The Public Service Loan Forgiveness (“PSLF”) program originated in 2007 when Congress passed the College Cost Reduction and Access Act.
This means borrowers only began becoming eligible for loan forgiveness under the program beginning in October 2017.
An attractive option for those wishing to work in a public service job or 501(c)(3) non-profit job, the PSLF program forgives the remaining balance on your federal Direct student loans after you make 120 qualifying monthly payments while working for an eligible employer.
Enrollment into the program can be a valuable asset for individuals who desire to work in public service, but fear a low salary will hamper their ability to repay their student loan obligations.
However, the standards to qualify for loan forgiveness under the program are stringent, and it is essential borrowers stay on top of their progress in the program to ensure their loans are ultimately forgiven.
As of June 30, 2018, 28,000 student loan borrowers had submitted 33,000 applications for public service loan forgiveness. 29,000 of those applications had been processed at that time.
A staggering 70% of those applications were denied due to student loan borrowers not meeting the PSLF program requirements, i.e., their loans weren’t eligible, they didn’t work for a public service or non-profit employer, had no made 120 qualifying payments, etc.
An additional 28% of applications for loan forgiveness were denied due to missing or incomplete information on the employment certification form.
Yes, you did the math right: a total of 98% of all processed applications for student loan forgiveness under the PSLF program were denied.
That has resulted in only 300 applications being approved, and 96 borrowers have collectively received approximately $5.5 million in public service loan forgiveness.
In order to make sure you find yourself in the small group of individuals who are successfully approved for public service loan forgiveness, below are four steps that are essential.
1. Enroll in a Qualifying Repayment Plan
Qualifying repayment plans include all of the Income-Driven Repayment (“IDR”) plans.
These plans base your monthly payment on your income, and typically reduce your monthly payment, especially if you have a high student loan debt-to-income ratio.
The 10-Year Standard Repayment plan is also a qualifying plan for PSLF, but you will not receive any loan forgiveness if you enroll in this plan.
Why?
If you complete the 10-Year Standard Repayment plan, you will have no loan balance left to be forgiven should you choose to seek forgiveness under the PSLF program.
If you are currently enrolled in a 10-Year Standard Repayment plan and anticipate qualifying for public service loan forgiveness, change to an IDR plan as soon as possible.
2. Certify your employment
In order to certify that you are working for a qualifying employer, you must fill out an Employment Certification for Public Service Loan Forgiveness form.
You will need your employer to fill out a portion of the form, too. Once you have completed the form in its entirety, you must sign it and send it to the U.S. Department of Education via regular mail or facsimile.
If your student loan servicer is already FedLoan Servicing at the time you are wishing to submit your form, you may simply upload the form to onto their website.
You should submit an Employment Certification form when you first begin employment, any time you change employers, and annually.
Doing so will help your loan servicer determine if you are on the right track for PSLF and allow them to notify you of any change that may need to be made.
3. Consolidate your loans if necessary
Only Direct federal loans are eligible for PSLF.
Individuals who borrowed before July 1, 2010, should check to see if all of some of their student loans were made under an older program called the Federal Family Education Loan (“FFEL”) Program, or to see if any of their loans are Federal Perkins Loans.
Loans from these different programs do not qualify for PSLF.
However, you may consolidate these loans into one Direct federal student loan, thereby making your student loans eligible for PSLF.
Only payments you make on the new consolidated Direct loan will be eligible for your 120 qualifying payments for PSLF. Any payments you made on your FFEL or Perkins loans do not count.
If you have both Direct federal loans and other types of ineligible federal student loans that you want to consolidate into one Direct loan to qualify for PSLF, use caution.
Any qualifying payments you made on your existing Direct loans towards your 120 payments for PSLF will be extinguished if you choose to consolidate your Direct loan with your other ineligible loans.
Thus, you will have to start over again to earn your 120 payments. You may want to leave your existing Direct loans alone, and consolidate your other federal loans into a separate Direct loan instead.
4. Make qualifying payments
A qualifying payment for the PSLF program is a payment you make:
1. After October 1, 2007;
2. Under a qualifying repayment plan;
3. For the full amount due as shown on your bill;
4. No later than 15 days after your due date; and
5. While you are employed full-time by a qualifying employer.
Qualifying payments can only be made when you are required to make a payment.
Therefore, you cannot make a qualifying payment while your loans are in: in-school status, the grace period, a deferment, or a forbearance.
Your 120 qualifying payments do not have to be consecutive.
For example, if you begin employment for a qualifying employer and make 60 payments, then change jobs to a non-qualifying employer, you will not lose credit for those 60 payments.
Once you return to a public service job, you will then begin accruing more qualifying payments, and progress to 61 payments, 62 payments, etc.
Keep in mind that you can receive credit for only one payment a month – any amount paid over your minimum monthly payment does not get credited towards an additional qualifying payment.
You cannot qualify for PSLF faster by making more than your required monthly payment amount.
The best way to ensure you are making on-time, complete payments in to sign up for recurring automatic payments through your student loan servicer.
Ensuring compliance with these requirements may sound daunting, but by following the above advice, you will be well on your way to public service loan forgiveness.