PSLF offers penalty-free first responder student loan forgiveness for serving your community.
Serving your community is a great commitment and a rewarding career, but it typically doesn’t pay well. Even if you work in a department or precinct that doesn’t require a degree, higher education can help advance your career. However, the cost of that education is often more than you can afford to repay on a public service salary.
What is Public Service Loan Forgiveness for first responders?
Public Service Loan Forgiveness (PSLF) is a federal program designed to help public servants address financial challenges caused by student loans.
Fact: The average student owes $37,172 in student loans. On average, firefighters make $46,870 per year, EMTs earn $31,980, and police officers earn $48,320.
PSLF offers student loan forgiveness for first responders, as well as other public service professions, such as teaching and nursing. After a first responder meets a series of eligibility requirements, they qualify for full loan forgiveness. This discharges the remaining balances on their federal student loans without penalties.
How first responder student loan forgiveness works
Qualifying for PSLF is not a quick or easy task. In fact, it takes ten years of effort to become eligible for forgiveness. You must take all the right steps during that 10-year period in order to successfully qualify.
- First, you may need to consolidate your federal loans using a Federal Direct Consolidation Loan. This ensures as many of your loans as possible qualify for forgiveness.
- Then you enroll in a hardship-based federal student loan repayment plan. There are currently four plans that qualify:
- Next, you make 120 qualified monthly payments on that plan. Each year, you will need to recertify your eligibility for your hardship program by providing your current income and family size.
- During that 10-year repayment period, you must maintain employment in a qualified public service position; you can certify your employment through ed.gov.
- While it’s not required, it’s recommended that you also recertify your employment each year and anytime you change jobs.
- Once you make your 120th payment, you can then apply for Public Service Loan Forgiveness.
Once approved, the federal government authorizes the loan servicer to forgive the remaining balances on your loans. This erases the balances without penalties or credit damage; the credit effect is positive, just like it would be if you paid your loans off in-full.
Are all first responders eligible for loan forgiveness?
You must work full-time employment in the public service sector in order to qualify for loan forgiveness. Most first responders meet this requirement because you work for a city or municipality. This includes:
- Firefighters who work for a public fire department
- Law enforcement officers who work for the city or their state
- Emergency Medical Technicians (EMTs) and paramedic who work for public hospitals
If you’re in one of these career fields, but you work for a private company, you won’t be eligible. So, a law enforcement officer who works at a private correctional facility won’t qualify for student loan forgiveness; neither would a paramedic that works for a private hospital.
This is why the Department of Education recommends that you certify your employment and recertify it regularly. This is not a requirement to qualify for PSLF; it’s just a recommendation. However, it’s the only way to ensure you actually qualify for forgiveness at the end of the 10-year period
You must also maintain eligibility for continued enrollment in hardship based repayment plan. If your income is too high, then you won’t be eligible. You must recertify your income and family size each year in order to maintain eligibility in the program.
What about loan forgiveness for volunteer firefighters and first responders?
Full-time paid employment is a requirement to qualify for Public Service Loan Forgiveness. However, that’s not to say that there are no student loan forgiveness opportunities for volunteers. However, this usually doesn’t involve volunteering at your local fire department or hospital.
There are three organizations that offer volunteer student loan forgiveness:
- If you serve in AmeriCorps for 12 months, you can receive up to $4,725 in loan forgiveness.
- Peace Corps volunteers can receive up to 70% loan cancellation for Perkins loans for completing two years of service.
- You can also qualify for up to $4,725 in loan forgiveness through the Volunteers in Service to America (VISTA) program.
AmeriCorps programs include disaster response services for things like hurricanes, fires and flooding. There are also health programs through the National Health Corps, which deal with national health crises, such as the opioid crisis.
For these volunteer opportunities, you usually must go where they send you, so local volunteer firefighting typically won’t count. In Peace Corps, that generally means outside the country; for example, combatting the HIV/AIDs epidemic in underdeveloped counties through their health services division.
First Responder Student Loan Forgiveness FAQ
Can I change jobs during the 10-year repayment period?
Yes. As long as the new opportunity is also in the public service sector, you can change jobs as often as you like. It’s recommended that you recertify your employment anytime you take a new position to ensure you’re still eligible. But this gives you flexibility if you relocate to go from L.A.P.D. to N.Y.P.D without any issue.
Just be sure that you don’t move into the private sector. If you take a position with a private, for-profit employer at any time during the 10-year repayment period, you won’t qualify for PSLF. After you qualify for PSLF and the government forgives your remaining balances, you’re free to move into the private sector.
Is loan forgiveness worth the effort?
Public Service Loan Forgiveness is 100% worth the effort it takes to get to it. This is currently the only loan forgiveness program that offers full forgiveness without any dollar caps. Whether you have $10,000 left or $100,000 at the end of your 10-year repayment period, it clears it all.
Let’s say you complete your education and get a full-time job as a paramedic. You make $40,000 per year and you borrowed $60,000 in federal loans at a 6.8% interest rate. You’re single with no dependents.
Here is a breakdown of what you might pay on two hardship-based repayment plans with loan forgiveness versus standard repayment:
|Repayment Plan||Total loan cost without PSLF||Total cost with PSLF||Number of payments with PSLF||Number of payments without PSLF||Monthly payment|
|Income Based Repayment (IBR)||$46,684||$116,329||120 (10 yrs.)||228 (19 yrs.)||$281-$511*|
|Pay as You Earn (PayE)||$31,122||$89,060||120 (10 yrs.)||240 (20 yrs.)||$188-$341*|
|Standard Repayment||$82,689||n/a||120 (10 yrs.)||n/a||$689|
* Maximum and minimum payment range
With student loan forgiveness, you actually end up paying less than what your borrowed to get through school. In addition, because you enroll in a hardship-based program, it also reduces the monthly burden of repaying your loans. However, PSLF halves the term for hardship-based repayment, bringing it back in line with a regular repayment plan. These hardship programs work by extending the term to reduce the monthly payments. With PSLF, you effectively get the best of both worlds.
What do “qualified payments” mean?
As we mention in how this works, you must make 120 qualified monthly payments on a hardship based repayment plan. That word “qualified” matters, particularly if you use PayE or RePayE and you repayment plan.
On all hardship based repayment plans, your monthly payment varies based on your Adjusted Gross Income; that’s the same income that you report on your income taxes. They compare your AGI to the Federal Poverty line in your state, based on your family size. As long as your income is no more than 150% of the FPL in your state, you qualify for hardship-based repayment. The payment is usually set at a percentage of your AGI:
- On an IBR, it’s usually about 15% of your AGI
- For an ICR, it’s 20%
- On PayE and RePayE, it goes down to 10%
However, both PayE and RePayE have a special exemption for borrower who fall below their state’s FPL. If you fall below that line, the servicer has to reduce your payments. In fact, in some cases, they won’t require you to make a monthly payment at all until your financial situation improves. But when you qualify for this exemption, it still counts as if you made a qualified payment; even if you pay nothing.
This can be extremely beneficial for anyone experiencing extreme financial hardship.
What happens if my income increases?
As we mention above, income refers to Adjusted Gross Income (AGI). That’s not the annual salary you make. It’s that amount minus deductions and factoring in tax credits. So, even if you get a raise and go above 150% of the Federal Poverty Line in your state, you may still qualify. Work with a tax professional to make sure you claim all of the deductions available to you and this may fix any issues that you have with an AGI that’s too high.
What if I need to change federal repayment plans?
You’re allowed to change federal repayment plans as often as you like. You can even switch programs more than once in a single year if you really need to do so. So, if your financial situation deteriorates and you need to change from ICR to PayE, you can do so. This doesn’t “reset” the qualified payments. As long as you make 120 qualified payments on any hardship-based plan, it counts.
Just be sure to stay in the hardship programs. If you switch to standard or graduated repayment, you won’t be eligible. Also make sure to maintain your eligibility and recertify promptly each year! If you don’t recertify your income and family size, they will kick you off your plan and put you into a default standard plan.
Important updates for student loan forgiveness in 2018
As mentioned above, any government program can change or disappear completely. By definition, Public Service Loan Forgiveness IS a government entitlement program. And although Obama did not create PSLF, politics today may play a role in what happens with the program now.
Here’s what you need to know…
PSLF started with Bush
Public Service Loan Forgiveness got its start under George H.W. Bush. The Department of Education under that administration created PSLF to provide relief for financially distressed borrowers in public service professions. That happened in 2007.
In other words, no one actually qualified for PSLF before October 2017. The first public servants who could qualify reached their 120th payment either last year or this year. And there are still major questions as to whether the government will forgive people’s loans as promised or not.
Obama changed qualifications, which created a big problem
There’s a reason people often search the Internet for PSLF under “Obama student loan forgiveness.” The Department of Education under President Obama amended the qualification rules, making it easier for more people to qualify. The idea was noble – people like lawyers working as public defenders or ER surgeons at public hospitals also faced problems with debt.
However, in practice, the rule changes led to increased costs for the PSLF program. The Congressional Budget Office estimated that the program would cost taxpayers $12 billion over the next 10 years. As a result, a bi-partisan program that had sweeping support has become a major target in entitlement program cuts by the current administration. Republicans complain that instead of helping public servants in need like police officers and firefighters, PSLF is really being used to forgive advanced degrees for lawyers and doctors who make six figures.
PSLF under the Trump administration
The Trump administration under the guidance of Betsy DeVos has already made changes to PSLF. And they say they plan to make more changes moving forward. The DOE has already rolled back the employment certification rules so that fewer people qualify now. In fact, even if you’ve taken the step of maintaining ongoing Employment Certification, you may find that you no longer qualify. It’s a good idea to recertify your employment now, even if you haven’t changed jobs since your last certification. This will help ensure you still qualify under the new rules.
In addition, a new report by the DOE seems to indicate that many people who thought they would qualify for loan forgiveness have been sorely disappointed when they finally apply for PSLF. Of the 29,000 applications received since October 2017, only 292 were approved. That’s a 99% rejection rate. Some applicants were rejected because of incomplete paperwork. But two third of the rejections cited a failure to meet qualification standards.
This shows how difficult it is to qualify for PSLF and why it may be in your best interest to seek professional help. Loan servicers are notoriously bad at providing the correct information to borrowers. But an independent third-party is you advocate, so it’s in their best interest to help you succeed. Working with a student debt resolution specialist can help ensure you take all the right steps to meet qualification requirements. Otherwise, you may get to the end of your 10-year repayment period only to find that you don’t qualify for PSLF.