Smiling Federal Employee

Via the Public Service Loan Forgiveness Program, student loan forgiveness for Federal Employees remains widely available in 2016, but the nature of those benefits is set to change soon.

Actually, in addition to Federal employees, the PSLF program offers student loan forgiveness for all Government Employees, including those working at the Federal, State and even Local level.

Better yet, President Obama’s Student Loan Forgiveness reforms just recently modified the public service loan forgiveness program to make it even more beneficial than before!

Unfortunately, the President’s 2015 fiscal year budget proposes to eliminate some of the most helpful parts of the program, so you’d better start taking advantage of it before it’s too late.

Government Employee Student Loan Forgiveness

How does it work? Fortunately, it’s quite simple:

Anyone employed by the Government and working full-time satisfies the employment condition required to qualify for Public Service Loan Forgiveness, making them eligible for total loan forgiveness.

In an nutshell, you’re able to receive student loan forgiveness for Government workers by working for the Federal Government, a State or Local Government, simply by making 10 years’ worth of payments on your qualifying student loan.

It might not sound like much, but trust me – it’s a big deal.

Sure, 10 years will require making a lot of payments, but the general population (non Public Service workers) doesn’t qualify for forgiveness benefits until they’ve made at least 20 years of payments!

What are the Eligibility Guidelines?

There are four main conditions that you must satisfy in order to qualify for federal or state employee loan forgiveness.

Those four requirements are:

  1. You must have received your Student Loan under the William D. Ford Federal Direct Loan Program, and your loan may not be in, or have ever been in default
  2. You must make 120, full, on-time and scheduled monthly payments on your Direct Loan (and only payments made after October 1st, 2007 will count toward the required 120)
  3. You must make those 120 monthly payments while enrolled in a qualifying Federal Student Loan Repayment Plan
  4. You must be, or have been working in a full-time position at a qualifying public service organization (any Government position counts) at the time each of those 120 monthly payments were made

It seems pretty complicated, but for anyone who’s got a Federal Direct Loan, and who also works for a Government agency of any sort (Police, Firefighter, Park Ranger, Civil Service, DMV, etc.) this program is virtually guaranteed to work, so participating is a no-brainer.

1. Qualifying Loans

Are all student loans eligible for Government worker loan forgiveness? Unfortunately, no.

Private student loan debt cannot be forgiven under this program, though you may have access to other forms of Private Student Loan Debt Relief.

In fact, even some Federal loans won’t qualify for these benefits.

Only those Federal loans issued under the William D. Ford Direct Loan Program are eligible for Government employee forgiveness.

That means FEEL Loans, Stafford Loans, Perkins Loans, Grad Plus Loans and any other Federal Student Loan will not qualify for forgiveness benefits unless they’re first consolidated into a Direct Consolidation Loan.

2. Qualifying Payments

There’s three qualifying factors that determine whether or not any particular monthly payment will count toward your 120 payment threshold, including:

  1. Payments Must be On Time
  2. Payments Must be In Full
  3. Payments Must be Scheduled

Again, as long as you’re working for a Federal, State or Local Government organization and making monthly payments on time, in full, and according to a qualifying Repayment Plan, you won’t have anything to worry about.

3. Qualifying Repayment Plans

Because the proposed 2015 Fiscal Year budget includes a stipulation that only income-based repayment plans will qualify for Government employee forgiveness, we recommend that you enroll in one of them as soon as possible.

The income-based repayment plans include:

For now, the other plans (the Standard Repayment Plan, Graduated Repayment Plan and Extended Repayment Plan) remain eligible for forgiveness, but that is likely to change in just a few short months.

4. Qualifying Employment

This is probably the easy part, since you wouldn’t be reading this page unless you were already a Government employee, or considering becoming one and researching the many benefits involved.

Loan forgiveness is available to all Government employees, including those working for any Federal, State, or Local Government agency, entity or organization.

As long as you’re employed in one of those positions, and working full-time, then you’ll qualify for student loan forgiveness benefits once you’ve made the required 120 payments.

If you don’t plan on working for a Government agency for 10 full years, then don’t give up quite yet, because all of the following professions also qualify for the same forgiveness benefits offered by the Public Service Loan Forgiveness program:

Additionally, keep in mind that you don’t have to do your 10 year stint of Public Service all at the same organization, or even for the same type of organization, or in the same line of work.

In fact, you could mix 3 years of Government service with 5 years of Nursing and 2 years of Teaching, then receive loan forgiveness at the 10 year mark.

Potential Changes

The most important thing to keep in mind when considering pursuing Local, State or Federal employee loan forgiveness benefits is that they are about to change, and in a big, bad way.

As we mentioned earlier, President Obama’s 2015 Fiscal Year Budget proposes many changes to the loan forgiveness program, including some significant cutbacks that will lead to a lot of financial pain for certain people.

Briefly, the potential changes include:

  1. Blocking High Debt Borrowers From Forgiveness at 10 Years
  2. Capping Loan Forgiveness at a Maximum of $57,000
  3. Only Counting Payments Made Under Income-Based Repayment Plans
  4. Forcing Married Borrowers to Count Their Spouses Income When Determining Monthly Payments

It may not sound like much, but these changes have massive implications, each of which could end up costing you tens of thousands of dollars (or more) over the course of your loan.

I’m following the proceedings on the 2015 Fiscal Year Budget very closely, and I will update this page once we’re sure about which provisions are going to get enacted, and which will be put aside.

Hopefully, for all of our sake, none of these will actually go to law written as-is.

Questions? Comments? Concerns?

If you have questions about how to qualify for the Government worker student loan forgiveness program, then please feel free to ask away in the comments section below.

I’ll do my best to get you a response within 24 hours, and if I can’t answer your question, then I’ll direct you to someone who can.

What do you think about this program? Is it fair? Does it encourage over-borrowing, or does it help subsidize the all-to0-expensive costs of higher education? Should it continue? Should it be modified?

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Tim's experience battling crushing student loan debt led him to create the website Forget Student Loan Debt, where he offers advice on dealing with excessive student loans and advocates a cautious approach to funding education costs via borrowed money.