- The Public Service Loan Forgiveness, or PSLF, is primarily intended for government and nonprofit workers.
- To be eligible for forgiveness, you will need to make 120 qualifying monthly payments.
- The program’s track record has been shaky, so don’t rely on forgiveness as a panacea.
- Read more about Insider loan coverage here.
Federal student loan debt is on the rise across the country, leaving many borrowers unable to pursue other financial goals. The total debt to the government is $ 1.59 trillion, according to data last digit from the US Department of Education.
While the situation may seem grim, if you are in a relevant government position, you can take advantage of the Federal Government Service Loan Forgiveness Program, designed to ease some of this financial burden.
What is Public Service Loan Forgiveness (PSLF)?
The Public Service Loan Forgiveness (PSLF) was signed in 2007 and forgives debts to graduates work in the public sector after at least 10 years of service and appropriate pay. Your specific job does not matter, you just work for a government employer. There is no limit on the amount of money that can be forgiven.
You will not be eligible for the program if you work for a trade union, political party organization, or a commercial company (which includes government contractors).
Full-time employment is defined as working at least 30 hours per week, or as defined by your full-time employer, whichever is greater. All direct loans are eligible, and if you have an ineligible federal loan from the Federal Family Education Loan (FFEL) or Perkins Loan Program, you can combine these debts into a direct consolidation loan to qualify.
Income oriented repayment plans (IDR) Base your monthly payments on your income – and you can pay less per month with IDR than with the 10-year standard repayment program.
Although payments under 10-year standard repayment programs are qualifying payments, you have already paid off your entire loan balance after 120 months and you will have nothing to forgive. To take advantage of PSLF, you need an IDR plan.
However, your benefits may increase with IDR depending on the amount you owe and your income, so you may not benefit from PSLF even if you qualify.
How to qualify for PSLF
You cannot make the appropriate payment when you are in school or when your loans are in a grace period, grace period, or grace period.
You will not be able to qualify for PSLF earlier by making higher monthly payments; you must make payments to cover 120 separate months. These payments do not have to be consistent.
You will need to send this form every year or when changing employers. The government will use the information you provide to tell you if you are making the appropriate payments to PSLF.
Private student loans are not eligible for PSLF.
Is PSLF a reliable program?
During the coronavirus pandemic, the government suspended payments on federal student loans until September 30, 2021. If you continue to work for a suitable employer during this period, you will receive a loan from PSLF as if you continued to make timely payments.
However, you should not count on the forgiveness of student loans through PSLF, as the program’s shaky reputation has put many borrowers in trouble.
The program has been criticized by legislators and borrowers for its high failure rate; recent education department data found that 98% of borrowers still get rejected by PSLF. Biden campaigned for a fix, but some experts and lawmakers say the confusing system is to blame.
In a letter sent to Education Minister Miguel Cardone in May 2021, Democrats pushing for an amendment to the program described it as “surrounded by numerous bagels that will disqualify certain types of loans, repayment plans and payments themselves.”
While the PSLF program can help you write off your student loan debt, the actual implementation is disappointing. Consider all your repayment options before relying on PSLF.