Public Service Loan Forgiveness (PSLF) is the number one thing I am asked about when I tell people that I’m a student loan lawyer. Unfortunately there are too many stories out there of people getting years and years into their repayment plans only to learn that they do not qualify for PSLF as they once thought. You should seek the advice of an expert if you have particular questions about your situation, but here are the most important things to keep in mind:
- Do all federal loans qualify? No, not all federal loans qualify. Your loans must be Direct Loans in order to qualify for PSLF. If you aren’t sure what type of loans you have, you can go to the National Student Loan Data System to find out. For instance, Perkins or old FFEL loans do not quality.
- What repayment plans qualify? Only income-driven plans or the standard 10-year fixed plan qualify for Public Service Loan Forgiveness. (Though, of course, if you make standard 10-year payments for 10 years, you will not have anything left to forgive). Even if you are making a low payment, always check which plan you are on, because low payments under the graduated or extended repayment plans do not count.
- What type of job do I have to have? Generally speaking you need to either work for a governmental agency or a registered 501(c)(3). Under certain circumstances, entities that have the primary purpose of providing qualifying public services will also count.
- How long until my loans are forgiven? You must make 120 on-time payments, so generally 10 years.
- Who will service my loans while I make my 120 payments? All borrowers who indicate their interest in PSLF by submitting an employment certification will be transferred to FedLoan Servicing. As any student loan lawyer will tell you, FedLoan is the most difficult of the servicers to work with. I always recommend that you keep your own copies of all paperwork you send them, including documentation of your on-time monthly payments.
- What do I need to do to enroll in PSLF? You cannot “enroll” in PSLF. You can only wait until your 120 payments are complete and you actually apply for forgiveness. In the meantime, you can complete yearly certifications of your employment status to tell your servicer of your intention to apply for PSLF and indicate where you have been employed. However, these annual certifications do not guarantee your participation in PSLF.
- Will PSLF be discontinued? We do not know. Removing the PSLF program for future cohorts of borrowers has been discussed in recent months. However, no action has been taken so far and even the proposed plans do not remove PSLF for current borrowers.
- Will forgiveness under PSLF cause a tax bill? No. While forgiven debts can sometimes incur tax liabilities, loans forgiven through PSLF will not be counted as taxable income.