Public Student Loan Forgiveness or PSLF

Public Student Loan Forgiveness or PSLF

Special Covid-19 Consideration

Since March 13, 2020 payments and interest on most Federal student loans have been suspended.  President Biden announced that his administration would continue to extend the suspension through September 30th, 2021.  This is great news for those who qualify, which are most borrowers with Federal student loan balances.  Check with your loan servicer if you have any questions on whether or not this applies to you.

While the federal student loan relief continues, even though not required to make payments until after September 30, 2021, are still considered working towards PSLF, as long as you are enrolled in an income-driven repayment plan and otherwise qualified Keep in mind you need to recertify your income-driven repayment plan each year, even during the student loan relief period. You also need to submit an employer certification form each year to your loan servicer (FedLoan Servicing) as you work towards PSLF.  The employer certification form helps to ensure that you have documentation at the end of the 120 qualifying payments that demonstrates you have worked for a qualified employer or employers during the ten-year period.

Public Student Loan Forgiveness-PSLF can be a very effective way of addressing student loan debt. Graduates who gain employment with a qualified nonprofit employer and meet the other requirements for PSLF, are required to make 120 qualifying payments, or ten years of monthly payments.  At the end of making 120 qualifying payments, you apply to have any remaining federal student loan balance forgiven.  If your application is successful, that forgiveness is tax-free!

Tax-free student loan forgiveness provided through the PSLF program can be an attractive opportunity for the right borrowers and should be carefully considered as you review job offers.   

Those working towards PSLF must enroll in an income-driven repayment plan and again make 120 qualifying payments.  Under current rules, Revised Pay As You Earn-REPAYE or Pay As You Earn-PAYE are the two income-driven repayment plans currently to consider.  Keep in mind as you enter an income-driven repayment plan-IDR, in the early years of payments, your payment may not even cover the interest the continues to accrue on your loan balance.  If you end of leaving public service before you meet your 120 qualifying payments, you might find your student loan balance is higher, in some cases much higher, than when you started making payments.  For this reason, you should calculate the monthly interest that is accruing above your required IDR payment and when possible, set aside this amount in a savings account or conservative investment account just in case you are unable to fulfill the 120 qualifying payments or if an opportunity in the private sector comes up that you can’t refuse.

Depending on your specialty and your goals, you may be considering offers from both PSLF qualifying nonprofit employers, like a community health clinic or from for profit employers.  It is important to not only consider pay and benefits as you review job offers, but also the potential impact of any student loan forgiveness that might be available through your employer or as a result of working for a PSLF qualifying nonprofit employer.   

The Department of Education reviews each PSLF applicant at the end of the 120 qualifying payments to verify that all requirements have been met.  This process can take several months and therefore it is advisable to continue making payments, past the 120 payments, until you receive notice from the DOE that your PSLF requirements have been satisfied.  Any over payments are refunded by the DOE.  This will likely take a few months also.

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