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How does Public Service Loan Forgiveness work?

The federal Public Service Loan Forgiveness Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, you may qualify for forgiveness of the remaining balance due on your William D. Ford Federal Direct Loan (Direct Loan) Program loans after you have made 120 qualifying payments on those loans while employed full-time by certain public service employers. You must make 120 qualifying payments on your eligible federal student loans after Oct.1, 2007, meaning the first applications for forgiveness were submitted on October of 2017.

Currently, the Department of Education is only approving about 1% of the forgiveness applications. One of the main reasons is the misinformation borrowers get from loan servicing companies (like Navient, Nelnet, Great Lakes, FedLoan, and others), which is why we support AB 376: Borrower Bill of Rights. We encourage nonprofit leaders and staff to learn about the Public Service Loan Forgiveness program and make sure they are - and remain - eligible for forgiveness.

What does “loan forgiveness” mean?

Loan forgiveness means the federal government will erase the remaining balance of your student loans after you’ve met the requirements and your application for forgiveness is accepted. Your loan balance (including interest) is forgiven regardless of the amount you borrowed or owe, your income level, your job title or position, the number of different jobs you’ve held during that time, or how many different organizations you’ve worked for. BONUS: you won’t have to pay income tax on the amount forgiven (check with your tax professional to make sure that applies to your specific situation.)

Can I be certain that the PSLF program will exist by the time I’ve made 120 qualifying payments?

There are no guarantees. Congress created the program and has the power to change or end it. It is unlikely that they’ll end the program without “grandfathering” those who have already submitted eligibility documentation (i.e. if you have submitted one or more Employment Certification Forms and FedLoan Servicing is tracking your progress toward qualifying for PSLF). The Department of Education is doing a terrible job of managing the program, but it's still worth making sure you're qualified and submitting the required paperwork.

Am I Eligible for Public Service Loan Forgiveness?

You must work for a qualified employer while making 120 qualifying payments on eligible loan type(s) through a qualifying repayment plan. Below are all the details about what employers, payments, loan types, and repayment plans qualify.

How do I know if I work for a qualified employer?

Not all nonprofits are qualified employers. 501c3 public charities* are qualfied as well as most government agencies including tribal government and educational entities. These include:

  • Public child or family service agency
  • Tribal college or university
  • Peace Corps
  • AmeriCorps

*Other private nonprofits may be qualified if they offer certain services -- please check the definition in Section 4 of the Employment Certification Form. Unfortunately, at this time labor unions, partisan political organizations, 501c4, and foreign nonprofits not operating in the US are not qualified employers.

Does my job title matter?

No. Your job title/position and the type of work you do at the organization doesn’t matter – you can be the CEO, an administrative assistant, the janitor, a social worker, or anything else. As long as you are a paid employee you are eligible.

Do I have to work 40 hours per week? What if I work part-time?

You must work an average of 30 hours or more each week for a qualifying employer. If you work part-time for more than one nonprofit (or other qualified employer) that together add up to 30 or more hours per week, you are eligible. You’ll need to submit an Employment Certification Form from all of your employers – each marking that you’re “part-time” and certifying the average number of hours worked at their organization.

What loans qualify? Do parent loans qualify?

Federal Direct Loans including parent loans qualify:

  • Federal Direct Stafford/Ford Loans
  • Federal Direct Unsubsidized Stafford/Ford Loans
  • Federal Direct PLUS Loans (including Parent Federal Direct PLUS loans)
  • Federal Direct Consolidation Loans

Federal Family Education Loans (FFEL) and Federal Perkins Loans do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan. However, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated them don’t count. For more information on consolidation see: https://studentaid.ed.gov/sa/repay-loans/consolidation. Private loans are not eligible for the program.

How do I check what loans I have and their status?

You can download and print your student loan/financial aid report from the federal government’s database: https://studentaid.ed.gov/sa/. If your loan does not appear there, your student loan is a private loan, and not eligible for Public Service Loan Forgiveness.

What repayment plans qualify?

The following is a list of the repayment plans that qualify for PSLF. Each plan has its own qualification requirements - for more information about each see: https://studentaid.ed.gov/sa/repay-loans/understand/plans.

  • Standard Repayment Plan (10 years) – if you’re on this plan your loans will be paid off in 10 years so loan forgiveness won’t apply. However, payments made while on this plan will qualify for PSLF if you switch to an income-driven repayment plan before your pay off the loan(s).
  • Income-Based Repayment Plan (IBR)
  • Income-Based Repayment Plan II (IBR II)
  • Pay As You Earn (PAYE)
  • Revised Pay AS You Earn (RePAYE)
  • Income Contingent Repayment Plan (ICR)

The graduated repayment plan and extended repayment plan are not eligible. Many people choose the graduated repayment plan or extended repayment plan because they cannot make the minimum payments required by the income-driven repayment plans. It might be worth stretching your monthly budget to make the income-driven repayment plan work, and thus get out of debt sooner, but it may not. If you were on one of the ineligible repayment plans but met the other criteria, you may be eligible for the Temporary Expanded PSLF. Find out more here.

Do all loan payments count toward loan forgiveness?

In order to qualify for forgiveness, you must make 120 on-time payments defined as:

  • One payment per month (additional payments in one month won’t count)
  • 120 = 10 years if payments made consecutively
  • Payments do not have to be made consecutively
  • On-time means within 15 days of the due date

Only payments made after October 1, 2007 count toward forgiveness. Payments made while loans are in default, deferment, in-school status, or forbearance do not count.

I didn’t know about this program – can I get loan forgiveness now?

Yes! If you have a qualified loan, you’ve been making payments on a qualified repayment plan, and you’ve worked for the nonprofit sector full time for ten years with one payment per month, then you’re likely eligible for forgiveness even if you’ve never heard of the program before. Most people, however, have not been on a qualified repayment plan, or their loans aren’t qualified loans. You can start now – but only payments going forward (on qualified loans, through a qualified repayment plan) will count toward the 120 payments. (Check out the Temporary Expanded PSLF if you met all the criteria but were on an ineligible repayment plan for part of that time. You may be able to get "credit" for payments made during that time.)

My loans are with Sallie Mae or Navient – do they count?

Sallie Mae and Navient are examples of loan servicing companies (the people who bill you) and are not indicators of what type of loans you have. Check https://studentaid.ed.gov/sa/ to see your loan type(s). To apply for forgiveness your loan servicer needs to be FedLoan Servicing. You can switch by submitting a PSLF Employment Certification Form and your loan servicer will be automatically changed to FedLoan, assuming your loans are eligible. You DON'T need to have FedLoan as your servicer for the entire 10 years, only when you apply for forgiveness.

What if I leave the nonprofit sector and go back to school, or take a job at a for-profit company? Will any of my loans be forgiven?

The 120 payments do not have to be consecutive, so you could leave the nonprofit sector to work elsewhere, take time off to travel or return to school, and come back without losing credit for the payments you’ve already made. However, payments made while you’re traveling or at a for-profit job won’t count toward the 120 requirement payments – only payments made while employed full time by the nonprofit sector will count. Partial loan forgiveness is not available. For example, if you work for a nonprofit and make payments on an eligible repayment program you’ll have 24 of the 120 payments made at the end of 2 years. If you then take a job for a year working on political campaigns or at a for-profit company, any payments you make during that time won’t count toward the 120 payments. So after 3 years, you’ll have made 36 payments but only 24 will count toward PSLF.

After 120 payments I’ll still owe a lot – will they forgive the full amount, including interest?

Yes, when your application for PSLF is approved the outstanding balance is forgiven including interest. Currently, there is no limit on the amount of debt forgiven. Even better, unlike other programs, the amount forgiven is not taxed as income.

Why 120 payments? 10 years is a long time!

The purpose of PSLF is to help move (and keep) people in nonprofit or public service jobs they may not consider taking without PSLF. So, ten years of payments means ten years of working for communities, which is a good thing for our society.

How do I apply for forgiveness?

The Public Service Loan Forgiveness (PSLF) program began accepting applications in October 2017 (ten years from the starting year of 2007). You can find the application for forgiveness here. Note: keep all your records, including all of your signed Employment Certification Forms, even after submitting them to FedLoan. Also, make sure you keep the letters you receive from FedLoan stating that your loans/payments meet the criteria. They routinely lose paperwork, and some people have had to fight with them to prove they were deemed eligible for forgiveness in the past. 

Should I do anything now? Or should I wait until I’ve made 10 years of payments?

There is an important step you should take now to confirm your eligibility: with the help of your employer, complete and submit an Employment Certification Form for all the years you’re likely eligible for the program (since 2007.) You only need one form per employer noting the dates of employment and average hours worked per week. Going forward, submit the Employment Certification Form every year even if you don’t change jobs and even though it’s not required. After submitting an employment certification form you will receive a letter acknowledging its receipt and notifying you of the qualifying payments. FedLoan Servicing will track your progress toward the 120 payments and your public service – which you should double-check online. Your online account will also tell you what month and year you can expect to apply for forgiveness. Mistakes are common in the FedLoan Servicing system – so check your account frequently and save all your paperwork!

What other loan forgiveness programs are available?

California health care professionals can apply for State Loan Repayment Program, designed to increase the number of primary care physicians, dentists, dental hygienists, physician assistants, nurse practitioners, certified nurse midwives, pharmacists and mental/behavioral health providers practicing in federally designated California Health Professional Shortage Areas (HPSAs). For more information: http://www.oshpd.ca.gov/HWDD/SLRP.html Teachers may apply for the federal Teacher Loan Forgiveness Program which is intended to encourage individuals to enter and continue in the teaching profession. Under this program, if you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness. For more information: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher Teachers with Federal Perkins Loans may be eligible for loan cancellation for full-time teaching at a low-income school, or for teaching in certain subject areas. You can also qualify for deferment for these qualifying teaching services. Check with the school that made your Federal Perkins Loan for more information.

For more information, answers, and all the forms you'll need for the Public Service Loan Forgiveness Program go here

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