The Public Service Loan Forgiveness is one of the most popular and sought-after loan forgiveness programs and you don’t need to know much about it to figure out why. The program literally forgives hundreds of thousands of dollars in Federal Loans to students that can’t afford to pay it.
However, applying for it can be quite confusing for most students. This article is created to educate every reader about all the basics of the Public Service Loan Forgiveness Program along with valuable details on how to avail it.
What is the Public Service Loan Forgiveness Program?
The name of the program is pretty self-explanatory. But, if you still need help to understand it, this is a federal program that is designed to forgive Federal Student Loan debt for employees of some specific public and non-profit jobs.
Is PSLF the Right Option?
There are a few things you need to consider before you go all-in with the PSLF program. You should think about how much in Federal Student Loans you’ll still have remaining after ten years of regular repayment. The program can be a life-saver for you if you have high loan balances as compared to your salary. If you have low loan balances, you should probably reconsider getting into this program because it’s highly unlikely that you’ll have much left after ten years of payment to be forgiven.
If you’re earning well, you probably won’t qualify at all for reduced payments. This may or may not result in you being forced to pay off a large portion of your loan in just ten years.
How Much is PSLF Program Worth?
Currently, at the time we’re writing this post, the true value of the amount of debt forgiven is limited by the amount of eligible loans you’ve accumulated. According to the conditions, you’ll have to make 120 on time payments because that’s a vital part of the program. In most scenarios, your balances are lowered to a small amount. If this happens, it is far better to get an income-driven repayment plan. Or, as it will be mentioned a bit later, the standard repayment will finish your debt in ten years.
What is the Eligibility Criteria?
Basically, there are just two criterion you need to meet in order to qualify for this plan. You have to be enrolled in a qualifying payment plan and you need to complete 120 monthly payments.
A list of payment plans that can help you qualify are given below:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Standard Repayment
It is important to note that regardless of which plan you are on, you will have to complete 120 monthly payments on time to qualify. Also, your loans have to be taken out after October 1, 2007 to qualify.
For most of the people reading this, REPAYE, PAYE, IRB and ICR are the perfect choice because they’ll maximize the loan forgiven. These plans are much more convenient because they lower the monthly payments. Thus, there’ll be a large amount to be forgiven after a ten-year period.
Which Type of Employment Qualifies For Public Service Loan Forgiveness?
The Public Service Loan Forgiveness Program is only designated for employees of the following:
- Federal, State, Local or Tribal Government Organizations
- A 501(c)3 nonprofit organization
- AmeriCorps or the Peace Corps
Your individual job is of absolutely no significance. It just depends on whether the company you work for falls in the above-mentioned categories.
Which Loans are Eligible?
All the eligible loans are federal student loans, however, not all federal loans are eligible. A list of eligible federal loans in given below:
- Federal Direct Subsidized Stafford/Direct Loans
- Federal Direct Unsubsidized Stafford/Direct Loans
- Federal Direct Plus Loans
- Federal Direct Consolidations Loans
However, there is just one special exception. If the loan has been consolidated into a Direct Consolidation Loan, then the loan directly becomes eligible. But, only the payment made to the new Direct Consolidations Loan will count as your monthly payments. You have to be careful though, you could reset the counter if you’ve been making qualifying payments in the past.
What to Do Right Now?
If you have been making qualifying payments and find yourself eligible according to all of the criterion mentioned above, then we’ll let you know how to proceed to the next step.
First, you have to complete the Employment Certification for Public Service Loan Forgiveness Form each year. This form will act as a validation that you have completed the hours of employment required to qualify for the program. You should have your employer fill out a few sections in the form too.
Please note that you’ll have to be in employment to a company that can be categorized as one of the three mentioned above.
Also, you have to understand that helping the Department of Education understand your form can significantly increase your chances of being shortlisted. Fill out every section of the form and provide details of every single place of employment that the form asks for.
It’s not a bad idea to keep a spare copy of each year’s form. You can also keep copies of pay stubs and W-2 taxes forms. There’s a chance that you might need them for verification in the future.