Can You Rely on Public Service Loan Forgiveness? (2024)

Many student loan borrowers spend years paying off their debt, but student loan forgiveness programs can help cut that time down. My friend Catherine works at a non-profit in Washington, D.C, providing therapy to middle school kids with special needs. She recently expressed her burden of paying off her student loans. I told her to look into the Public Service Loan Forgiveness program. It was great to hear that she already knew about it. But I was surprised that she refuses to enroll because she didn’t trust that the government would honor their word.

What is the Public Service Loan Forgiveness Program?

The Public Service Loan Forgiveness Program (PSLF) was created in 2007 and signed into law by President George W. Bush. The program allows federal student loan borrowers to have their federal student debt forgiven after 10 years of working for either the government or a 501(c)(3) non-profit. You must have also made 120 qualifying monthly payments under an income-driven repayment plan.

Who qualifies for student loan forgiveness?

Has the COVID-19 pandemic changed any aspect of the PSLF?

Federal student loan borrowers who are seeking public service forgiveness don’t need to make payments until September 30, 2021.

Why are people scared of PSLF?

Many Americans who are currently enrolled in PSLF are very anxious. Public Service Loan forgiveness is proving to be more difficult than people initially thought it was going to be.

As of the end of June 2019, over 110,000 applications have been submitted for PSLF, but only 1,216 (or about 1.1%) have been approved.

Is PSLF worth it?

How can I get Public Loan Forgiveness?

Most borrowers are denied because they don’t meet the program’s requirements. Make sure you know the requirements because they are very strict on these.

• Have the correct type of loans: Only loans that are part of the federal Direct Loan Program are eligible for PSLF. Private student loans and non-direct federal loans aren’t eligible. You can also consolidate other types of federal student loans to make them PSLF-eligible.
• Work full time for a qualifying employer: You can complete an employment certification form to confirm if your employer qualifies. Make sure that you submit a new form if you change jobs. Qualifying employers include:
  – Government organizations at any level.
  – 501(c)(3) nonprofits.
  – AmeriCorps or the Peace Corps.
  – Nonprofit organizations that don’t have 501(c)(3) status but provide a qualifying public service as their primary purpose.
• You must be enrolled in an income-driven repayment plan before you begin making repayments. The four most common income-driven repayment plans are:
  – Revised Pay As You Earn Repayment Plan (REPAYE Plan).
  – Pay As You Earn Repayment Plan (PAYE Plan).
  – Income-Based Repayment Plan (IBR Plan).
  – Income-Contingent Repayment Plan (ICR Plan).
• Make 120 qualifying monthly payments. President Biden has previously proposed expediting borrowers’ eligibility for forgiveness to five years in public service (versus the current ten years), but it remains to be seen if actual legislation will be passed.

Are the forgiven loans taxable?

What are the downsides to Public Service Loan Forgiveness?

• You may have to wait a long time for forgiveness and your loan may grow while you wait. It’s best to continue making payments while your application is being processed. However, if your application is approved, any payments you made after your 120th qualifying payment, will be refunded.
• Your career or financial situation may change. If you no longer want to work in the public sector, then you will no longer qualify for Public Service Loan Forgiveness.
• The criteria is very strict. Make sure that you meet all of the requirements to be eligible otherwise you will be denied forgiveness.

Other ways to pay off your student loan debt

If you don’t work in the public sector, or if public service loan forgiveness is not an option for you, there are other ways to repay your student loans quickly.
You could:
1. Refinance your loans to potentially reduce your interest rate,
2. Use the debt snowball or;
3. Use the debt avalanche method.

Is PSLF a good idea?

Public Loan Forgiveness is great for those who work in the public sector. Try to utilize the PSLF program to pay off your student loan debt if you work in the public sector. However, many people won’t qualify.When you are deciding how to repay your student loan, it’s important to think about the pros and cons of each strategy. Deciding to have a debt repayment strategy is already putting you steps ahead of others. If you are interested in public service loan forgiveness, or if you want to pay off your student loan debt faster, schedule a complimentary discovery call today.