Public Service Loan Forgiveness

The PSLF program is a government-based program signed into law in 2007 by President George W. Bush as a way to encourage graduating college students and professionals to choose working fulltime in public service in exchange for partial loan forgiveness on some of their federal student loans.

The PSLF forgives the remaining balance on certain federal student loans after eligible employees complete 120 qualifying monthly, on-time payments under a qualifying repayment plan while working full-time for a qualifying employer such as Auburn University.

To qualify for the program, there are several requirements that must be met:

1. Qualifying Employer: First and foremost, employees must be employed by one of the following types of organizations:

• Government organization (federal, state, local, or tribal)

• Not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code

• Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services

• Serving as a full-time AmeriCorps or Peace Corps volunteer

2. Qualifying Hours: To qualify for PSLF, employees must work full-time for qualifying employers. Employers have different definitions for the number of hours which must be worked to be considered full-time. Employees must work for the number of hours required by their employer to be considered full time or at least 30 hours per week, whichever is greater. It is also possible for forgiveness applicants to work part-time for two qualifying employers, as long as they work more than 30 hours per week in total.

3. Qualifying Student Loans: Only non-defaulted federal student loans received under the William D. Ford Federal Direct Loan Program qualify for possible forgiveness. Direct loans include direct subsidized and unsubsidized loans, direct PLUS loans, and direct consolidation loans.

Borrowers with other loan types besides Direct Loans may still become eligible for PSLF if they consolidate them into a Direct Consolidation Loan; however, private student loans cannot be consolidated into this plan. Borrowers should be aware that qualifying payments made before consolidation may not be counted towards their new eligibility, but it is possible to leave certain loans outside of the consolidation process.

4. Qualifying Monthly Payments: PSLF eligibility requires that qualifying payments are completed within the following criteria:

• Made after Oct. 1, 2007

• Made under a qualifying, income-based repayment plan

• Made for the full amount due as shown on the borrower’s bill

• Paid no later than 15 days after the due date

• Paid while the borrower is employed full-time by a qualifying employer

The 120 qualifying monthly payments do not need to be consecutive. A period of employment with a non-qualifying employer, for example, will not cause the employee to lose credit for prior qualifying payments, but loan payments still need to be made during the time of non-qualifying employment. The qualifying monthly payments, however, can only be made during periods when the loans are not in deferral due to an in-school status or other reason, the grace period after graduation, or a forbearance.

5. Qualifying Repayment Plans: Eligibility for PSLF requires that employees enter into an income-driven repayment plan for their federal student loans. These are plans where the monthly payment is based on the employee’s monthly income. Employees that are using a non-income driven repayment plan are advised to analyze whether it makes sense to switch to an income-driven repayment plan to be considered for PSLF eligibility.

Because employees have to make 120 qualifying monthly payments, it will be at least 10 years after making the first qualifying payment before they can apply for PSLF. It is strongly advised, however, that employees working towards loan forgiveness should complete and submit a Public Service Loan Forgiveness Form every year or when they change employers, to ensure continuing eligibility.

FSA uses the information provided to let applicants know if they are indeed making qualifying PSLF payments,and how many have been counted toward their 120 payment goal, so they can determine if they are on the right track as early as possible. Employees can also find out how many qualifying payments they have made by logging into their account at FedLoan Servicing and viewing their loan details, or by looking on their most recent billing statement.

Although it is not required to complete this form every year, it is a good idea to do so. Not only does completing this task annually provide a form of assurance, it also makes life easier when employees actually do apply for loan forgiveness. At that time, they will be required to submit an Employment Certification form for each employer where they worked while making the required 120 qualifying monthly payments, which could be a paperwork nightmare.

Once employees complete 120 qualifying monthly payments, they need to submit the Public Service Loan Forgiveness Form to receive loan forgiveness. At the time of the application submittal, and when the remaining balance is forgiven, employees must still be working for a qualifying employer.

Loan types may be reviewed by logging into the Federal Student Aid site. As a general rule, loan types that have the word “Direct” in the name are most likely eligible for the PSLF program, but employees should verify this information directly with their loan provider.

Employees can review the student aid Questions and Answers page, or contact Federal Student Aid.