Public Service Loan Forgiveness

Would you like to have your loan balances forgiven after ten years? If so, the Public Service Loan Forgiveness Program (PSLF) is for you. You have to work full-time, however, in a qualified public service job and make 120 payments.

Public Service Loan Forgiveness can be obtained with these types of employers:

Federal, State, or Local government agencies, entities, and/or organizations

  • Tax-exempt and/or non-profit organizations
  • Other organizations, depending

Most borrowers will need to be on the Income-Based Repayment Plan or the Income-Contingent Repayment Plan in order to have some balance left over after ten years. It is possible to be on the Extended Repayment Plan in later years of the loan life, and/or switch to/from the Standard Repayment Plan temporarily.

However, if you are approved for PSLF and make 120 payments under the Standard 10-year repayment plan, you won’t have any balance to forgive. Any forgiven balance may not be taxable.

Borrowers should make sure that they’re payments will be eligible for Public Service Loan Forgiveness – sometimes borrowers make payments and assume that those payments will be applied to the 120 payment requirements.

Make sure you are employed full-time by a qualified public service organization when you make each of the 120 payments. You should also make sure that your loans are actually in repayment status.

For example, if you’re still in a grace period after graduation, your payment would probably be applied to principal and you might not get credit for PSLF – and you can’t waive the grace period in order to make your payments apply.

You can, of course, waive an in-school deferment in order to continue making PSLF payments if you are able. Many times it is difficult for borrowers to stay in school and work full-time for a public service organization.

Peace Corps and Americorps volunteers may have special benefits and special terms when it comes to applying for PSLF. In most cases, borrowers will not want to make payments in excess of the required amount.

Eligible repayment plans typically include:

Standard 10-year Repayment

  • Income-Based Repayment
  • Income-Contingent Repayment

From the beginning, borrowers should ensure that their repayment plan qualifies for PSLF (not just their employment). Many more rules apply including special treatment for Direct Consolidation loans. Contact a professional for assistance with Public Service Loan Forgiveness.