Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) tends to be the most commonly known federal student loan forgiveness program. Some also call it the “Obama Forgiveness Program” although you should note that nobody with any real knowledge of the student loan programs will ever call it that. In fact, this misnomer is one of the clues we use to identify potential student loan scams. You should too. **Scroll to the bottom of the page for information on the recently enacted PSLF “fix”**
To be eligible to get the balance of your loan forgiven under PSLF, the borrower will need to make 120 payments under an eligible repayment plan, on eligible loans, while working full time for an eligible employer. It’s important to note that all three of these things have to happen at the same time. Once you complete the 120 payments, the balance of your loans are forgiven, tax free.
What is an Eligible Loan for PSLF Purposes?
Only Federal Direct Loans are eligible for PSLF. These can be Direct Stafford, Direct Graduate Plus, Direct Parent Plus and Direct Consolidation loans.
The following loans can be made into Direct Loans and become eligible for PSLF by consolidating through the Direct Loan program at www.studentloans.gov :
- Federal Family Education Loan (FFEL) Program Loans including
- Subsidized and Unsubsidized Stafford loans
- Parent Plus Loans
- Graduate Plus loans
- FFEL Consolidation Loans
- Supplemental Loans for Students (SLS)
- Federal Perkins Loans
- Federal Nursing Loans
- Health Education Assistance Loans
It’s very important to understand that if you must consolidate to gain access to PSLF, do so as soon as possible. Any payments made prior to consolidation will not count towards PSLF and cannot be made to count. Once you consolidate, you will be starting at payment zero of the 120 needed for forgiveness.
Remember, the name of the game is to pay the least amount over time. Sometimes this means pursuing forgiveness, and sometimes it means aggressively repaying the loans in full. If you have been paying your loans for some time, or have a balance under $50K or so, or have a fairly decent income, you should use this calculator to determine if pursuing PSLF is the smartest strategy for you before going through the consolidation process.
Private loans, state loans, institutional loans and other higher education financing tools are never eligible for PSLF. Defaulted Direct Loans are also not eligible for PSLF, but can be brought out of default.
If you aren’t sure what kind of loans you have, contact your loan holder or go to www.nslds.ed.gov
What Is An Eligible Payment?
For PSLF purposes, an eligible payment is one made after October 1, 2007, on time (within 15 days of the due date), on an eligible loan (see above for a list of eligible loans), while working full time for an eligible employer (see below for eligible employer definitions) under one of the following repayment plans:
- Standard 10 year repayment plan
- Income based repayment
- Income contingent repayment
- Pay As You Earn (PAYE)
- Revised Pay as You Earn (REPAYE)
You can learn more about each of these plans here.
There are a few things to remember about payments for PSLF purposes.
You do not need to be under the same plan for all 120 payments
Payments made under a standard plan that is longer than 10 years, such as what is generally given to consolidation loans, do not count towards PSLF
Parent Plus loans are only eligible for the income contingent repayment (ICR) plan and only if they are consolidated under the Direct Loan program. Parent Plus borrowers pursuing PSLF should consolidate as soon as possible and apply for ICR right away to take advantage of PSLF.
Lump sum payments do not count for PSLF unless they are made by AmeriCorps or the Department of Defense.
It is possible to have a zero dollar payment under the income driven plans. Zero dollar payments that are due under these plans do count towards PSLF. Not being due for a payment because you are in forbearance or deferment or in school does not count towards PSLF.
Payments made on a defaulted loan do not count towards PSLF.
Payments made under a graduated or extended repayment plan generally do not count towards PSLF, unless that payment is in an amount equal to or larger than what the payment would be under a 10 year standard plan. This is a rare occurrence.
Note that while 10 year standard plan payments do count towards PSLF, if you are under that plan, after you make the full 120 payments the loan will be paid in full with nothing to forgive.
It does not matter who is making the payments for them to count for PSLF purposes.
What is Eligible Employment?
Eligible employment depends on who you are working for, not what your job is. An eligible employer is one that meets one of the following criteria:
- Is a government employer. This includes:
- Is a Tribal college or university
- Is a 501(c)(3) non-profit
- Is a 501(a) as long as the activities that qualify the organization for this status are unrelated to religious instruction, worship services, or any form of proselytizing
Serving full time for AmeriCorps or the Peace Corps is considered eligible employment. So is serving full time in the military as that is a government employer.
There are other types of non-profits that also count as eligible employers for PSLF purposes. Those are employers whose primary function is one of the following:
- Emergency management
- Military service: service on behalf of the U.S. armed forces or the National Guard
- Public safety
- Law enforcement: crime prevention, control or reduction of crime, or the enforcement of criminal law
- Early childhood education: includes licensed or regulated childcare, Head Start, and state-funded prekindergarten
- Public service for individuals with disabilities and the elderly
- Public health: includes 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 Bureau of Labor Statistics
- Public education: includes services that provide educational enrichment or support directly to students or their families in a school or a school-like setting
- Public library services
- School library or other school-based services
Here are some online lists that may help you determine if your employer fits these criteria. This list is most government agencies and departments. This list is the IRS database of non-profit organizations. Note that for this second list, you’ll also need to determine if the employer is a 501(c)(3) or other type of non-profit. If it’s the latter, you’ll need to review the activities above to determine if it qualifies.
You must be full time for the employment to qualify. Full time is defined as whatever your employer defines it as, or 30 hours per week, whichever is greater. You can work part time for two eligible employers as long as the hours add up to at least 30 hours per week.
Note that hours worked at religious activities used to be excluded from hours worked for PSLF purposes, but this is no longer the case. If you submitted proof of employment in the past that was denied due to the exclusion of hours spent on religious activities you should resubmit proof of employment for those time periods.
You do not need to work for the same employer for the full qualifying time for PSLF. Your eligible employment also does not need to be consecutive. So if you work in eligible employment and make eligible payments during that time, then leave for the private sector, or to go to school, etc, and then return to qualifying employment, those prior payments you made will still count towards the 120 needed for PSLF.
For the vast majority of borrowers, the employer listed on your W-2 is who is considered your actual employer. Most contractors, unless the contractor themselves is an eligible employer, won’t be considered engaged in eligible employment. There are some, rare, exceptions where a third party is issuing the employees paycheck despite the employee actually working for an eligible employer. To be considered eligible, the employer must have hiring and firing authority over the employee.
Only the employment of the borrower on the loan counts for PSLF purposes. So for Parent Plus loans, it must be the borrower of the loan, rather than the student or spouse, who is working in qualified employment, regardless of who is actually making the payments. The borrower on the loan cannot be changed.
How to Apply for PSLF
There are a few things you need to do to apply for PSLF. First, you need to ensure the loan holder has proof that you have worked for a qualifying employer during the time you made your 120 eligible payments. You do that by submitting the employment certification form (ECF) to the address listed on the form. We strongly recommend you do this on an annual basis and keep copies in your files. It is solely your responsibility to prove your eligible employment so if you wait to submit ten years worth of forms, you could run into a situation where your prior employer is out of business or no longer has records of your employment. You CAN submit all ten years of employment forms at the same time, we just recommend against it for the reasons previously stated.
Once your loans are being held by FedLoan Servicing, you can upload future EFC forms here. You can also find out how many qualifying payments you’ve made at that link by logging in and clicking on loan details.
The first time you submit the ECF, your loans will be transferred to FedLoan Servicing (also known as PHEAA or AES). Nothing will change about your loan terms, only who you make payments to and who you communicate with. They will also begin counting your eligible payments for you at that point.
After you’ve made your 120th payment, you must submit the PSLF forgiveness application. This form is to prove that you are still working for an eligible employer. Note you must be working for an eligible employer when you submit the form AND when they process the form. The Department of Education has stated that they may contact your employer when reviewing your form to ensure you are still working there.
When they receive your application for forgiveness, they will place your loans in forbearance while they review it. This can take up to sixty days. If you make more than the required 120 payments they will return the excess to you. This can take additional time.
The amount forgiven under PSLF is not taxed.
The Department of Education has published some Frequently Asked Questions here. Most of that information is covered above, but we wanted to ensure you had a back-up source in case something wasn’t clear.
Temporary Expanded Public Service Loan Forgiveness (TEPSLF)
If you have been making payments under a plan that is ineligible for Public Service Loan Forgiveness (PSLF), you may still have hope.
Congress included a provision in the Consolidated Appropriations Act of 2018 that would allow payments made on a Direct Loan under a graduated, extended or standard consolidation repayment plan to potentially count towards PSLF. To qualify these payments, the borrower must complete the following steps:
- Make 120 qualifying payments while working for a qualifying employer as outlined above
- Some or all of these payments may have been made under a graduated, extended or standard consolidation repayment plan
- The payment you made 12 months prior to applying for the TEPSLF, as well as the last payment made, must have been at least as much as you would have paid under an income driven repayment plan. See details below.
- Prepare an email to FedLoan Servicing requesting that your eligibility for PSLF be reconsidered. We have provided a sample email below that has been suggested by the Department of Education.
- Include a completed PSLF application with the email
- Include proof of eligible employment for the period you made the payments if you have not already done so
- Send the email to TEPSLF@myfedloan.org.
The Last 12 Payments Under the TEPSLF
The payment you make 12 months prior to applying for the TEPSLF, as well as the final payment you make, must be at least as much as you would have paid under an income driven plan. Just those two payments. You do not need to be on an IDR plan or be billed this amount, you just need to make two payments of at least this amount – one payment of this amount 12 months before the final payment and then one final payment of the same amount 11 months later. The 10 payments in between should be in the amount you are billed those 10 months.
If the difference between your current payment and your income driven plan payment is minimal, it’s easier just to get on an income driven plan for your final 12 months before you apply for forgiveness under the TEPSLF. You can do this through your loan servicer. If the IDR amount is much higher than your current payment, just make the two payments – the one 12 months before and the final amount in the necessary amount (at least as much as the IDR payment amount).
To determine what your IDR amount would be, we suggest getting 3 estimates of the necessary amount. Use the Department of Education’s repayment estimator at www.studentaid.gov, our calculator here https://studentloanplans.app, and ask your servicer for the amount. To be on the safe side, we strongly recommended you round up to the next dollar from the highest amount given. If you have Parent Plus loans you must use the amount shown under the income contingent repayment plan. If you don’t have Parent Plus, you may use the IDR payment amount for any of these IDR repayments plans: IBR (Income Based Repayment), PAYE (Pay as You Earn), REPAYE (Revised Pay as You Earn), or ICR (income contingent repayment).
Borrower’s payment under an extended repayment plan is $200. The payment they would make under an income driven plan is $300. Borrower plans on applying for the TEPSLF January of 2020 so a payment of $300 should be made in January 2019 and again in December of 2019. The rest of the payments that year can be made at the billed $200 amount.
Here’s the sample email suggested by the Department of Education. Be sure to include the same name and date of birth you included in your original application:
Subject: TEPSLF request
I request that ED reconsider my eligibility for public service loan forgiveness.
- Name: [Enter the same name under which you submitted your PSLF application]
- Date of Birth: [Enter your date of birth in MM/DD/YYYY format]
It’s important to note that Congress allotted a finite amount of funds for this program. These funds will be allotted on a first come, first serve basis. Once these funds are used up, this fix will no longer be available. For that reason, we strongly recommend that any borrower in this situation switch to an income driven plan as soon as possible.
Payments made to a Federal Family Education Loan (FFEL) do not qualify under this provision, nor can ever qualify for PSLF. There is no remedy for this currently, nor is there expected to be one. If you have FFEL loans, you can consolidate under the Direct Loan program and start the PSLF process from scratch. It is strongly recommended you determine if you would pay less over time by taking this step, or by simply paying the remainder of your loans off aggressively.