The Public Service Loan Forgiveness (PSLF) Program is a federal program designed to encourage students to enter public service by forgiving any remaining loan balance after 120 qualifying monthly payments (10 years) have been made. As simple as that may sound, in practice, qualifying for this program hasn’t gone very smoothly, in part due to the strict rules but also due to the poor communication by loan servicers. That being said, this program is a tremendous opportunity for federal employees with federal student loans to receive loan forgiveness. So read on to find out if you’re eligible for the PSLF.

Qualifying for PSLF

So, who qualifies for the PSLF? Per the U.S. Department of Education website, to qualify, borrowers must meet the following requirements:

1. Be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization (federal service includes U.S. military service);
2. Work full-time for that agency or organization;
3. Have Direct Loans (or consolidate other federal student loans into a Direct Loan);
4. Repay your loans under an income-driven repayment plan; and
5. Make 120 qualifying monthly payments.

Breaking It Down

Employment Requirement
This requirement is pretty straightforward, and most federal employees can check this box; however, you must certify your employer by submitting the PSLF form annually (PDF below). If you do not certify your employment annually, when you apply for forgiveness, you’ll have to submit the certification for the periods over which you made the 120 qualifying monthly payments.

Full-Time Employment
Again, another straightforward requirement. You meet this requirement if you meet your employer’s definition of full-time or work at least 30 hours a week, whichever is greater.

Have Direct Loans
This requirement has caused a bit more confusion, so let’s break it down. Before 2010, many loans issued were from the Federal Family Education Loan (FFEL) Program, and while the U.S. government-backed these loans, they weren’t issued by the government. Hence, they did not qualify for the PSLF program. In contrast, while loans issued via the Direct Loan program are serviced by private companies, they are issued by the federal government and thus qualify for PSLF.

If you don’t have a direct loan, you may still be able to qualify by consolidating your loans into a new Direct Consolidation Loan. There is currently a limited PSLF waiver in effect until October 31, 2022, that will allow any payments made on loans before the consolidation to count toward the PSLF. You can find out more about the waiver here.

Note: You will not be eligible for PSLF if you have private student loans.

Use An Income-Driven Repayment Plan
This is another requirement that can cause confusion. Qualifying repayment plans include the following four income-driven repayment (IDR) plans:

1. Revised Pay As You Earn Repayment Plan (REPAYE Plan): Based on 10% of your discretionary income.
2. Pay As You Earn Repayment Plan (PAYE Plan): Typically, 10% of your discretionary income but never more than what you would pay under the Standard Repayment Plan.
3. Income-Based Repayment Plan (IBR Plan): Based on 10% to 15% of your discretionary income but never more than what you would pay under the Standard Repayment Plan.
4. Income-Contingent Repayment Plan (ICR Plan): The lesser of 20% of your discretionary income or fixed 12-year payment plan.

Although payments made under the 10-year Standard Repayment Plan (default plan) qualify, only those using an IDR plan will benefit from the PSLF program. The reason is that under the Standard Repayment Plan, loans will usually be paid in full after the 120 qualifying PSLF payments (or 10 years), and there will be no balance to forgive.

Note: The qualifying repayment plan rules have been suspended until October 31, 2022, due to the PSLF waiver.

Make 120 Qualifying Payments
Although this requirement seems straightforward enough, in practice, there were many errors due to incorrect payment amounts or late payments. So, to be clear, a qualifying payment is a payment that was made: after October 1, 2007, under a qualifying repayment plan for the full amount due on your bill, no later than 15 days after the due date, and while you were working full-time for a qualifying employer.

An important point to remember is that your payments do not have to be consecutive. For instance, if you had a period of unemployment or left the federal government, your past payments will not be disqualified. Once you return to work and are eligible, you can continue to make qualifying payments.

Note: Most of these rules have been suspended until October 31, 2022, due to the PSLF waiver.

Apply For Loan Forgiveness

Once you’ve made 10 years’ worth of payments (a total of 120 payments) while working for the federal government or another qualifying organization, submit the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application form. This is the same form used to certify your employer annually. Once your 120 qualifying payments have been verified, your loan balance will be forgiven tax-free!

Note: The tax-free status of the loan cancelation is set to expire in 2025.

Final Thoughts

The Public Service Loan Forgiveness program is far from perfect, and there are certainly some hurdles that must be crossed. Still, the prospect of having a substantial amount of your student loan forgiven makes this a worthwhile endeavor. And considering that under the temporary PSLF waiver, credit will be given for many payments that previously did not qualify, now is a perfect time to review whether you’re eligible for the program. As always, consult with a qualified financial planner if you’re not confident in building your financial plan.

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2023 Legislative Change Notice

The SECURE ACT 2.0 passed and impacted many of the articles on this website. While the articles were correct when written, it’s impossible to re-write every article. Please consult a qualified professional (i.e., CFP®, CPA, or attorney) before implementing any strategy.

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