How to Use PSLF to Get Rid of Your Federal Student Debt
In 2019, The Public Service Loan Forgiveness Program (PSLF for short) remains the single best and most powerful Federal Student Loan Forgiveness Program on offer, but unfortunately, President Trump’s proposed 2020 budget unveiled on March 11th, 2019 may change all that…
I’ll go through the details of PSLF, including how it works and why you should try to get enrolled in the program immediately, before it’s shut down, but before we get into that, please sign my Petition to SAVE PSLF from President Trump’s Proposed 2020 Budget Cuts!
Why is PSLF so important? Because the Public Service Loan Forgiveness Program offers complete federal loan forgiveness benefits in return for qualifying public service work, meaning that it allows you to wipe out your Federal student debt in exchange for working in a public service field (like teaching, nursing, Government positions, etc.) for a period of 10 years.
PSLF is the gold-standard for Student Loan Forgiveness, as it’s the fastest and cheapest way to get rid of your loans without paying for them.
How Does PSLF Work?
The Public Service Loan Forgiveness Program is simple: if you agree to work in a qualifying job and make all of your student loan payments in full and on time for a period of 10 years, then the Federal Government will write off your remaining Federal student loans.
The best thing about the PSLF program is that it allows you to get rid of your student loan debt without paying for them.
The second best thing about PSLF is that it’s relatively easy to qualify for the benefit because it hinges on your employment status, and MANY different types of jobs qualify for the program.
Below, I’ll detail all the eligibility conditions, then talk about the way the qualifications process works.
If you have questions about anything related to PSLF, please read this entire post, then if they still aren’t answered, feel free to ask away in the Comments section at the bottom of this page and I’ll get you a response as quickly as possible.
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For help with Federal Student Loans call the Student Loan Relief Helpline at 1-888-906-3065. They will review your case, evaluate your options for switching repayment plans, consolidating your loans, or pursuing forgiveness benefits, then set you up to get rid of the debt as quickly as possible.
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Eligibility Guidelines for PSLF
To qualify for PSLF, you must:
- Have an outstanding balance on a Federal Student Loan that you received under the William D. Ford Federal Direct Loan (Direct Loan) Program
- Make 120 on-time, full and scheduled monthly payments on your Direct Loan, limited to payments that were made after October 1st, 2007
- Make your 120 payments under a qualifying repayment plan (one of the Income-Based Repayment Plans, outlined in detail below)
- While making each of these 120 payments, you must be working full-time at a qualifying public service organization (see below for details)
The biggest requirement for PSLF are that you work a job that qualifies as public service – a role working for the Government at any level, Federal, State or Local, with a 501(c)(3) Nonprofit Organization, or in any other role that counts as “Public Service”.
Once you’ve ensured that your job qualifies, all you need to do is make sure that you’re enrolled in one of the Income-Based Federal Student Loan Repayment Plans, including the Pay As You Earn Plan, the Revised Pay As You Earn Plan, the Income-Based Repayment Plan or the Income-Contingent Repayment Plan.
Assuming you have taken care of these two requirements and you make your 120 scheduled, on-time payments, you will have earned complete forgiveness for whatever amount of money is still owed on your loan!
Which Student Loans are Eligible for PSLF?
While it may seem unfair, not all Federal Student Loans qualify for PSLF forgiveness. In fact, some of the most popular forms of loans will disqualify you from eligibility for this benefit.
Only loans that have been awarded under the William D. Ford Federal Direct Loan Program are eligible for PSLF.
If you received loans under the Federal Family Education Loan (FFEL) Program, the Stafford Loan Program, the Perkins Loan Program, the Grad Plus Loans Program, or any other Federal loan program, then you will not qualify for Public Service Loan Forgiveness benefits.
However, if you do happen to have FFEL loans or Perkins Loans and you do want to take advantage of the PSLF plan, then you MAY be eligible if you first turn those loans into a Federal Direct Consolidation Loan.
Keep in mind though that only the payments you have made on the new Direct Consolidation Loan will count toward your 120-month (10 year) payment requirement for PSLF eligibility.
To find out about how to consolidate your FFEL or Perkins loan into a Direct Consolidation Loan, check out my www.nslds.ed.gov to find out (this is a Government-backed website, so you can trust it!).
Which Payments Count Toward the 120 Payment Threshold?
Three different factors go into determining whether or not each of your monthly payments will qualify as one of the 120 required to receive complete PSLF forgiveness. They are:
- Payments Must Be Made On Time – Any payment received by whoever services your Direct Loan no later than 15 days from the scheduled payment due date counts as an “On-Time payment”.
- Payments Must Be Made In Full – Any payments make on your Direct Loan that equal or exceeds the amount you are required to pay each month according to your Direct Loan repayment schedule count as “Full Payments”. If you made, or make a payment that is less than the amount set in your repayment schedule, then those payments will not count toward your required 120 payments. However, if you make multiple payments per month equaling or exceeding the required full monthly payment amount, then you will get credit for a single Full Payment. You cannot game the system by making many payments each month though, as the maximum number of credits that you can receive in a 30 day period is 1.
- Payments Must be Scheduled – Any payments that you make on your Direct Loan which is made under a qualifying repayment plan after your loan servicer has billed you for the month’s payment will count as “Scheduled Payments”. Any payments made while your loans are in the in-school status, or during a grace period status, or under deferment or a forbearance period will not count as Scheduled Payments.
*NOTE: Qualifying payments must also be made as separate monthly payments. You cannot game the system by making lump sum payments, or payments for future months that you have not yet been billed for, as these will not count as qualifying payments toward your 120 payment requirement.
However, if you are employed with AmeriCorps or the Peace Corps, you may fall under special rules allowing for lump sum payments. Contact your employer for additional details.
Keep in mind that only payments which were made while you were a full-time employee at a qualifying public service organization will count toward your required 120 qualifying monthly payments.
You also need to be a full-time employee of a qualifying public service organization both at the time that you apply for PSLF benefits, and when your student loan forgiveness is actually granted.
What Repayment Plans are Eligible?
Only the Federal Income-Based Repayment Plans are eligible for PSLF, meaning that if you’re not making payments under one of those plans, your payments won’t count toward the 120 payment threshold.
Also, you should keep in mind that your repayment process could actually completely invalidate the PSLF benefit, as, for example, if you decided to use the Income-Based Repayment Plan throughout the entire course of your loan, never missing a payment, and paying MORE THAN REQUIRED sometimes, then you may end up paying off the entire balance of your loan, leaving nothing to be forgiven at the 120 payment threshold.
You need to pay close attention to how much you’re paying each month, how much will actually be left after you’ve made 120 payments, and determine whether or not PSLF is actually going to end up saving you money in the long-run.
Also, if you are not absolutely certain that you want to remain employed at a qualified public sector position for the 10 year duration required to qualify for the benefit, then you should avoid counting on PSLF at all, because leaving a qualifying position will mean sacrificing access to the benefit.
Note that you can hop in and out of qualifying positions over time, and that the requirement for qualifying payments doesn’t have to be consecutive. As an example, you could make 50 qualifying payments, leave a qualifying position and make 50 non-qualifying payments then come back into a qualifying position and make the final 70 qualifying payments to hit your 120 payment threshold.
You really don’t want to do that though, as the way to maximize your return with PSLF is ensuring that the next 120 payments you make are ALL qualifying payments. That will give you maximum bang for your buck!
What Kinds of Jobs Qualify for PSLF?
The easiest way to qualify for PSLF is to work for the Government, at any level, including Federal, State or Local Government Agencies, Organizations and Institutions, as ALL Government Workers have access to PSLF.
For full details on utilizing PSLF as a Government Employee, visit my Guide to the Federal, State & Local Government Employee Student Loan Forgiveness Program.
The second simple option for qualifying for PSLF is to get a job with any non-profit organization designated as tax-exempt by the IRS under Section 501(c)(3) of the tax code counts as qualified employment too.
For full details on utilizing PSLF as a 501(c)(3) Employee, visit my Guide to the Non-Profit Worker Student Loan Forgiveness Program.
Some private non-profits that are not qualified tax-empty organizations under 501(c)(3) may also count as qualifying public service organization, if they provide certain specific public services.
Eligible public services include: military service, emergency management, public safety or law enforcement, public health services, public education or public library services, school library or other school-based services, public interest law services, early childhood education, public service for individuals with disabilities and public service for the elderly.
One stipulation to qualification is that labor unions and partisan political organizations do not, under any circumstances count as qualified employers.
What Counts as Full-Time Employment?
First, your position must meet your employers definition of full-time employment.
Even if you work more than 40 hours a week, if your employer somehow does not define your role as a full-time employee for their tax liabilities, then your position will not allow you PSLF eligibility.
Additionally, your position must meet the following criteria:
- Your position must be at least 30 hours per week when averaged annually
- Your 30 hours per week cannot include any time spent participating in religious instruction, worship services, or any form of proselytizing
Teachers and employees of public service organizations with contracts for at least eight months per year must also meet full-time standards if they work an average of at least 30 hours per week during the contractual period, and must receive credit from their employers for a full year’s worth of employment.
Also, If you work at more than one qualified part-time job simultaneously, you are allowed to meet the full-time employment eligibility requirement if you work a combined average of 30 or more hours per week at your positions with eligible employers.
Typically, your actual work duties and the type or nature of your employment with your employer is irrelevant to PSLF eligbility, unless you work for a not-for-profit organization that has something to do with religion.
In that case, when determining full-time work, you may not include any time that was spent participating in religious instruction, worship services or any form of proselytizing (as mentioned above).
How Can I Track My Progress?
To keep track of your eligibility for PSLF forgiveness, the Government provides a form called the Employment Certification for Public Service Loan Forgiveness (which you can find here) that you should download, print, fill out and submit to track your progress for completing PSLF requirements.
The ECPSLF form will guide you through the process of collecting required employer’s certification of employment, and submitting the form will provide you with confirmation of qualifying employment and eligibility for your Direct Loan payments.
This form should be submitted annually, though it could be submitted less frequently as long as you’re able to provide all the necessary data for the time period covered, and it will essentially prevent you from discovering any problems along the way, or from straying from the path of eligibility from the Public Service Loan Forgiveness Program.
You are not required to use this form, but it should help you to remain organized, understand how much of the eligibility you have completed, and how much you have left to complete, and keep you on track for receiving total loan forgiveness once you’ve finished PSLF requirements.
If you do choose not to submit the form along the way, you will still need to submit a separate form for each employer at the time that you request final clearance for PSLF benefits, so you might as well be using it throughout the process when it’s easier to collect the required information.
Seven Simple Steps to Receiving PSLF Forgiveness:
- Complete the Employment Certification for Public Service Loan Forgiveness form each year, or whenever you change jobs, providing the Government with your employer’s certification credentials.
- Submit the completed form to FedLoan Servicing, who services all PSLF loans, following the instructions found on the form itself (which you can read here).
- FedLoan Servicing will review the form you submitted, make sure it’s completely filled out properly, then determine whether or not your employment qualifies you for PSLF benefits.
- If the form wasn’t filled out properly or if you do not qualify for the PSLF Program, FedLoan Servicing will let you know and provide you with another opportunity to give them the correct information.
- If FedLoan Servicing can’t tell whether or not you qualify for the PSLF Program, they might request more documents from you to prove that you have been or are employed by a qualifying public service organization. You may be asked for IRS forms (W-2’s), pay stubs, or any other documents to prove your employment at the business you’ve listed, or to prove that your employer is in fact a qualified public service organization.
- If your employment does qualify you for the PSLF Program, but some or all of your federally held loans are not currently being serviced by FedLoan Servicing, then those loans will be automatically transferred to them so that you have a single servicer for all of your federal student loans. Once your loans have been transferred to FedLoan Servicing, all payments you made to different servicers in the past will be reviewed to see if they qualify as counting toward PSLF payments.
- FedLoan Servicing will let you know if your employment qualifies for the PSLF Program, and will let you know how many payments you have made that count as qualifying payments. You will know exactly how many qualified payments you still have to make before you are eligible for complete loan forgiveness under PSLF benefits.
What To Do Once You Qualify for Forgiveness
After you’ve completed the entire process and made your 120th qualifying payment, you should immediately submit the PSLF application to request loan forgiveness.
You can find the PSLF Application right here.
Remember that you will need to be working for a qualified public service organization when you submit your final request, and that you will have had to be working for a qualifying organization, in a qualified position, and have made 120 qualified payments before you can even consider submitting this request.
Finally, you will need to remain working for a qualified organization when the Federal Government receives your request, or they won’t offer you complete loan forgiveness.
Do not think that simply submitting your application will mean that you can now change jobs, leaving the public service space, and still receive your loan forgiveness – this program has not been set up to work that way!
PSLF Benefits & Taxable Income
One of the biggest benefits to participating in the PSLF program is that it’s one of the only forgiveness benefits that does NOT end up increasing your taxable income.
For people unfamiliar with that term, you may want to read my page about Student Loan Forgiveness Benefits and Tax Liabilities.
To make it simple, most forms of forgiveness end up costing you something, because the IRS requires that you claim that forgiveness as “taxable income” for the year you received it.
That would mean that if you had $10,000 forgiven, you’d have to add that $10,000 to your total taxable income for that year on your IRS tax return.
And this is where many other forgiveness programs end up leading to financial disasters, because if you had something like $100,000 forgiven, it could end up creating a $20,000 or even $30,000+ tax bill that year!
But what makes things worse is that the IRS requires you to pay all the money you owe in taxes in one lump-sum payment, unlike student loans, which are stretched out over a longer period of time, and paid off in small monthly payments.
I think the taxable income laws regarding forgiveness benefits are likely to lead so many people into financial ruin that I’ve created a brand new website to help people out with their tax-related problems, called Forget Tax Debt, which you can find here.
On Forget Tax Debt, I cover similar topics as I’ve done here on Forget Student Loan Debt, including things like Getting Free Help With IRS Back Taxes, Applying for IRS Tax Debt Forgiveness Benefits, and evaluating the Best IRS Tax Resolution Services.
If you have any tax-related problems, I highly suggest visiting the site to look for help.
PSLF Updates & News Announcements
March 11th, 2019: President Trump’s Proposed 2020 Budget Seeks to Eliminate PSLF Entirely
President Trump’s Proposed 2020 Budget will set a new record in spending – $4.75 TRILLION dollars – but one area where he’s planned significant cuts in spending is in Federal student loan forgiveness benefits, including a total elimination of the Public Service Loan Forgiveness Program.
As reported by trusted news sources like the New York Times, Wall Street Journal and other major media entities (NOT Fake News!), the new budget proposal seeks to end not just the Public Service Loan Forgiveness Program, but also subsidized Stafford Loans, meaning far less opportunities to receive Federal assistance with student debt.
Before everyone freaks out though, let’s make one thing clear – President Trump sought to eliminate PSLF last year too, made a ton of noise about it, and then ended up totally giving up on killing it in return for other concessions that the Democrats offered to keep it and other benefits programs funded.
I would put the odds of PSLF being completely eliminated at something like 5-10% at this point, as I think this will turn out to be just political posturing, as usual, but just in case, I’ve set up a new Change.org Petition that seeks to Save the Public Service Loan Forgiveness Program from President Trump’s Proposed 2020 Budget, and I would really appreciate it if you could add your name to the list of signatories here:
March, 2018: PSLF is Expanded to Cover Non-Eligible Repayment Plans
In Late March, 2018, the $1.3 TRILLION dollar spending bill passed by Congress and President Trump included $350,000,000 in funds earmarked to help people land PSLF forgiveness sooner than they otherwise would qualify for it.
Why? Because PSLF rules are being slightly relaxed for some borrowers. Under the original PSLF structure, only payments made on one of the eligible Income-Based Repayment Plans would count toward the 120 payment threshold required to receive forgiveness, but under the new rule, any payments that were made on any Federal plan will now count, even if they were done on an alternative, non-Income Based Repayment Plan.
The reason this update was made is that shady Loan Servicers were widely reported to have steered borrower’s the wrong direction, telling them that other payment plans would work just fine for PSLF, when that was definitely not the case. Fortunately, this new update will set things right for those borrowers who weren’t told the whole story and who ended up making payments on the wrong plan.
Keep a couple things in mind though, because there are a couple limitations to this change. First, the $350 million additional forgiveness funds for borrowers on the wrong plans is a one-time deal, and these funds are being provided on a first-come, first-served basis, so once that $350 million dries up, other borrowers will still be stuck in the same position as they were in the first place (with payments that don’t count).
And second, in order to receive part of that $350 million in forgiveness, your most recent monthly payment, and the one you made a year before applying for forgiveness, must both be AT LEAST AS HIGH as what you would have paid under one of the PSLF-eligible plans. That shouldn’t be a problem for most borrowers, since the Income-Based Plans typically stretch things out further and allow for a lower monthly payment that the old Standard Repayment Plan.
If you’re one of those people who was on the wrong payment plan and didn’t get payments counted toward the 120 threshold, then it’s time to contact your Loan Servicer and see if you can take advantage of this one-time offer.
October, 2017: PSLF Applications are Officially LIVE!
Even though Betsy DeVos and President Trump have been trying to kill off the Public Service Loan Forgiveness Program, there’s no indication that this will actually happen, and the official PSLF application is now available online (find it here)!
Everyone who’s been participating in PSLF and filling out those annual Certification Forms should rest assured that they will actually qualify for and receive PSLF benefits, as Betsy DeVos’s Department of Education won’t be able to stop people from getting their benefits as long as they submit their applications BEFORE any laws are changed (and Congress isn’t showing any indication that they want to do that…).
One thing to keep in mind, however, is that you can’t submit the completed PSLF application until you’ve fully satisfied the program’s requirements, so do NOT submit your application until you’ve made 120 qualifying, on-time, and in-full payments, under one of the Income-Based Federal Student Loan Repayment Plans, (like PAYE or REPAYE).
For additional information about PSLF benefits, please visit the resources listed below:
View the PSLF Fact Sheet here.
View the PSLF Question & Answer Page here.
For other general questions about student loans, you’ll want to visit some of the other Guides I’ve created for this site. I’ve been working on this project for nearly a decade now, and I’ve got resources, how to’s and articles covering just about any part of the student loan repayment process that you can imagine.
For Help with Federal Student Loans, look at my Guides on:
- Federal Student Loan Forgiveness
- Federal Student Loan Bankruptcty Discharges
- Federal Direct Loan Consolidation
- Federal Student Loan Delinquency & Default
- The Federal Student Loan Rehabilitation Program
- Stopping Federal Student Loan Wage Garnishments
- Using Federal Student Loan Deferments
- Using Federal Student Loan Forbearances
- Federal Student Loan Repayment Plans
And for Help with Private Student Loans, take a look at my Guides on:
- Private Student Loan Forgiveness
- Private Student Loan Consolidation
- Private Student Loan Bankruptcy Discharges
- Getting Help with Defaulted Private Student Loans
Alternatively, if you have any other questions about student debt, please feel free to post them in the Comments section at the very bottom of this page.
I review comments on a daily basis and I’ll get you a response as soon as I can.
NOTE: Please do not attempt to contact me via email or Facebook, as I will ONLY respond to Comments posted here on FSLD.
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Disclaimer:Information obtained from Forget Student Loan Debt is for educational purposes only. You should consult a licensed financial professional before making any financial decisions. This site receives some compensation through affiliate relationships. This site is not endorsed or affiliated with the U.S. Department of Education.