Protecting and serving your community can be a rewarding career, but it might not always be the most lucrative. Even if you work in a department that doesn’t require a degree, a higher education can help with career advancement. And thankfully, the federal government provides a way to reduce the burden of getting that education. You can qualify for loan forgiveness through the Public Service Loan Forgiveness (PSLF) program offered by the government.
Fact: Student debt averages $29,400 per student, but firefighters & EMTs only make $34,000 per year, on average.
Debt.com provides the information below to help you understand how loan forgiveness works. It also explains the steps you need to take to qualify, as well as warnings you need to know along the way. If you have questions, call us. Otherwise, if you want to see if you qualify, complete the form above to request a free consultation with a student loan specialist.
How loan forgiveness works
Qualifying for the PSLF program is not an easy task. It’s a process that takes 10 years to complete before you even become eligible. You must take the right steps along the way to ensure you qualify for forgiveness at the end.
These are the steps you must take to qualify:
- First, you must enroll in a hardship-based federal repayment plan. There are three plans that qualify:
- Income based repayment (IBR)
- Income contingent repayment (ICR)
- Pay as you earn (PayE)
- Once you enroll in the repayment plan, you must make one qualified payment each month for 10 years. So, you basically make 120 payments before you become eligible for forgiveness.
- During that 10-year period, you must be employed in a qualified public service position. You can apply for Employment Certification through gov.
- After you make 120 payments, you can then apply for Public Service Loan Forgiveness.
Once approved, the federal government forgives the remaining balances on all loans included in your repayment plan. The loan servicers discharge your remaining balances without penalties. The loans appear on your credit report as if you paid them off in-full. That means forgiveness can help improve your credit, too.
How to know if you’re eligible
You can basically qualify for student loan forgiveness if you work in the public service sector. Most first responders meet this requirement because you work for your city or municipality.
- Firefighters who work for a public fire department
- Law enforcement officers who work for the city or state
- Emergency Medical Technicians (EMTs) that work for public hospitals
If you have one of these careers but you work for a private company, it does not count. So, let’s say you’re a law enforcement officer who works at a private correctional facility. That would make you ineligible for PSLF.
Employment Certification is the best way to guarantee that the government will forgive your loans after 10 years. You are not required to get certified. However, the Department of Education recommends that you get certified as soon as you enroll in a repayment plan. You should renew that certification annually or at least every time you change jobs.
5 Essential Facts about Loan Forgiveness
- You MUST enroll in one of the three repayment plans mentioned above. There are other repayment plans, such as a standard plan and graduated plan; however, these do not qualify you for forgiveness.
- Until the government forgives your loans through PSLF, be careful when you change jobs. If at any point in the 10-year repayment period you don’t work in the public sector, you lose your eligibility. That’s why it’s important to maintain employment certification, even though it’s not a requirement.
- Loan forgiveness only applies to federal student loans. This means forgiveness won’t apply to private student loans. In addition, if you have a federal loan that you don’t include in the repayment plan, it is not eligible for forgiveness either.
- Loan forgiveness does not depend on graduation. If you took out federal loans to attend school, but did not finish you may still qualify. As long as you enroll in an accredited repayment plan and work in an approved public service position, you qualify.
- Like all government programs, PSLF can change. The current administration may adjust the program or cancel it entirely. That’s why it’s important to act quickly to take advantage of programs like these.
A note about volunteer firefighter student loan forgiveness
It’s important to note that loan forgiveness for firefighters, in this case, refers to career firefighters. You must be employed full-time as a firefighter in a public department. That means PSLF is not a program that can forgive student loan balances for volunteer firefighter work.
That being said, there is a loan forgiveness option that could apply for a volunteer firefighter. If you work through the Volunteers in Service to America (VISTA) program, you can qualify for forgiveness up to $4,725. You must log 1,700 hours of volunteer work at a VISTA sponsored nonprofit organization. It would be rare to qualify for this as a volunteer firefighter, but is another avenue to consider.
An Important Update about Loan Forgiveness in 2017
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 public servant borrowers. That happened in 2007.
In other words, no one has actually received loan forgiveness under PSLF yet. The first public servants who could qualify will reach their 120th payment this year – in October, to be exact. There are still major questions as to whether the government will forgive their 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 public defender lawyers and ER surgeons at public hospitals also faced problems with debt.
However, in practice, the rule changes led increased costs for the PSLF program. The Congressional Budget Office says the program will now 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.
What will happen to PSLF moving forward?
The truth is, no one knows what will happen to PSLF. Changes are likely to start coming this year. So far, the following revisions are on the table:
- Cap the amount of money PSLF will forgive
- Removing or adjusting the 10-year limit on repayment (i.e. the government would forgive a certain amount, but it might take more than 10 years to repay the rest)
- Readjusting the qualification rules, meaning you could find yourself in a uncertifiable field even if you received certification prior.
It’s a story that our Debt.com News Team follows closely. We encourage anyone hoping to qualify to watch the news as well. This could have a big impact on your debt and the bottom line in your budget in the years to come.