The Public Service Loan Forgiveness Program is a government program created with the College Cost Reduction and Access Act of 2007.

The goal was to help professionals working in public service who have more federal student loans than their public sector salaries allow them to repay easily.

It aims to ensure that the best and the brightest don’t feel as though they have to leave these important jobs to join corporate America so that they can pay down their student debt.

Stressed out about your debt and hoping you qualify? Here are some things you need to know about being eligible and getting your student debt forgiven.

Who is Eligible for the Public Service Loan Forgiveness Program?

To qualify for Public Service Loan Forgiveness (PSLF), borrowers must meet the eligibility criteria. This includes:

Working for a Qualified Employer

Part of PSLF eligibility requires working for a qualified government organization (municipal, state, or federal organizations count) or a qualified 501(c)(3) organization is required. Full-time AmeriCorps or Peace Corps volunteers are also eligible for PSLF.

Some other non-profits also qualify, but not labor unions, political organizations, and most other non-profits that don’t qualify for 501(c)(3) status. Work for a government contractor? Unfortunately, that doesn’t cut it. You have to be working directly for the qualifying organization.

In addition to working for a qualifying organization, you have to work full-time. Generally, those who meet their employer’s definition of full-time or work a minimum of 30 hours per week. People employed at multiple qualifying organizations in a part-time capacity can also be considered full-time as long as you’re working a combined 30 hours per week.

Note that time spent working in religious instruction or worship does not count toward meeting the full-time requirement.

Having Eligible Loans

But working for the right type of employer is only half the battle. You also have to have eligible loans, including any Direct loans such as Stafford loans, PLUS loans (but not Parent PLUS loans), and Federal Direct Consolidation loans.

If you want to have your Federal Family Education Loan (FFEL) or Perkins loans forgiven, you may be able to; however, you’d have to consolidate those loans into a Direct Consolidation Loan first. However, any payments you made on the FFEL Program loans or Perkins Loans before you consolidated won’t count towards the necessary payments.

Private student loans are not eligible for federal forgiveness programs.

Applying for Public Service Loan Forgiveness

There are a few hoops to jump through to pursue PSLF. To apply for the program,

1. Consolidating any FFEL Program loans and Perkins loans you want to be forgiven into a Direct Consolidation Loan. This is necessary because if you consolidate your loans afterward, you won’t get credit for any qualifying payments you made on those loans. Already consolidated your Direct loans? Consider consolidating your Perkins Loans separately and start making new qualifying payments.

2. Signing up for an income-driven repayment plan.

There are four income-driven repayment plans to choose from; There’s Pay As You Earn, income-based repayment, income-contingent repayment, or Revised Pay as You Earn. This will likely allow you to pay less per month toward your loans than you would on the standard plan.

There are separate eligibility requirements for these plans, so be sure to check if you qualify.

3. Certifying your employment. To do this, print out an Employment Certification Form. PDF File and get your employer to fill it out and send it in for approval. The Federal Student Aid website suggests filling this form out annually or at least every time you switch jobs.

You can also use the Public Service Loan Forgiveness Help Tool to find qualified employers and get the forms you’ll need to fill out.

4. Making 120 qualifying monthly payments on your student loans while a qualified public service employer employs you. What if you switch employers? So long as you are still working for a qualifying employer, you’ll still qualify.

5. After you make the final payment, you can apply for forgiveness. You fill out an application. PDF File, send it in and wait. Then (hopefully!) you can celebrate your loan forgiveness.

The Current State of the Program

Because the program was created in 2007, the first people to qualify to have their loans forgiven applied for forgiveness in September 2017. But while the Congressional Budget Office estimates that the program could cost just under $24 billion in the next 10 years. PDF File and the U.S. Government Accountability Office believe that more than four million student loan borrowers qualify for the program; some aren’t aware that it exists. And even more, graduates have gotten bad information from loan servicers that rendered them ineligible.

In 2018, just 1% of applicants were approved for loan forgiveness through PSLF. In November 2020, the US Department of Education released updated information indicating that 2.4% of applicants have been approved for PSLF.

Pros and Cons of the Public Service Loan Forgiveness Program

The Advantages of the Program Are Pretty Straightforward:

1. Your balance of student loans is forgiven after a set time, which can be a relief. This works as a kind of bonus to make up for the low pay people working in the public sector may earn.

2. The amount forgiven usually isn’t considered income, so you aren’t taxed on it (that means you don’t have to save additional money to account for the IRS bill). other loan forgiveness programs will forgive your loans. Still, you might see a big tax bill when they do.

3. You get rewarded for being a do-gooder (just like your mom promised you would). It will feel great to know that you’re making a difference, and your government appreciates it enough to give you a break on your federal student loans.

4. You may pay less monthly because you’re on an income-driven plan. This means paying out less of your hard-earned cash every month.

The Disadvantages of the Program Are That:

1. The program is only open to those with certain types of employers. And it’s contingent on you staying with a qualifying public service employer for 10 years, which might not be a guarantee.

2. Some people aren’t aware of the program, partly because of a lack of education by employers, loan servicers, and schools.

3. There are a lot of hoops to jump through to get your loans forgiven. Sounds fun, right? Plus, if you don’t jump through a hoop properly, you could jeopardize your forgiveness.

4. The extra money that could be earned from working for a corporate employer may help you pay off your loans sooner than through PSLF.

5. You might end up paying more interest by making 120 payments than if you budgeted to repay your loans in less than 10 years aggressively. Also, if you enroll in the PSLF program and then stop working for a public service employer, you might be left with a larger loan to repay because of the interest accumulated under the income-based repayment plan.

Alternatives to the Public Service Loan Forgiveness Program

Another program available to some individuals is the Teacher Loan Forgiveness program. This program is available to full-time teachers who have completed five consecutive years of teaching in a low-income school. This program also has strict eligibility requirements that must be met to receive forgiveness.

These federal forgiveness programs do not apply to private student loans. If you are looking for ways to reduce your interest rate or monthly payments on private student loans, refinancing with a private lender could be an option.

It is important to mention that refinancing your federal student loans with a private lender may make you ineligible for the Public Service Loan Forgiveness program should you choose that route.

The Takeaway

The Public Service Loan Forgiveness program can be one way for eligible borrowers to have their federal student loans forgiven. The program has stringent requirements that can make successfully receiving forgiveness through PSLF challenging.

Refinancing is another option that can allow borrowers to secure a competitive interest rate on student loans. Refinancing federal loans eliminates them from borrower protections.

This post originally appeared on SoFi.com
 



IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO, YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE  FOR MORE INFORMATION.

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IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO, YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE  FOR MORE INFORMATION.


Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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