top of page
  • Writer's pictureRafael Gutierrez

Sorry, Not Sorry… Why Student Public Service Loan Forgiveness is Not Forgiving


Photo by Felix Koutchinski on Unsplash

Public Service Loan Forgiveness (PSLF) is a program that began in 2007. It was intended to help anyone working for the government or qualified non-profit organizations pay off their student loans. The terms were simple: Make 120 payments under a qualified repayment plan, work for a qualified entity and have federal student loans.


The first batch of those eligible for forgiveness began in 2017. With about two years of data from applications, 99% of those eligible have been denied. For more information about these stats, refer to this link.


So what’s the problem?


According to the data, those that have applied for forgiveness are being denied because they did not meet the terms as indicated above. They were not on the proper repayment schedule, are not working for a qualified employer, or didn’t have the right loan type.


What can you do to ensure forgiveness?


1.     If you want to apply for PSLF and have already made payments or want to make sure you will be eligible in the future, make sure that you are on a proper repayment plan. These include one of the following:


·        Income Based Repayment (IBR)

·        Income Contingent Repayment (ICR)

·        Pay as You Earn (PAYE)

·        Revised Pay as You Earn (REPAYE)


2.     Make sure you are working full time for a qualified employer while making your payments. These include non-profit, government agencies and most public service jobs. To be considered full-time, you have to work at least 30 hours a week.


3.     Make sure you have the right loan. The loans that are covered under PSLF are the following: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. Unfortunately, private loans do not qualify for PSLF and cannot be consolidated into direct loans.


4.     Finally, make sure that you have made the required 120 payments. This part can get tricky because if you have consolidated your direct loans, any payments made prior to consolidation will no longer qualify and you will be required to start all over again. Additionally, any payments that were made under a repayment plan other than an income driven one, will not qualify. The only exception is payments that were made under a standard 10-year repayment plan will count. Finally, any payments that were made when you were not employed full time or not working will not count as a qualified payment.


Bonus tip


If you are considering applying for PSLF and have met the above criteria, do not send in additional payments. Only pay the minimum amount required. Remember, the goal here is to eventually have your loans forgiven, not pay them down early. Of course, this is taking into consideration that PSLF will still be around 10 years from now and you have done everything according to plan.


Final Word


In summary, PSLF is a great program if one is able to take advantage of what is being offered. Unfortunately for most, as the data already shows, their loans are not being forgiven. An additional benefit of PSLF, is the amount forgiven is not taxable. Traditionally, any amount that is forgiven through loan forgiveness with a PAYE repayment plan after 20 years, will be taxed which is something you need to plan for. With PSLF, this is not the case. If you have any questions, feel free to reach out to see if you are doing what's necessary to qualify. Rafael@eonequity.com

16 views0 comments
bottom of page