PSLF might be your path to student loan forgiveness. But expect an uphill climb.
The Public Service Loan Forgiveness program – PSLF, for short – provides a path to federal student loan debt forgiveness. If you work in a qualified public service profession, the government may forgive a portion of your federal student loans. However, the qualification process is long, complicated and (worst of all) not guaranteed.
How PSLF Works
- First, you must have federal student loans that qualify for a federal repayment plan.
- Then you must have an income level that qualifies you to enroll specifically in a hardship-based repayment plan.
- You make payments for 10 years – that’s 120 qualified payments.
- During that time you must maintain employment in the public service sector.
- After 10 years of maintaining eligibility, you can apply for PSLF
- Once approved, the loan servicers must forgive the remaining balances on all federal loans included in the repayment plan.
Now, to the three things we think you should know about PSLF…
#1: If you can make PSLF work, it’s absolutely worth the hassle
We probably don’t have to tell you how much of a burden student loan debt can be. Student loans lead to major life delays, such as homeownership and even marriage. They aren’t discharged by bankruptcy. Default hurts your credit.
Enrollment in a federal repayment plan provides monthly relief from your student loans. Plans like the IBR and PayE lower your monthly payments, matching them to your income and family size. But they also increase the repayment term up to 25 years.
Two and a half decades in debt is a long time to be in debt. So, the fact that PSLF forgives your balances after 10 years is a substantial advantage.
#2: Income is extremely important during the repayment period
Even though the federal government offers a range of repayment plans, you must enroll in a “hardship based” program. There are three programs that qualify:
To enroll, your Adjusted Gross Income (AGI) must be less than 150% of the Federal Poverty Line in your state. This calculation also considers your family size. For example, if the FPL is $20,000 for a family of two where you live as a single parent your AGI must be less than $30,000.
You must re-certify your income every year to maintain eligibility in the program. Otherwise, you get switched to a non-hardship program and no longer qualify for PSLF. Thankfully, this means any deductions made that reduce liability on your tax returns also help maintain eligibility for these programs. Things like childcare deductions can work in your favor. Make sure to maintain your certification and re-certify promptly each year.
#3: Get employment certification, even though it’s not required
However, remember that you must be employed in public service throughout the 10 year repayment period. If you don’t strictly adhere to that eligibility you could find yourself rejected for PSLF. All that work for 10 years, only to find you don’t qualify to have your loans forgiven.
That makes it imperative to get your employment certified and make sure you maintain that certification. As soon as you enroll in the repayment plan, submit your certification request. You should re-certify every year and anytime you change jobs. This is your best guarantee for loan forgiveness.
#4: PSLF is not “Obama Student Loan Forgiveness”
The Public Service Loan Forgiveness program started in 2007 under George W. Bush. However, the Department of Education under Obama changed the rules for hardship eligibility for the federal repayment plans in 2010, 2012 and 2015. New estimates from the Congressional Budget Office estimate the PSLF will now cost tax payers over $12 billion over the next 10 years.
This has all made a 10-year-old loan bi-partisan loan forgiveness program highly controversial. And just like President Obama’s DOE had the authority to change PSLF and the repayment plans, so does President Trump. That means Betsy DeVos and the current Department of Education holds loan forgiveness in their hands.
No one can say what will happen, but some worry rules may change right as many public professionals reach their 120th payment. If eligibility requirements change and they apply those changes retroactively, even approved employment certification may not be enough. You could apply for forgiveness after doing everything right, only to find the rules have changed.
The DOE could also cap the amount of debt they forgive, leaving you on the hook for the rest. DeVos already stated that adjustments must be made to rein in runaway costs. She also wants to close loopholes that some say allow people like doctors with six-figure graduate degree debt to qualify.
Regardless of your political beliefs, if you think you qualify for PSLF follow this story closely. Any change to the program could affect your eligibility, regardless of your previous status. Get into the program immediately if you haven’t already started and maintain eligibility to the best of your ability.
#5: PSLF isn’t the only type of loan forgiveness
There are other ways to forgive federal student loan debt that aren’t tied to Public Service Loan Forgiveness. Military Service and even service in AmeriCorps, PeaceCorps or Volunteers in Service to America allow you to qualify for loan forgiveness.
Military loan forgiveness doesn’t run through the DOE; it runs through the DOD (Department of Defense). The DOD actually repays your loans up to a certain amount – $60,000 overall. You must serve at least 3 years. The DoD Loan Repayment pays out up to $10,000 per calendar year. You can also qualify for forgiveness under a Veteran’s Total and Permanent Disability Discharge.
Volunteer service doesn’t forgive all your debt, but it can forgive some. There’s one program that cancels 15% of Perkins loan debt for each year of PeaceCorp service. You can do 12 months of AmericaCorps service or 1,700 hours of VISTA service for up to $4,275 towards your loans.
Pursue as many avenues for student loan forgiveness as possible. Anything you can do to decrease your student loan debt is worth it.