying Employment?
Qualifying employment for the PSLF Program looks to the employer not the job title or description. Employment with the following types of organizations qualifies for PSLF:
- Government organizations at any level (federal, state, local, or tribal)
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if they provide certain types of qualifying public services
- Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program.
What is Considered Full-Time Employment?
Under PSLF, full-time work is generally considered the greater of at least 30 hours per week or the employer’s definition of “full-time work”.
If a borrower is employed in more than one qualifying part-time job at the same time, the borrower may meet the full-time employment requirement if he or she works a combined average of at least 30 hours per week with both employers.