Public Service Loan Forgiveness comes up a lot on the Student Loan Ranger blog — but it’s necessary. This is an important program that borrowers ask us about on a daily basis.
Based on these questions and the data we’ve seen, more work is critical to ensure that all eligible borrowers are aware of how PSLF works.
[Read more about the fate of public service loan forgiveness.]
Recently, the Department of Education published the PSLF forgiveness form. Borrowers who have completed 120 eligible payments on direct loans while working full time for a qualifying employer may now return this form to the address listed on it to apply for forgiveness.
If you believe you have met all the PSLF requirements, review these statements, which you must attest to on the form, as well as a few additional criteria before you apply.
— ” To qualify for PSLF, I must have made 120 qualifying payments on my Direct Loans while employed full-time by a qualifying employer or employers.”
Before you submit this form, ensure you’ve submitted proof to your loan holder for all 10 years of eligible employment. And be fairly certain you’ve made all required qualifying payments, since not doing so could cost you financially, as we explain further below.
[Learn to prepare wisely for Public Service Loan Forgiveness.]
— “To qualify for PSLF, I must be employed full-time by a qualifying employer when I apply for and receive PSLF.”
This is important — you have to be working for an eligible employer at the time you made each of the 120 required payments and when you submit the forgiveness application.
Further, you must still be working full time for this employer when the Department of Education processes your forgiveness application. When processing your application, the Department of Education may check with your employer to confirm you are still employed full time.
— “If I am eligible for forgiveness, the amount forgiven will be the principal and interest that was due on my eligible Direct Loans when I made my final qualifying payment. Any amount that I pay on those loans after I have made my final qualifying payment will be treated as an overpayment. I must continue to make payments on any of my other loans.”
Not all of your loans may qualify for forgiveness at the same time. This tends to happen if you take out loans, start pursuing PSLF, then go back to school and take out new loans.
You must make 120 eligible payments on each individual loan to receive forgiveness for that loan. PSLF is based on each loan, not on the borrower.
It’s OK if all of your loans don’t qualify at the same time. But be sure you don’t drop the ball on loans that aren’t eligible for forgiveness when you submit the PSLF form for another loan.
[Read about student loan repayment myths that are debunked.]
— “If I am not eligible for forgiveness, I will be notified of the determination and why it was made, my forbearance will end, and unpaid interest may be capitalized (added to my loan’s principal balance).”
The takeaway here is not to apply unless you are fairly certain it’s time to do so. Otherwise, you could lose valuable months of qualifying payments and gain some extra interest while you wait for the determination.
If you aren’t sure where you stand, talk with your loan holder. Your servicer can confirm the number of eligible payments you have made and that you’ve submitted your employment verification forms annually.
Finally, as you pursue PSLF, here is additional information to remember — overlooking these key details could undermine your progress toward PSLF , which we’ve seen happen to a number of borrowers.
First, you must have a direct loan to qualify. Parent PLUS loans are also eligible for PSLF ; however, the best way to take advantage of the program is by consolidating and enrolling your Parent PLUS loans in the income-contingent repayment plan.
You must also consolidate Federal Family Education Loan program loans under the direct loan program to gain access to PSLF. You may have these if you borrowed prior to June 30, 2010. Keep in mind that if you are a student loan borrower pursuing PSLF and consolidate your loans, you will most likely need to apply for an income-driven repayment plan.
Understand, too, that consolidation resets the PSLF clock — no payments made prior to consolidation can count toward the program .
Finally, the only employment that counts for PSLF is that of the borrower listed on the loan, regardless of who actually makes the loan payments. You can’t change the name of the borrower listed on the loan.
Be sure to review all the PSLF eligibility requirements. And if you are currently eligible for PSLF, we’d love to hear from you about your experience with the process. Email us at studentloanranger@usnews.com.
More from U.S. News
Stay Informed to Make Wise Student Debt Choices
File FAFSA Early to Minimize Borrowing
5 Ways to Handle a Student Loan Shortfall
Tackle the Public Service Loan Forgiveness Form originally appeared on usnews.com
