Developed by Congress in 2007, public service loan forgiveness allows government or non-profit workers to have their federal student loans forgiven after 10 years of on-time payments and employment within their field.
However, it’s important to know that not all borrowers qualify for this program, which can be easy to misunderstand if you’re not careful. Here are seven common myths about public service loan forgiveness, and the facts behind them.
You have to be employed by a government organization to qualify
You have to be employed by a government organization to qualify. In order to qualify for the loan forgiveness program, you must work full-time at a public service organization and make 120 monthly payments on your qualifying federal student loans. The loan must also be one of the following: Direct subsidized or unsubsidized Stafford loans; Direct PLUS loans; or Direct Consolidation loans.
If you’re considering this option but are still unsure if it is right for you, contact your school’s financial aid office. They can provide more information about eligibility requirements and what qualifies as public service employment, and public service loan forgiveness.
You have to make 120 qualifying payments
Making 120 qualifying payments is the only way to qualify for public service loan forgiveness. That’s the only way to get your loans forgiven, and it doesn’t matter how much you owe or when you started working in public service. The only other requirement is that your employer is qualified under the Department of Education’s (ED) certification program – meaning they’re a not-for-profit organization or government agency.
If you’re not sure whether your employer qualifies, contact ED for assistance on what type of entity they are. Some employers qualify as eligible lenders while others qualify as certified. If your employer is not eligible, you may be able to apply through a certified lender.
Only certain types of loans are eligible
Only certain types of loans are eligible for public service loan forgiveness, so not all student debt is eligible. The two types of loans that are eligible are Direct Loans and Perkins Loans. PLUS loans, Stafford loans, and Grad PLUS loans do not qualify for PSLF.
If a borrower has multiple types of federal loans and one type isn’t eligible for PSLF, the remaining balance will be forgiven after 120 qualifying payments. To see which type of federal loan you have, log into the National Student Loan Data System (NSLDS) or contact your servicer.
You have to have a high income to qualify for public service loan forgiveness
You have to have a high income to qualify. False! The income requirement is based on the amount of debt you’re carrying, not your income. In other words, if you are eligible for PSLF, it doesn’t matter what your salary is or how much money you make. What matters is how much student loan debt you owe.
So as long as you carry more than $57,000 in federal loans and meet all the other qualifications, then PSLF will be available to you. Remember that only certain types of loans can be forgiven with this program. If you work at a non-profit organization and qualify, then the government will forgive any remaining balance after 10 years (120 qualifying monthly payments) of employment.
If you work at a 501(c)(3) tax-exempt organization that’s not necessarily non-profit (such as museums), then there’s no time limit but an equal number of monthly payments must be made before your public service loan forgiveness is granted.
5 Things you must know that qualify a person
- You have to work full-time to qualify: Most people think you need to work full-time to qualify for the PSLF program, but that’s not true! You only need to work at least 30 hours a week and make a little under $53,000 per year. This means that you can be employed part-time and still qualify.
- When does it start? The forgiveness doesn’t start until 10 years after the first qualifying loan is made.
- Can I go back and change my repayment plan? Yes, as long as you are working in public service, you can change your repayment plan as often as needed.
- What if I don’t pay my loans on time? As long as you’re making timely payments and meeting all of the requirements, your eligible loans will get forgiven after 120 monthly payments. If you miss or are late with a payment, it could result in changes to your eligibility date or even cancellation of the entire loan forgiveness benefit.
- Who qualifies? To qualify for the public service loan forgiveness, you must be working full-time (at least 30 hours a week) in one of the following professions:
- Doctoral-level teaching positions,
- Medical positions that typically require licensing,
- Emergency management positions,
- Law enforcement positions where law enforcement officers routinely carry firearms (e.g., U.S. Marshals, Bureau of Alcohol, Tobacco and Firearms agents),
- Positions with the Armed Forces or National Guard where members can earn federal recognition, certain specialized firefighting jobs (e.g., airport fire departments),
- Qualified military defense contractor positions,
- Qualified early childhood education providers including licensed preschools,
- Elementary schools,
- Secondary schools such as career academies or specialty schools like music and arts conservatories provide training in specific fields such as classical music performance, etc.
You have to be employed in a public service job to qualify
You might be eligible for partial forgiveness of your federal student loans if you work in public service. You have to meet certain qualifications in order to qualify for the public service loan forgiveness program, which includes working in a qualifying job, making 120 on-time monthly payments on your federal student loans, and not being in default on any of your federal student loans. You can also qualify if you are employed by the government or a tax-exempt nonprofit organization that is not primarily engaged in financial activities.
Public service loan forgiveness: The key difference between qualified employment and unqualified employment is whether your employer qualifies as a publicly supported employer. A publicly supported employer is an organization that either derives its revenue from such sources as contributions, grants, or other forms of charity; or has been designated as exempt from income taxes under IRC Section 501(c)(3) (as opposed to having to pay taxes).