Student Loans

Can You REALLY Get Public Sector Loan Forgiveness?

Fears about the long-term viability of the Public Sector Loan Forgiveness (PSLF) have surrounded the program ever since it was established in October 2007.  In fact, we’ve discussed these concerns on the blog before!  But since we last discussed the future of PSLF, the initial round of forgiveness data seems to validate a lot of the concerns I last discussed in 2017, as the vast majority of applications for forgiveness were rejected in 2018.

That being said, most of this fear is misplaced.  There are three primary requirements you must meet in order to achieve loan forgiveness under PSLF – and unfortunately, the “fine print” is confusing for each of these three requirements, and the needed information historically hasn’t been clearly communicated by federal loan servicers.

At the end of the day, PSLF is a viable option for you – as long as you make sure you meet the three requirements, to the letter.  And despite scare tactics put out by companies that make money when you refinance your student loans – which, incidentally, will disqualify you from PSLF – borrowers who are currently in repayment are not threatened by any future changes to the PSLF program.

If you’d like to learn more about how to make sure your loans are on track to qualify for PSLF, download our free Student Loan Guide to learn more!

What is Public Sector Loan Forgiveness?

Before diving into the loan forgiveness provisions of PSLF, I want to give you some background on the Public Sector Student Loan Forgiveness program as a whole. This program was created to encourage citizens to pursue government jobs in exchange for loan forgiveness –the main selling point being that working in one of these jobs for 10 years would qualify you for complete loan forgiveness.

Unfortunately for the government, the PSLF program has essentially been too successful; not only did individuals in many different fields pursue these types of jobs in government in search of the benefits this program offered them, but a growing number of graduate and professional students accepted jobs at teaching hospitals and other non-profits seeking forgiveness for 7+ years of student loan borrowing.  The government didn’t intend to open this program to the volume of people currently seeking loan forgiveness, which has prompted several proposals to change the program over the years.  Critically, though, these changes will only affect future borrowers. If you are currently repaying loans seeking PSLF forgiveness, this should not be a cause for concern.

What Problems Face the PSLF Program?

When this program was first launched, the specifications and requirements for forgiveness were very vague and poorly communicated.  Additionally, Congress and the Department of Education have made significant changes to student loan policy several times over the past 15 years.  All of these changes were well-intentioned, but they made it hard for borrowers to keep up to make sure they had the right loans to qualify for PSLF forgiveness, and that they were on a qualifying repayment plan.  This particularly affects borrowers who had taken out student loans prior to 2010.

Unfortunately, the changes in student loan policy and poor communication of the requirements to applicants meant that almost 100% of people were rejected for forgiveness the first year it was offered.  And the fact that loans only started to be forgiven over the past year and a half is enough to raise concerns about the program by itself, at first glance. It is important to note, however, that this program began in October 2007. Because of the 10-year forgiveness requirement period, the first round of applicants eligible for forgiveness only submitted their applications a little over a year ago. To potential applicants for the program, seeing that the rejection percentage was so large and the total number of people who have had loans forgiven was so small, it’s completely understandable that  individuals are afraid to count on the application process altogether simply because they associate the program with failure.

But, here’s the catch: the PSLF program is not a failure, and it won’t be for anyone currently seeking loan forgiveness who reviews the detailed program requirements  PSLF is still in its early stages and there are many reasons to expect that the program will be successful for you in the coming years:

  • This is a blessing and a curse, but the government has only rejected applicants because their loans, payments, or jobs did not meet the requirements for forgiveness. Unfortunately, due to the poor communication about the program requirements, many individuals who thought they were eligible for PSLF actually were not. But the good news is that if you do make sure you comply with the “fine print” requirements for PSLF, you can expect loan forgiveness. With my help, we can ensure that you are meeting all the requirements for eligibility and are set up on the right path towards success.
  • Many people experience issues with the student loan servicers that process the payments. These companies often make a lot of mistakes processing loans that can incorrectly calculate your monthly payment or put your eligibility for forgiveness at risk. For the average millennial, it’s very difficult to identify and fix these potential issues.  With the help of a student loan planner (like me), this can be much more manageable.
  • I expect the number of accepted PSLF forgiveness applications to increase significantly in the coming years.  As I mentioned, the government did a terrible job getting people the information they needed to know how to qualify for the program.  That has gotten better over time, and it’s much easier for students who entered college in 2011 or later to have loans that automatically qualify for the program.  Just because so many people have been rejected in the first year or so of forgiveness applications doesn’t mean this will continue.
How Can I Make Sure I Get Loan Forgiveness?

Despite what you may have heard, qualifying for PSLF can be MUCH easier than many think… you just need to do your homework. Student loan policy has developed over time, and the changing options mean that additional steps may be required to maximize your likelihood of forgiveness.  If you focus on meeting three key requirements, you can feel good about your chances of achieving loan forgiveness.

As long as you make sure you are on track through each step, attaining forgiveness through this program is possible. I have laid out the three major steps you need to take right from the start to optimize your possibility of public sector loan forgiveness:

  1. Make sure your loans are eligible. The biggest myth around PSLF, that gets the most people into trouble, is assuming that every federally-issued student loan qualifies.  Not every type of federal loan qualifies for Public Sector forgiveness, so you should review your loan documents to verify. If the loans you currently have were distributed before 2010 (these type of loans are classified as “FFEL loans”), or are categorized as Perkin’s loans, you will need to consolidate them through the federal government to make them eligible for PSLF.  For those of you who have not yet started repaying your loans, be sure to check that your loans meet the eligibility requirements
  2. Make sure you are on an eligible payment plan. Often, individuals don’t realize that the payment plan they are on may be hurting their chances of loan forgiveness or reducing the amount that will be forgiven. Critically, you won’t get credit for any time where any of your loans are in deferment or forbearance.  While the Public Sector Loan Forgiveness program is often associated with a forgiveness time period of “10 years”, the real requirement is represented as 120 monthly payments.  If you make one payment a month for 10 years, this gets you to the required number of payments… but if you skip payments or place your loans into deferment or forbearance, you need to “make up” that payment in the future before you can apply for PSLF.  Additionally, “graduated” or “extended” payment plans won’t qualify as PSLF-eligible payments, either.  If you are seeking PSLF, you should make sure you are either on an Income-Driven Repayment plan or the standard 10-year repayment plan.  (And as a side note, you should make sure you are on the right Income-Driven Repayment plan.  In my experience, student loan servicers often put you on sub-optimal plans unless you specifically request the “right” one for you!)
  3. Make sure your job is qualifying and eligible. This loan forgiveness plan offers benefits to a wide range of professions, but it is important to confirm that your position qualifies. To be more specific, qualifying jobs include working for one of the following types of organizations:
    1. The Government
    2. A 501(c)3 Nonprofit
    3. The AmeriCorps or Peace Corps
    4. A Public Service Organizations.  Generally, non-profits as a whole will qualify.  But, there are a few exceptions.  Specifically, even if you work for a non-profit, jobs that are political in nature or labor union jobs are not eligible for forgiveness.

Once you understand these three criteria and confirm your eligibility, you can feel confident that you are on track for PSLF.

What is the Future of Public Sector Loan Forgiveness?

As I mentioned, a lot of the fear around PSLF has to do with future changes to the program.  And to be candid, this program is likely to see tweaks to it in the future. Congress has already tried to make changes to this program since the Obama administration, and I believe some new changes will come to fruition in coming years. Both Presidents Obama and Trump have discussed putting some type of limit on how much can be forgiven by the program.

Currently, Republicans in Congress has introduced the Prosper Act, which would completely eliminate PSLF altogether.

However, this is not a cause of concern for people who currently have student loans. This change would only affect new borrowers, not those who are already pursuing forgiveness. These forgiveness provisions are often written into borrower’s loan agreements; it will be a massive legal fight for the government to take these provisions away from current borrowers, and there is strong legal precedent for changes in student loan policy to only affect future borrowers.

So, if you or someone you know is considering going back to school with the goal of achieving loan forgiveness through PSLF once you graduate, this should be a legitimate concern. But otherwise, there is no need to fear.

The Key Takeaways

From all this information, there are two big takeaways:

  1. Public Sector Loan Forgiveness is very attainable as long as you do your homework and stay on track. Take the time to make sure that your loans, payments, and job qualify for the program.  And each year, you should recertify your income and file the Employment Certification Form to prove you work in a qualifying job.
  2. Recognize the conflicts of interest in the student loan industry.  As I mentioned at the beginning of this post, I was inspired to discuss the fears about the future viability of PSLF am discussing this topic mainly because of an article sent to me by a private student loan refinancing company.  Ultimately, this is a pretty good overview of the program, but the section in the middle calling PSLF into question is misleading and intentionally stokes fear about the future of the program.  Remember, this company is a private student loan lender, meaning they make their money by taking loans eligible for PSLF and refinancing them into ones that aren’t. As long as you follow the PSLF program requirements, there is no need to be concerned about achieving forgiveness through the program.  And above all, if you’re seeking PSLF forgiveness, don’t refinance your loans!
What’s the Next Step?

If you would like to learn more about this program or your eligibility, I encourage you to download my Student Loan Guide to give you some help in determining whether or not you are on track to qualify for PSLF. I am also more than happy to set up an introductory call to walk through any questions you may have!