What is Public Service Loan Forgiveness (PSLF)?
Public Service Loan Forgiveness (PSLF) is a student loan discharge program that is designed to encourage fresh graduates and young professionals join and continue serving public service institutions. Under this program, individuals who are a part of public service and who have made 120 income-based loan repayments can get a waiver on outstanding student loan debt.
How Does the Discharge Process Work?
Under the Public Service Loan Forgiveness or PSLF program, individuals serving a public organization can get loan forgiveness after making 120 qualifying income-based monthly payments. For PSLF, the amount of monthly payments is determined on the basis of applicant’s income and family size.
What are the Eligibility Requirements for PSLF?
While the requirements for PSLF may sound simple, it is important to determine the types of loans that can be discharged under this program.
Let’s have a look at basic eligibility requirements of PSLF.
Type of Loan
The following types of loans are eligible for PSLF:
- Direct consolidated loan
- All Direct loans, subsidized and unsubsidized
- Direct PLUS loans
- All Direst Stafford loans, subsidized and subsidized
Other types of federal loans and loans offered by private lenders are not eligible for PSLF. However, federal loans that are consolidated into a direct loan using the Direct Loan Consolidation program are considered eligible for PSLF.
Nature of Employment
Full-time employees of local, federal, and state organizations and of those non-profit organizations that have been declared as tax-exempt by Internal Revenue Code (IRC) can apply for PSLF. In order to be considered a full-time employee, an individual must for a minimum of 30 hours per week at a public service organization.
Payments
Outstanding debt is discharged after 120 monthly payments. Periods of deferment and forbearance do not contribute towards loan discharge.
What is the Application Process?
Payments made before October 1, 2007 are not considered under PSLF program. Also, in order to qualify for loan discharged under PSLF, the applicant must have made 120 monthly payments. Therefore, no individual will be eligible for PSLF until 2017.
The US Department of Education has announced that applications will be made available in 2017 and has released an employment certificate, which is to be submitted every year by applicants to make sure that the eligibility data is appropriately documented.