Public Service Loan Forgiveness: What It Is and How It Works

If you’re dreaming about working in government or a nonprofit and worried about student loans, you’re in the right place. Public Service Loan Forgiveness (PSLF) is a program that can wipe away your federal student loan balance after 10 years of qualifying payments. This can be a great trade-off if you’re worried that your potential earnings in these sectors might be low compared to the cost of the degree you need to work there. Sounds awesome, right? It can be!

What’s PSLF?

PSLF is like a magic wand for your student loans. If you work for the government or a nonprofit for 10 years, make 120 qualifying payments, and meet all requirements, the rest of your federal student loan debt can be forgiven. Yup, you read that right – forgiven, as in gone! Note that not every government or nonprofit organization will participate, but we’ve linked some resources below to help you find out who does.

The Basics:

These are the main points you need to know about PSLF:

Work for the Government or a Nonprofit: This includes jobs in firefighting, teaching, nursing, the military, and many more public service roles.
Make 120 Payments: These are monthly payments made over 10 years.
Income-Driven Repayment (IDR) Plan: Your payments are based on your income, making them more manageable.
No Taxes on Forgiveness: Unlike some other forgiveness programs, the amount forgiven under PSLF isn’t taxed.

Why Should You Care?

As of July 2024, PSLF has forgiven $62.9 billion in student loans for 946,000 borrowers. This program is designed to encourage you to pursue rewarding but potentially lower-paying careers in public service. If you’re passionate about making a difference, PSLF can make your financial life a lot easier.

How to Check If You’re Eligible

The PSLF Help Tool is your new best friend. Use it to see if your loans and your employer qualify for the program. If you’re eligible, your loans will be managed by MOHELA, the servicer handling PSLF applications and repayments.

Recent/Temporary Changes to PSLF During the Pandemic

These temporary changes helped many borrowers stay on track for PSLF even amidst the financial uncertainties caused by the pandemic, but have since ceased.

Payment Pause:
- From March 2020 to October 2023, federal student loans were placed in an interest-free forbearance period.
- This meant no interest accrued on your federal student loans, and you were not required to make payments during this time.
Counting Past Payments:
- Despite the payment pause, the months from March 2020 to October 2023 still counted toward your 120 qualifying payments for PSLF, as long as you were employed in a qualifying job.
- This was a significant benefit, allowing borrowers to progress toward loan forgiveness without having to make actual payments during the forbearance period.

5 Steps to Qualify For PSLF

In order to take advantage of the Public Service Loan Forgiveness benefit, you’ll need to ensure that you qualify in these five areas:

Make Sure You Have The Right Type of Loans
- Only federal direct loans qualify.
- If you have FFELP, Parent PLUS, or Perkins loans, you’ll need to consolidate them into a direct loan.
You Must Work Full Time for a Qualifying Employer
- Government organizations, 501(c)(3) nonprofits, and some other nonprofits count.
- You need to work at least 30 hours per week.
Be Sure To Submit Employment Certification Forms
- Submit a form to verify your employer qualifies. Do this yearly or whenever you change jobs.
- Use the PSLF Help Tool to make this process easy.
Switch to an Income-Driven Repayment Plan
- IDR plans adjust your payments based on your income.
- The SAVE plan is often the best, capping payments at 5-10% of discretionary income. (On July 18, 2024, a federal court issued a stay preventing the US Department of Education from operating the Saving on a Valuable Education (SAVE) Plan. The US Department of Education is assessing the ruling and will be in touch directly with borrowers about how this will affect them.)
You Need To Make 120 Qualifying Payments
- Payments need to be full, on time, and made while working for a qualifying employer.
- Payments don’t need to be consecutive; you can take breaks if needed.

Apply for Forgiveness

Once you’ve hit the 120 payments mark, apply for forgiveness through MOHELA³. Submit your application and employment certification forms for all employers you had during the 10 years. MOHELA will handle the rest.

Need a Recount?

If your PSLF application was rejected before, you might get a second chance. You can request reconsideration online. The PSLF Help Tool can guide you on whether your past payments and employment periods qualify.

Don’t Qualify for PSLF? No Worries!

If PSLF isn’t a fit for you, there are other ways to get relief:

Other Forgiveness Programs: Explore other federal student loan forgiveness options.
Income-Driven Repayment Plans: These plans adjust your payments based on income and offer forgiveness after 20-25 years.
Refinancing¹: This can lower your interest rate² but beware – once you refinance federal loans, they’re no longer eligible for forgiveness programs.

Wrapping Up

Public Service Loan Forgiveness is a fantastic opportunity for those committed to serving their communities. It might seem like a lot to navigate, but the payoff is worth it. Keep track of your payments, stay informed about your options, and use the resources available to you. Good luck, and keep making a difference!

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

¹ Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan.

² Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

³ Beginning May 1, 2024 the US Department of Education (ED) will transition the Public Service Loan Forgiveness (PSLF) Program from MOHELA to ED via StudentAid.gov. To allow for the transition of the PSLF Program to StudentAid.gov, the processing of all PSLF documentation will be temporarily paused beginning May 1, 2024. The processing pause is expected to last into July 2024. For more information, please visit StudentAid.gov/streamlining.

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Daniel Bod

Writer at Going Merry

Daniel Bod is a seasoned higher education professional with two decades of expertise in financial aid. He began his career at Hofstra University in 2004, after completing his Bachelor's degree from Stony Brook University in 2000, where he provided comprehensive financial aid support to families from diverse backgrounds. In 2007, he transitioned to LIU Post and advanced to Senior Assistant Director of Enrollment Services, dedicating over ten years to assisting students and families in various capacities. During his tenure at LIU Post, Daniel also earned a Master's degree in Childhood Education. Transitioning to St. George's University in 2019, he spent over four years focusing on the financial needs of medical students. Daniel excels in advising on loan options and empowering students and families to make informed decisions about educational finances.