How Public Service Loan Forgiveness Works

If you work in public service and are a federal student loan borrower, you should be aware of the public service student loan forgiveness program. With this program, you may qualify to have your remaining student loan balance forgiven after you make a minimum number of qualified loan payments while employed. Keep reading to learn how to qualify and take advantage of this opportunity.

What Is Public Service Loan Forgiveness?

The Public Service Loan Forgiveness program (PSLF) was created by the federal government in 2007 as a way to provide student loan debt relief to those working in public service occupations. Those who are eligible and apply to the program will have the remainder of their federal student loan debt forgiven after they make 120 qualifying monthly payments while working full time for a qualifying employer. 

How Much Can Be Forgiven Through Public Service Loan Forgiveness?

The PSLF program applies to federal Direct student loans only, but there is no upper limit to how much might be forgiven. All that is required is to make 120 qualifying payments while working full-time in public service. 

Your qualifying payments will depend on your income and family status. In some cases, you may end up paying off your entire loan by the time 120 payments are made. In other cases, you may end up with tens of thousands of dollars in forgiven education loans.

Does PSLF Forgive Interest?

Yes, outstanding interest and principal of Direct loans are fully forgiven so long as you made the required 120 qualifying payments on time.

What Does It Take to Qualify for PSLF?

The Office of the U.S. Department of Education lists five eligibility requirements for PSLF. These are:

• You must be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization. This includes U.S. military service and AmeriCorps or Peace Corps volunteers. Not-for-profit organizations are those that are tax-exempt under Section 501(c)(3) of the IRS code, although some not-for-profit organizations that aren’t 501(3)(c) may still qualify if they provide certain types of public services. Note that it doesn’t matter what your job function is, only that your employer falls under one of the specified categories. Labor unions, partisan political organizations, and for-profit organizations (including for-profit government contractors) don’t qualify.
• You must work full time for the qualifying agency or organization. This means you must be directly employed and not simply a contractor for a qualifying organization. You must also meet your employer’s definition of full time or work at least 30 hours per week, whichever is greater. You may still qualify if you work more than one qualifying part-time job at the same time with a combined average of at least 30 hours per week. 
• You must have federal Direct loans. Eligible loans are those issued under the William D. Ford Federal Direct Loan Program, including Direct subsidized loans, Direct unsubsidized loans, and Direct PLUS loans. Loans that don’t qualify include Federal Family Education Loans (FFEL), federal Perkins loans, and any private student loans. However, you may consolidate your other federal student loans into a Direct loan, which will then make them qualify, but payments made before your Direct Consolidation Loan won’t count unless you consolidate prior to Oct. 31, 2022, and apply for a waiver.
• You must repay your loans under an income-driven repayment plan. These student loan repayment plans base your monthly payment plan amount on your current income. Payments made under the 10-year Standard Repayment Plan still technically qualify; however, you won’t see any benefit if you stay on that plan since your entire loan would be paid off after 120 payments. Income-driven plans include PAYE and REPAYE, which set monthly payments at 10% of your discretionary income. 
• You must make 120 monthly qualifying payments. Qualifying payments are those made after Oct. 1, 2007, under a qualifying repayment plan for the full amount due, which are paid no later than 15 days after the due date and were made while you were employed full time by a qualifying employer. Note that some PSLF qualifying payment rules have been suspended through Oct. 31, 2022. By completing a temporary waiver, you can get credit for certain payments that normally wouldn’t qualify. 

Due to the requirement of making 120 monthly qualifying payments, it takes at least 10 years before your loans can be forgiven under the PSLF program.

Government Employers and Nonprofits That Qualify for PSLF

The full list of employers that qualify is long, but they all fall under one of the following categories:

• U.S. federal, state, local, or tribal government agencies
• The U.S. military
• Public elementary and secondary schools
• Public colleges and universities
• Public child and family service agencies
• AmeriCorps or Peace Corps 
• Certain entities, such as public transportation providers, water, bridge district, or housing authorities
• Any organization tax-exempt under Section 501(3)(c), which may include:
• Private elementary and secondary schools
• Private colleges and universities
• Any organization that is NOT tax-exempt under Section 501(3)(c) but which provides a qualifying service, such as:
• Emergency management
• Service on behalf of the U.S. armed forces or the National Guard
• Public safety
• Law enforcement, including crime prevention, control or reduction of crime, or the enforcement of criminal law
• Public interest law services, including legal services provided by an organization funded in whole or in part by a U.S. federal, state, local, or tribal government
• Early childhood education, including licensed or regulated child care, Head Start, and state-funded prekindergarten
• Public service for individuals with disabilities and the elderly
• Public health, including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the U.S. Bureau of Labor Statistics (BLS)
• Public education
• Public library services
• School library or other school-based services

Employment that does NOT qualify includes:

• Serving as an elected member of the U.S. Congress
• Working for a government contractor
• Working for a labor union or a partisan political organization

If you’re still unsure if your employer qualifies, you can visit the StudentAid.gov website and find the PSLF Help Tool, which can help you determine if you work for a qualifying employer and guide you through the eligibility process.

The PSLF Application Process

To qualify, you must not only work for a qualifying employer when you make your qualifying payments, but you must also be working for a qualifying employer when you submit your application for loan forgiveness. 

The first step in applying is to complete and submit the Public Service Loan Forgiveness (PSLF) & Temporary Expanded Public Service Loan Forgiveness (TEPSLF) Certification & Application form. This can be done on the Federal Student Aid website by creating a login to get started, or you may download and complete a paper version of the form. You will need your most recent W-2 or your employer’s Federal Employer Identification Number (EIN). The form itself is designed to help you determine your eligibility and make sure you complete the appropriate information. 

Completion of the form takes about 30 minutes and must be done in a single session if done online. The form may be completed whether you have already made your 120 qualifying payments or are in the process of doing so. After completion, you’ll be notified if you qualify and how many qualifying payments you have yet to make. 

Unless you’re immediately eligible for forgiveness, your loan will be transferred to a PSLF student loan servicer. You will need to periodically resubmit the form to update your number of remaining payments. It’s often best to submit the form annually to ensure that you stay on track and avoid having to track down all the paperwork and past employers later on. 

As part of the application, your employment must be certified by your employer using an employment certification form. This certification is typically handled by your employer’s human resources department. Once you submit a PSLF form that shows your final qualifying student loan payments have been made, the remaining balance of your loan will be forgiven as a lump sum.

Read More About Loan Forgiveness on CollegeFinance.com

The PSLF program is not the only loan forgiveness program out there. You can read more about student loan forgiveness, as well as other tips for helping pay off your college loans, on CollegeFinance.com, including state loan forgiveness programs, jobs that may help you pay off your loans sooner, loan forbearance and deferment, and more.