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The federal Public Service Loan Forgiveness (PSLF) program is notorious for its strict eligibility requirements. That’s what thousands of borrowers learned in 2017 when applying for the first round of loan forgiveness. Only a small fraction of applicants—approximately 1%—had their loans discharged.
So if you’re following the PSLF route, it’s important to be aware of how any major life change could affect your eligibility status. Here is a guide for PSLF borrowers looking to continue their education.
How Does Public Service Loan Forgiveness Work?
Public Service Loan Forgiveness is a government program that only applies to borrowers with federal loans. Private loans are not eligible for PSLF.
Borrowers have to make 120 monthly payments while working for an eligible employer, usually a government agency or nonprofit, after which point the remaining amount is forgiven. The forgiven amount is not considered taxable income.
You must be a W2 employee; contractors are not eligible for PSLF. You must also be a full-time employee or work two part-time jobs—both at qualifying employers—totalling 30 hours a week or more.
Only federal direct loans are eligible for PSLF. If you have a Federal Family Education Loan (FFEL), you’ll have to convert it into a direct consolidation loan to qualify for PSLF. If you’ve already been making payments toward PSLF, do not consolidate any direct loans with your FFEL loans or the clock counting down to loan forgiveness will restart.
If you have Perkins loans, those are eligible for loan cancellation after only five years of service if you work in a qualifying position. However, if you consolidate them into a direct consolidation loan, you’ll have to meet the 120-payment requirement for PSLF.
The 120 payments do not have to be consecutive. It’s perfectly acceptable to take a break, like if you’re unemployed, change jobs or go back to school.
While working toward PSLF, you should be on an income-driven repayment (IDR) plan, which uses your family size and income to determine your monthly payment. Borrowers on the standard, extended or graduated student loan repayment plans won’t have those payments count toward PSLF.
How to Apply for Public Service Loan Forgiveness
Borrowers are strongly encouraged to file an employer certification form at least once a year and send it to the Department of Education. This form will document that both your loans and employer qualify for PSLF. While you’re not required to file this form every year, it will make the loan forgiveness process easier.
If you wait to submit the form until after you’ve made 120 payments, you’ll have to ask every previous employer to verify your dates of employment. This can be difficult and time-consuming, so it’s better to certify once a year.
After you complete the form, the government will certify the payments made under that employer. Once you’ve made 120 payments, you can file for forgiveness.
Only federal loans are eligible for PSLF. If you refinance your loans with a private lender, you will no longer qualify for PSLF or any other type of federal loan forgiveness program.
How to Get Credit for PSLF When You Go Back to School
When you go back to school, your loans are automatically placed under in-school deferment, which means you won’t owe any payments. However, if you’re going to keep working full time for a PSLF-eligible employer, you can make payments on your loans that will count toward PSLF.
The first step is to contact each loan servicer and ask them to remove the in-school deferment from your account. This process may take some time, so be persistent if the deferment isn’t disappearing from your account.
Then, keep making payments as before. Make sure to submit the employer certification form while you’re in school to verify that your payments are being tracked correctly.
Does Working During Grad School Count Toward PSLF?
Because PSLF has strict rules about employer eligibility, you should not assume that just any nonprofit will count.
First, you must be a W2 employee. Having an internship, employment or doing contract work for a nonprofit does not make you eligible.Some grad students will qualify for work-study, which is a federal program that provides students with demonstrated financial need a part-time job, usually on campus. But since those jobs typically don’t allow students to work more than 30 hours per week, as required for PSLF, they won’t make you eligible for the program.
Another important consideration is that any new loans you take out to pay for grad school won’t be eligible for PSLF until you either graduate or leave school. Then, you’ll have a six-month grace period. After that time, the loans will enter repayment and your monthly loan payments will start counting toward PSLF. If you make payments on those loans during school, they won’t count toward PSLF.
What to do After You Graduate
If you took out more federal loans to pay for grad school, those will have their own timeline for PSLF and will not be forgiven at the same time as your previous loans. If you start working at a PSLF-eligible organization, you should file the same employer certification form you were using before.
Borrowers should also remember not to consolidate undergraduate and graduate loans. Every time you consolidate loans, any previous PSLF payments are wiped clean, forcing you to start over.
Borrowers should track how many payments they’ve made under PSLF and keep copies of their employer certification forms, ideally in an online cloud storage account. The government won’t notify you when you become eligible for loan forgiveness, so it’s your responsibility to do the math and monitor when you’re ready to apply.
Once you’ve made 120 eligible payments, contact your loan servicer and ask them to discharge the loan. If you’ve filed your employer certification form every year and had your payments certified, this process should be relatively simple.
Other Loan Forgiveness Options
Depending on what you’re going back to school for, you may be eligible for loan forgiveness programs on top of PSLF. The following are some possible options.
Teacher Loan Forgiveness
Teachers who work in a low-income school for five consecutive years can have some of their federal loans forgiven. You can check the government’s directory to see if your school qualifies.
Math, science and special education teachers can have $17,500 worth of qualifying loans forgiven, while all other teachers can have $5,000 worth of loans forgiven.
Nurse Loan Forgiveness
Nurses who join the Nurse Corps loan repayment program can have up to 85% of their loan balance forgiven when they work for three years in an underserved or low-income area.
Nurses can work for two years and have 60% of their loans forgiven. They also have the option of signing an extension for a third year to have an additional 25% forgiven.
Lawyer Forgiveness Programs
Lawyers have access to several forgiveness programs, including the Department of Justice Attorney Student Loan Repayment Program. This requires that you work for the Department of Justice to have $6,000 worth of loans forgiven annually, up to $60,000 total.
Lawyers who work as public defenders can apply for the John R. Justice (JRJ) Program, and the amount forgiven depends on the state where you work.