Public Service Loan Discount: What It Is, How It Works

Public Service Loan Forgiveness is a federal program designed to encourage students to engage in relatively low-paying careers such as firefighting, teaching, government, nursing, public interest law, labor military and religious.

You must make 10 years of payments, for a total of 120 payments, while working for the government or a nonprofit organization before you can qualify for tax exemption.

You can use the PSLF Help Tool on the Federal Student Aid website to find out your eligibility based on the types of loans you have and your employer.

The delivery of civil service loans has undergone temporary changes in the face of the COVID-19 pandemic.

  • First, all federal student loans have been put into abstention without payment due until January 2022.

  • Second, the Ministry of Education issued a temporary waiver until October 2022 to the sometimes onerous arrangements for the PSLF qualification.

The waivers for the PSLF qualification mean that a wider range of past payments on federal loans will count towards the remission, as long as you were working for a qualified employer at the time.

Details on these two programs can be found below.

Federal loan forbearance

Federal student loan borrowers seeking a PSLF do not need to make payments until the extended automatic forbearance expires on January 31, 2022. As long as you are still working full time for an eligible employer , these months of non-payment will count for the 120 payments necessary to benefit from the PSLF.

In other words, if you haven’t made any payments since March 2020 and won’t make another until February 2022, you’re even closer to 22 months of forgiveness.

Temporary exemptions for PSLF candidates

All payments made on your federal loans, regardless of which payment plan you have signed up for, will count toward the PSLF. Previously, only payments made on certain repayment plans were eligible.

If you have made payments in the past that were rejected because they were not taken into account on time, these will now be taken into account in the PSLF.

Any payments made on the Federal Family Education Loan (FFEL) or Perkins Loans after 2007 will count retroactively to the PSLF, provided borrowers consolidate those loans into Federal Direct Loans by the deadline. Previously, payments on these loans were not recorded in the PSLF.

If you consolidated your non-direct loans before the waiver period, payments made before the consolidation will also count towards the PSLF.

For members of the military, any time spent on active duty will count towards the PSLF, whether or not loan payments have been suspended during that period.

If you have applied to the PSLF before and have been refused, the Education Department has said it will review rejected applications. The ministry will also contact borrowers who are now eligible for a discount under the PSLF but have not applied to ensure they are aware of the temporary rule changes.

PSLF eligibility under temporary waiver programs

The waiver applies to borrowers with direct loans, those who have already merged into a direct loan, and those who consolidate into a direct loan by October 31, 2022.

While grad PLUS loans are included in the waiver, parent PLUS loans are not.

Some federal loans are not direct loans. If you have FFEL or Perkins loans, for example, you will need to consolidate your loans into a direct consolidation loan by October 31, 2022. You will then need to verify that you are working for an eligible employer and submit a PSLF form –– also by October 31, 2022.

If you already have direct loans, no consolidation is necessary. Instead, all you need to do is verify that you work for an employer eligible for the program, then submit a PSLF form through your loan department by October 31, 2022.

Find the latest

Who has obtained PSLF so far?

The remittance of civil service loans began in 2007, meaning the first group of borrowers became eligible for relief in 2017.

Of the 726,811 PSLF and TEPSLF applications never submitted, only 8,429 (5,467 for PSLF and 2,962 for TEPSLF) were deemed eligible for pardon, according to data from the Ministry of Education. This means that only 1.16% of all requests have ever been approved.

The average balance of borrowers whose loans were released under PSLF was $ 82,804 and $ 43,879 for borrowers under TEPSLF.

How to get a civil service loan forgiveness

Although the waivers are temporary, the Education Ministry said it is seeking to make these changes permanent to the PSLF. Nonetheless, even if the ministry takes this step, many of the current requirements will remain in place. And in addition, parent PLUS borrowers seeking to qualify for forgiveness under the PSLF will need to complete current qualifications.

Have the right kind of loans, or consolidate

Only loans that are part of the federal direct lending program are eligible for the PSLF. Private student loans are not eligible.

You can consolidate other types of federal student loans – federal family education loans or Perkins loans – to make them eligible for the PSLF.

If you are eligible for Perkins loan cancellation, which offers a discount after five years of public service, pursue this option and do not consolidate your Perkins loans. You can still participate in the PSLF with your other federal student loans.

Work full time for an eligible employer

Eligibility for the program depends less on the type of work you do and more on the identity of your employer. Eligible employers can include:

  • Government organizations at all levels.

  • AmeriCorps or the Peace Corps.

  • Non-profit organizations that do not have 501 (c) (3) status but provide an eligible public service as their primary purpose.

Fill in a employment certificate form to confirm that your employer is eligible. Submit the form to FedLoan Servicing, the contractor who currently oversees PSLF for the department. Once the form is processed, your loans will be transferred to FedLoan for processing in the future.

Submit a new form each year, or each time you change jobs, to make sure you are on the right path to forgiveness. You don’t have to submit the form every year, but it’s a good idea to do so for your records. You can also request a rebate once you qualify and certify your employment retroactively.

You must be working for your eligible employer full time, which equates to at least 30 hours per week. If you work part-time for two eligible employers and your time averages at least 30 hours per week, you may still qualify.

Need to Know for 2021 University Graduates

Check out NerdWallet and Inceptia’s guide to managing money and careers after college.

Switch to income-based reimbursement

For borrowers who cannot benefit from the temporary waiver, your payments should be made on the standard 10 year plan or on one of the four income-based repayment plans.

You’ll save the most money if you make all eligible payments under an income-oriented plan. If you make all payments on the standard plan, you will pay off the debt when you have made enough payments to qualify for the PSLF.

Payments made on progressive or extended federal repayment plans generally do not count towards the PSLF. But under the Temporary waiver of the extended civil service loan program, which the Trump administration rolled out in March 2018, payments made under these plans may still be eligible.

Make 10 years of payments

You must make 120 monthly loan payments. These payments must be made:

  • On time, that is, within 15 days of the due date.

  • Effective October 1, 2007.

  • While you are working full time for an eligible employer and on an eligible repayment plan.

Payments don’t count if they’re made while you’re in school, deferred or inactive, during a grace period, or if your loans are past due or in default.

Payments do not need to be consecutive. For example, you can make some qualifying payments, pause forborne payments, and then resume the refund, picking up where you left off.

You can also change jobs, switching from eligible employers to non-eligible employers. However, payments only count towards the PSLF when you are working for an eligible employer.

From August 2020, lump sum or advance payments also count towards the 120 required for the remittance. You can do this several times a year until your annual recertification deadline. For example, if your monthly bill was $ 100 and you paid $ 500, that would count towards your next five payments.

Apply to forgiveness

In addition to the application, you will need to submit an employment certification form for your current employer and for each employer you have had during the 120 payments. If you complete these forms regularly, you will only need to submit one for your current employer.

FedLoan Servicing will notify you when your documents have been received. You are not required to make loan payments while they process your application.

You are not eligible for the PSLF? You have other options

You are not alone if you do not meet the strict requirements of the PSLF. You also have other options:

  • Stay on the income-based repayment. All four income-oriented plans will cancel your remaining balance after 20 or 25 years, depending on the plan. However, unlike the PSLF, the amount remitted is taxable.

  • Think about refinancing. Student loan refinancing can save you money and help you get off debt faster by lowering your interest rate. However, once you refinance federal loans, they are no longer eligible for forgiveness programs or income-based repayment. You need stable finances and good credit to qualify.

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