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Understanding the Public Service Loan Forgiveness (PSLF) Program

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Education

Understanding the Public Service Loan Forgiveness (PSLF) Program

If you are a government employee or work for a nonprofit organization, you can receive and benefit from loan forgiveness under the PSLF Program.

The Public Service Loan Forgiveness program waives off or forgives the outstanding balance of your direct loans as soon as you make 120 qualifying payments on a monthly basis. You have to make these payments under an eligible repayment plan when you are working for a qualified employer on a full-time basis.

You can qualify for Public Service Loan Forgiveness in the future or right now. For this, you need to fill out and submit your Employment Certification form immediately. A majority of borrowers make the mistake of waiting for many years to furnish this vital form. At that point, they usually realize they are failing to make and benefit from qualifying payments. To make sure you are on the right track to avail loan forgiveness, you are required to fill out and submit the form on an annual basis and whenever you switch employment.

Meaning of Qualifying Employment

With respect to PSLF Program, a qualifying employment has nothing to do with the specific job you perform for the employer. Instead, it is concerned with who your employing organization is.

If you are an employee of the following kinds of entities you will qualify for the PSLF program:

  • Government entities (federal, local ,state, or tribal)
  • Nonprofit entities that are exempt from tax under the relevant IRS sections
  • Other nonprofit entities that are not exempt from tax, but their main aim is the provision of certain qualifying public services.

The following employers are not eligible for PSLF program:

  • Labor unions
  • Political organizations
  • Profit making entities

What Constitutes Full-Time Employment?

For Public Service Loan Forgiveness purposes, you will be deemed a full-time employee. This consideration applies if you have met your employer’s specific definition of full-time employment or you work a minimum of thirty hours on a weekly basis, whichever is higher.

You are allowed to hold multiple qualifying, but part-time jobs simultaneously. You can satisfy the requirement for full-time employment if you work an average of minimum thirty hours on a weekly basis. This is the total number of hours you have to work with your employing organizations.

There are certain rules that apply to nonprofit employees. Under these rules, the time you spend on worship services, religious instructions or any type of proselytizing will not be considered as satisfying full-time employment requirement.

What are Qualifying Student Loans?

A qualifying student loan for PSLF program is any non-defaulted student loan you received under the Direct Loan Program. It is important to keep in mind that only Direct Loans qualify for PSLF. In case you borrowed an amount prior to July 1, 2010, all or some of the student loans might have been provided to you under older student loan programs. These will not be eligible for forgiveness.

You might have availed student loans under federal loan programs, like the FFEL Program or Perkins Loan Program. These student loans are also not eligible for PSLF program. However, these loans may be eligible in case you aggregate them into a single Direct Consolidation Loan.

But keep in mind that only qualifying payments made for the new consolidated loan are eligible for the 120 repayments required for PSLF program. Any repayments you have already made on the Perkins Loans or FFEL Program before consolidation do not count.

Related: 12 Tips to Pay For College Without Going Broke

Meaning of Qualifying Monthly Payment

The following payments meet the definition of qualifying monthly payment:

  • Any payment you made after October 1, 2007
  • Any payment made under a qualifying payment plan
  • A payment for the whole amount that is due on your bill
  • Any payment made within 15 days of your due date
  • Payments made while you are in full-time employment of a qualifying organization

You are eligible to make qualifying payments only during the period when you are under an obligation to make payments. Hence, your payment will not be a qualifying payment in case your student loans are in:

  • An in-school status
  • A forbearance
  • The grace period
  • A deferment

You have to make 120 qualifying payments on a monthly basis. However, these payments do not have to be consecutive. For instance, you won’t lose any credit for making prior payments. This is in case you have served an employment period with a non-qualifying employer.

You will be eligible for credit for a single payment per month if your monthly payments exceed the amount you have to pay. This applies irrespective of the amount of the prior payments. In addition, you do not qualify for the PSLF program any faster by making higher payments.

However, if you are willing to pay an amount that is higher than the required payment amount, you must get in touch with your loan service provider and request them to apply the additional sum. They will assign your payments to cover your future payments. If you do not, you could end up paying ahead or in advance. You will not be able to avail credit for an eligible PSLF repayment during the month where no repayment is due.

Applying for the Public Service Loan Forgiveness Program

As you have to make 120 qualifying repayments, it will usually take you a minimum of ten years after making the initial qualifying repayment before you may apply for the PSLF program. Because only those payments made subsequent to October 1, 2007, qualify for PSLF, the earliest date by which any borrower can become eligible to apply for the PSLF program is fall 2017.

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