If you’re like many student loan borrowers, you may have heard of Public Service Loan Forgiveness (PSLF), wondered if you qualified, and started clicking through the federal government’s website on the topic, getting so overwhelmed you had to spend the next 30 minutes in social media therapy.
If this is you, you’re not alone. Only 1% of the people applied for this forgiveness were able to receive it. One percent? It’s not a typo.
What’s the idea of PSLF?
PSLF was created to relieve some of the burdens of student loans for those employed in public service professions, such as those who work in education, healthcare, non-profit, and government jobs, for example. If you qualify, you can make payments on your student loans, adjusted to your income level, for as little as ten straight years, and have the remainder of the debt forgiven, tax-free.
It seems simple enough. Why is it so complicated?
The short version is that many borrowers attempted to ensure they were making qualifying payments for years while being given little or bad information from their loan servicers and the Department of Education. These borrowers got a really unpleasant shock when they discovered their payments didn’t qualify.
People like Meghan, a geologist with the federal government, who graduated with a mound of debt from undergrad work. Meghan consolidated her plan, extended her payments, went to grad school, made years of real payments with real money on her loans, that would have qualified for PSLF…except they didn’t. Because she wasn’t on the right repayment plan. So instead of reducing the number of years she was going to make payments (if she had been well-advised about how to qualify from the beginning), she actually extended her loan period. She was working in a qualifying job. Partway through her repayment (and, as she says, “by chance”) she had a qualifying loan because she had consolidated but she didn’t have the right repayment plan.
“The one thing that really got me is I have all this service time from working at the university, and technically it would count but I’ve been on the wrong plan. Unconsolidated and/or on the wrong plan. I could have had years and years and years of payments already counted for, but it doesn’t matter until I reach that 10-year mark.”
But there is a bright side!
Loan forgiveness is a real thing, and it is available if you qualify. There are three simple things you need to remember to wipe that debt slate clean:
We’re calling them the Key Three:
- The right loan
- The right repayment plan
- The right employer
1. The right loan. To you, it probably doesn’t make a difference what “type” of loan you have – you just want to pay the least amount of money for the least amount of time, right? For PSLF, it does matter.
a. Loan types that are eligible for PSLF:
- Federal Direct PLUS loans
- Federal Direct consolidation loans
- Federal Direct/Stafford loans, subsidized and unsubsidized
b. Loan types that are not eligible for PSLF:
- Federal Perkins loans
- Private student loans
- Federal Family Education loans
How do I know what type of loans I have?
Log into your loan servicer’s website or give them a call (say a quick prayer for short hold times) to ask them what type of loans you have. Note that you may be carrying multiple types of loans.
Is it possible for me to switch my loans to the correct type?
Often, yes! Most commonly, you’ll consolidate several of your loans into a Federal Direct Consolidation loan.
2. The right repayment plan. Crazy, but you’re actually almost required to pay less than the standard payments on your loans to qualify to get the rest of them forgiven.
Below is a list of the only repayment plans that qualify:
- IBR – Income-Based Repayment
- ICR – Income-Contingent Repayment
- PAYE – Pay As You Earn
- REPAYE – Revised Pay as You Earn
Can I change my repayment plan type?
As long as you meet all the requirements for one of the plans above, you should be able to change your repayment plan type at any time.
Good news: There’s also a temporary expansion of the PSLF, which is not-so-coincidentally called the Temporary Expansion of the Public Service Loan Forgiveness. If you were one of those unlucky people who were not informed that you needed to be on an income-based plan, there might be government funds available to you here.
3. The right employer. Confirming whether you work for a qualifying employer can be tricky. If your employer is a registered 501c3 or government entity (such as a public school), then it should count. If it is another type of public service-type organization, you’ll need to check with your loan servicer to see if it qualifies.
Do I have to work for a qualifying employer for ten consecutive years?
No. You only have to work for a qualifying employer for 120 payment cycles. That can be broken up if you temporarily take a job in the private sector or return to grad school and pause your payments.
Do I have to work for a qualifying employer for ten consecutive years?
Yes. This is important. Even though you can have gaps in your qualifying public service employment, you must be working for a qualified employer when you actually apply for the forgiveness at the end. Once you have your loan type, repayment type, and employer type ironed out, the process goes like this:
1. Make your 120 payments
2. Apply for forgiveness
Do my 120 payments have to be consecutive?
No. If you do remain employed at a qualifying employer for ten straight years and make 120 consecutive monthly payments, you will qualify for forgiveness at that point. If there is a break in your qualification at any point (you change employers, spend a few months unemployed, etc.), you can simply resume making qualified payments after you qualify. It’s not about the time (10 years); it’s about the payments (120).
Do I need to submit anything other than payment throughout the 120 payment cycles?
No. The application process happens at the end of your qualifying payments.
Meghan would be done making payments on her student loans by now if she had received the right information from the get-go about this program. A complicated process can be made simpler by remembering the three critical points: right loan, right repayment plan, right employer. If the answer is “no” to any of these questions, take a deep breath and do something about it. Some are easier to address than others, but there are many cases where a “no” can turn into a “yes,” which can turn into a lot of dollars back in your pocket while you keep doing what you love.
If you have questions, contact your loan servicer. Here is a complete list of servicers and their phone numbers.
If you applied and believe the answer you received is wrong or incomplete, you may need to contact the Federal Student Aid (FSA) Ombudsman Group of the U.S. Department of Education (ED). The Ombudsman Group is a neutral, informal, and confidential resource to help you resolve disputes about federal student aid. The Ombudsman Group is dedicated to helping with issues related to the federal student aid programs, including Direct Loans, Federal Family Education Loan (FFEL) Program loans, Perkins Loans, and grant programs.
Ask your employer if they’ve considered using Savi, a partner who can hold your hand through navigating this process.