Many student loan borrowers received some relief when the U.S. Department of Education paused payments, collections and interest on most federal student loans in March 2020 due to the coronavirus pandemic.
That relief is coming to an end. After multiple extensions of that administrative forbearance, federal student loan repayments will resume in September, and the Supreme Court also struck down the Biden Administration’s plan for widespread federal student loan forgiveness of up to $20,000 per borrower. However, eligible borrowers can still receive some permanent relief through federal programs, including Public Service Loan Forgiveness.
PSLF, as it’s known, has long drawn criticism because of high ineligibility rates fueled by strict and detailed requirements and miscommunication from loan providers. The Department of Education has sought to address eligibility barriers and confusion through several changes, like the Temporary Expanded Public Service Loan Forgiveness, or TEPSLF, and the limited PSLF waiver.
“There seems to be some desire to make the process easier and more transparent,” says Stacey MacPhetres, senior director of education finance at EdAssist by Bright Horizons, an education consulting company.
What Is Public Service Loan Forgiveness?
PSLF was introduced in 2007 to incentivize more people to pursue careers in public service by erasing some of their student debt from federal loans. The program is aimed at helping borrowers who become teachers, nurses or police officers, for example.
But the forgiveness comes with stipulations.
Borrowers must first make 120 qualifying monthly payments, which takes at least 10 years, while being employed full time in a qualifying job by an eligible employer. Whatever federal student loan debt is left after that point is supposed to be forgiven. But many borrowers have been stymied by the logistics of the program over the years, and have lost out on forgiveness.
A student loan payment meets requirements for PSLF if it is made after Oct. 1, 2007, under a qualifying repayment plan. Consecutive payments are not required and paying more per month does not reduce the time it takes to earn loan forgiveness.
To participate, you must be employed by a federal, state, local or tribal government organization, including the U.S. military; a nonprofit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code; or be a full-time AmeriCorps or Peace Corps volunteer.
Nonprofits without 501(c)(3) status are still considered a qualifying employer if they offer one of the following public services: emergency management, military service, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities and the elderly, public health, public library services, school library or other school-based services.
Labor unions, partisan political organizations and for-profit organizations, including for-profit government contractors, are not eligible for PSLF. However, the Education Department is examining whether certain for-profit employers can qualify and plans to release guidelines soon.
To see if your employer meets the qualifications, use the PSLF Help Tool on the Education Department’s Federal Student Aid website.
There are certain loan and repayment plan requirements, as well. Only direct federal student loans qualify, so the Federal Family Education Loan and Federal Perkins Loan programs are not accepted.
As for repayment plans, there are two options: an income-driven repayment plan or the 10-year standard repayment plan. But given the 10-year timeline with the standard repayment plan, a borrower may have no remaining balance to forgive.
The Biden administration recently announced a new income-driven repayment option, SAVE, or the Saving on a Valuable Education plan. In this plan, monthly payments decrease from 10% to 5% of a borrower’s discretionary income, and no one earning less than the equivalent of $15 an hour annually will have to make payments.
“With the SAVE plan, negative amortization is going away, so you will not see your balance grow and grow and grow as you are just sort of crossing your fingers and hoping that PSLF is going to work out for you in 10 years,” says Jill Desjean, a senior policy analyst with the National Association of Student Financial Aid Administrators.
The average balance discharged for borrowers under PSLF — including with TEPSLF and the limited waiver — in March 2023, the latest month for which data was available, was $68,547, according to the Education Department. That figure represents 500,519 borrowers.
How to Apply for PSLF
It’s recommended that a borrower fill out an employer certification form annually, which requires either a recent W-2 form or federal employer identification number. Not only can the PSLF Help Tool be used to search for qualifying employers, but it can also generate information automatically in the form and provide further clarification around eligibility requirements.
Once an employer is deemed eligible after the form is completed, direct loans are transferred to the PSLF servicer, MOHELA. Notice is given to borrowers each time the form is submitted about the number of qualifying payments they have made.
Borrowers who choose not to fill out the form each year will be required prior to forgiveness to submit employment certification for every employer they worked for while making the required monthly payments.
Digital signatures — hand drawn, not typed — are needed from both the borrower and the employer. The completed form can then be submitted digitally instead of being mailed or faxed.
If a borrower is approved and makes more than 120 qualifying payments, those extra payments — in most cases — will be refunded. Processing time once approved for loan forgiveness varies, but could take up to several months.
Changes to PSLF
The program has faced criticism and investigations for its high ineligibility rates. The first round of applications for PSLF were accepted and reviewed in 2017, and by June 2018, 99% of applicants had been rejected. This was often for minor details such as incomplete paperwork.
To reduce program barriers, TEPSLF was created in 2018 to extend relief to borrowers of direct student loans who made some or all of their on-time, monthly payments in the wrong repayment plan. But with confusion on eligibility requirements and little funding distributed, and due to the coronavirus pandemic, the Education Department announced establishment of the limited PSLF waiver.
Between Oct. 6, 2021 and Oct. 31, 2022, any prior period of repayment qualified for PSLF, regardless of the loan program or repayment plan type. But for repayment to be valid, all nondirect federal student loans, like Perkins or FFEL program loans, needed to be consolidated into the direct loan program before the limited waiver deadline. An individual’s period of service that led to eligibility for Teacher Loan Forgiveness could also be used toward PSLF.
The time in pandemic forbearance still counts toward the 120 qualified monthly payments — only if direct loans were not in default and the borrower was still employed full time for an eligible employer — even though no payments were occurring.
As of mid-April 2023, 616,000 borrowers had qualified for forgiveness under the PSLF limited waiver, according to Department of Education data.
Although the limited waiver deadline has ended, new regulations to improve PSLF were implemented July 1, 2023. For instance, certain periods of deferment or forbearance — such as for cancer treatment or military service — now count toward PSLF. Borrowers will also receive credit for payments made late, in installments or in a lump sum, and 30 hours a week is now considered the standard for full-time employment, according to the Department of Education. (See the full list of changes here.)
“It cleans up a lot of the ambiguities and fixes a lot of what I would call technicalities that were keeping people from getting PSLF,” Desjean says. “I think ultimately, people will be more likely to get PSLF than they have been. And in combination with this new IDR plan, I think people will be more encouraged to stick in public service.”
Given the complicated nature of the PSLF program, borrowers may be left with questions. Refer to the FSA website to learn more about eligibility requirements.
Experts also suggest reaching out to your student loan servicer for more tailored assistance.
“Your situation may be different than your roommate’s or somebody down the hall,” says Joseph Orsolini, president of College Aid Planners Inc. “Your loan service providers are going to have all the details to your specific situation.”
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Update 07/31/23: This story was published at an earlier date and has been updated with new information.