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- The Public Service Loan Forgiveness Program forgives government and nonprofit workers' loans after 120 payments.
- Studies show that only 6.7% of eligible borrowers apply for PSLF, and of those, 98% are denied.
- Most applications get denied because of misspelled words, missing the payment requirement, or missing documents.
- Read more stories from Personal Finance Insider.
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The Public Service Loan Forgiveness program forgives federal student loans of US government and nonprofit workers after 120 qualifying monthly payments.
While some people feel optimistic about this debt repayment option, the program is notoriously tricky to navigate. According to a study conducted by Melanie Hanson at the Education Data Initiative, only 6.7% of eligible student borrowers apply for student loan forgiveness. Recent data from the Federal Student Aid office of the Department of Education shows that 98% of borrowers who do apply are still being denied.
The application process can be daunting and frustrating, but Tony Aguilar, cofounder and CEO of free student loan repayment support app Chipper, has helped over 5,600 people get their federal student loans forgiven by helping them navigate the PSLF application process.
From Aguilar's experience, three common mistakes typically trip people up.
1. Misspelling words
"They are so strict about how you fill out the forms," Aguilar says about PSLF.
He tells Insider about a borrower who kept getting denied repeatedly for no clear reason. After weeks of combing through the form, the Chipper team finally realized why.
"When we submitted the paperwork, we put the borrower's school as Cypress Fairbanks ISD," Aguilar says. They denied the application because we left out the hyphen between 'Cypress' and 'Fairbanks.'"
Aguilar adds, "It was the most frustrating experience. Anyone who's filling out these forms, you have to be super clear, cross your t's, and dot your i's."
2. Not meeting the minimum eligible payment requirement
Aguilar says that most of his new clients don't take advantage of repayment plans that can lower your monthly payments while still being eligible for PSLF. Instead of missing payments you can't afford, talk to your lender to see if a different payment plan can help you.
PSLF requires 120 eligible payments, which equates to 10 years of monthly on-time payments. Besides the standard repayment plan offered by the lender, three repayment plans, listed below, may offer significantly lower monthly payments that are also eligible for PSLF.
Remember that in order to qualify for PSLF or for the payment plans below, you must have public loans — not private. If you refinance your public loans with a private lender, your loans become private and you are no longer eligible for PLSF.
Here are the three payment plans that still make your payments eligible for PSLF, according to the Federal Student Aid government website:
- An income-driven repayment planlets you make lower monthly payments proportional to your income, but it extends the life of the loan to 20 to 25 years instead of 10 years. You'll need to report any changes in your income over time, and your monthly balance will rise or fall depending on how your income changes. If your income is low enough, you could be eligible to pay $0, which can still count toward the 120 PSLF eligible payments.
- Similar to IDR, an income-contingent repayment plan lets you make lower monthly payments over 12 years that equal 20% of your discretionary income — the income leftover after you've paid taxes, housing, and bills.
- The Pay-As-You-Earn repayment plan lets you make lower monthly payments that equal 10% of your discretionary income, which will never exceed the standard repayment plan initially offered by the lender.
When choosing repayment plans, Aguilar says the key is to make the smallest possible monthly payments eligible for PSLF, so you can maximize on the forgiveness offered at the end of a 10-year repayment journey.
3. Not providing the right documents
The aforementioned study by the Education Data Initiative also found that, among denied claims, 30.7% of applications were denied because they didn't provide enough paperwork.
Aguilar says the best solution to this common problem is to consult with a student loan expert to make sure your PSLF application is as complete as possible.
Aguilar adds, "A lot of the borrowers that we work with, they have applied on their own two or three times, and they've been rejected for some reason. Most of them would have stopped, but when they see that there are resources like Chipper to help them handle the process from start-to-finish, there's a different outlook."
Leo Aquino (they/them) was a Spending & Saving Reporter. Before joining the Insider team, they covered relationships, sexual wellness, beauty, fashion and more, always uplifting stories of BIPOC and LGBTQ+ communities. In 2022, Leo won The Curve Award for Emerging LGBTQ+ Journalists, presented by the NLGJA.
