Do Churches Qualify for PSLF? Yes, Here’s How

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Updated on March 2, 2024

Under new regulations effective as of July 1, 2021, most churches and religious organizations do qualify for Public Service Loan Forgiveness (PSLF). This applies to clergy, pastors, and other religious workers who are employed full-time in non-secular activities. The qualification isn’t limited by the type of religious institution—church, synagogue, mosque, or other houses of worship—all are generally eligible.

Time-Sensitive Note for Religious Workers: Retroactive PSLF Credit

If you’re a pastor or religious worker who’s been serving for years, you could potentially receive retroactive credit for past loan payments thanks to the IDR Waiver and the IDR Account Adjustment Initiative. These programs expanded what payments qualify for PSLF, moving many borrowers significantly closer to loan forgiveness.

Important: The Limited PSLF Waiver has expired, but you can still benefit from the IDR Account Adjustment Initiative until December 31, 2023.

Don’t leave this opportunity on the table.

Reach out to our team for personalized guidance on how to work with the PSLF servicer, MOHELA, to get maximum credit for your qualifying payments.

What is PSLF?

The Public Service Loan Forgiveness (PSLF) Program is a U.S. federal program designed to alleviate the burden of student loans for professionals working full-time in public service roles. After making 120 PSLF qualifying payments, which amounts to about 10 years, the remaining balance of your federal student loans could be forgiven.

The catch?

You must be employed by a qualifying public service employer, which now includes most religious 501(c)(3) organizations.

Why PSLF Matters for Religious Roles

The PSLF program opened a new door for religious workers on July 1, 2021. Before this date, clergy and other religious roles were generally excluded from the program.

But in August 2020, the Department of Education issued new regulations that changed the game.

These regulations were motivated by concerns that excluding religious activities was discriminatory and infringed on religious freedom rights.

Benefits Tailored for the Faithful

  1. Loan Forgiveness: After you’ve made 120 payments under an income-driven repayment plan while serving in a qualifying religious organization, your remaining federal student loan debt will vanish.

  2. Expanded Eligibility: The new PSLF regulations extend the umbrella to include religious workers. This not only lessens their financial load but also incentivizes continued service in their communities.

  3. Flexible Employment Requirements: Activities like religious instruction and worship services now contribute to meeting the full-time employment requirement, making it easier for you to qualify.

A Matter of Debate

While many applaud the changes as a protection of religious liberties, critics argue that the new regulations could blur the lines between church and state.

The potential impact and costs of this change are yet to be fully understood.

The Department of Education anticipates a minor uptick in eligibility, but some experts warn of significant costs. As of now, the department assures that existing safeguards will prevent misuse of funds, but only time and more data will tell the real impact.

Who is Eligible?

For Individuals: Pastors, Clergy, and Ministers

If you’re in a religious role and wondering how to qualify for Public Service Loan Forgiveness, here are the key boxes you need to check:

  1. Employment: Work full-time for a qualifying employer. This now includes most religious 501(c)(3) organizations like churches, synagogues, and mosques.

  2. Loan Type: Ensure your student loans are federal Direct Loans.

  3. Repayment Plan: Be enrolled in a qualifying repayment plan, i.e., any of the Income-Driven Repayment (IDR) plans.

  4. Consistent Payments: Make 120 qualifying monthly payments while employed by a qualifying organization.

The game-changer? Activities like religious instruction and worship services now count toward your full-time employment requirement.

For Organizations: Churches and Religious Groups

For your religious organization to be the stepping stone for your employees’ PSLF eligibility, here are the must-haves:

  1. Nonprofit Status: Your organization should be classified as a 501(c)(3) nonprofit organization by the IRS.

  2. Inclusion of Religious Activities: Employees engaged in religious activities as part of their job responsibilities are now eligible for PSLF.

Remember, it’s not the nature of the job that qualifies an individual for PSLF. It’s the status of the employer. Make sure your organization ticks these boxes to pave the way for your employees’ financial relief.

How Church Workers Can Apply for Public Service Loan Forgiveness

Embarking on the PSLF journey? If you’re a pastor, clergy, or minister, here’s your step-by-step guide to navigating the application process with confidence:

  1. Kickstart with the PSLF Help Tool: The first stop on your PSLF journey is the PSLF Help Tool. This user-friendly platform walks you through eligibility requirements and the application steps. You can find it on the Federal Student Aid website.

  2. Fill Out the PSLF Form: Once you’ve familiarized yourself with the program via the Help Tool, it’s time to get down to paperwork. The PSLF form consists of three sections: your personal details, your employment info, and employer certification. Be meticulous when filling out your employment data, especially if you work for a religious organization.

  3. Get Employer Certification: An authorized official from your religious organization must certify your employment details on the PSLF form. This step is non-negotiable—it’s how you prove you’re eligible for loan forgiveness.

  4. Send Off Your Form: After receiving employer certification, submit the PSLF form either electronically or by snail mail. The PSLF Help Tool can guide you through the electronic submission process.

  5. Keep Things Updated: Submit an updated PSLF form annually or whenever there’s a change in your employment status. Regular updates help you track your progress and ensure you remain eligible for the program.

Why Document Carefully?

Accuracy is your best friend when documenting your employment with a religious 501(c)(3) organization. Make sure to highlight time spent on activities like religious instruction, worship services, and proselytizing. Proper documentation solidifies your eligibility and proves you meet the full-time employment criteria.

What About PSLF Question 13?

When navigating the PSLF application process, you might stumble upon Question 13 and wonder how to answer it as a pastor or clergy member. This question lists various types of public services and asks you to check the ones your employer provides. Sounds straightforward, right? Not so fast—this question can be a curveball for those in religious employment.

The Truth About Question 13 for Pastors and Clergy

  1. Skip It If You’re With a 501(c)(3): Most churches operate as 501(c)(3) not-for-profit organizations. If this is the case for your religious employer, you can actually bypass Question 13 altogether.

  2. The Rule Change and Religious Activities: The recent change in PSLF eligibility regulations allows time spent on religious activities to count toward full-time employment requirements. This change came in the wake of a Supreme Court decision about the Establishment Clause, removing a previous exclusion that made it difficult for clergy to qualify.

  3. Work for an Eligible Employer: While the change in rules means you don’t have to exclude time spent on religious activities, you do still need to work for an eligible employer, such as a 501(c)(3) organization. This foundational eligibility criterion hasn’t changed.

What is Full-Time Religious Work?

Another misconception surrounds the definition of “full-time” work. Previously, clergy often struggled to meet the 30-hour weekly requirement because time spent on religious activities didn’t count. Now, that time does count, making it easier for religious workers to qualify as full-time employees for PSLF purposes.

Bottom Line

New PSLF regulations have expanded student loan forgiveness eligibility to include religious workers.

Don’t miss the chance for retroactive credit. The deadline is December 31, 2023.

Think you’ll never get your debt forgiven?

We’ve helped religious workers across all faiths qualify for PSLF. Book a call with our team now to fast-track your journey to financial freedom.

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