The Public Service Loan Forgiveness (PSLF) Program wipes out borrowers’ debt after making payments for 10 years while working full-time for the government or a non-profit organization.
Public servants qualify for tax-free forgiveness of their federal student loan debt after 10 years, but few borrowers would initially benefit because of the program’s complex rules. The government has sought to fix that failure by modifying PSLF with three new programs: the Limited PSLF Waiver, the IDR Waiver, and the Temporary Expanded Public Service Loan Forgiveness Program.
Ahead, learn how to qualify for the different PSLF Programs and maximize your loan forgiveness.
- There are four PSLF Programs. The original, the PSLF Waiver, the IDR Waiver, and TEPSLF.
- Want retroactive credit for public service work? Apply for the Limited PSLF Waiver Opportunity.
- Still have FFEL Loans? Apply for a Direct Consolidation Loan, certify past qualifying employment, and get credit under the PSLF and IDR Waivers.
PSLF Program Overview
The Public Service Loan Forgiveness Program started in October 2007 when President George Bush signed the College Cost and Reduction and Access Act of 2007. The program encourages graduates to accept vital but often low-paying work with the government or non-profit organizations by offering a bonus: work for 10 years while making student loan payments on time, and the Education Department will wipe away their remaining balance.
Many people accepted this promise, faithfully worked for a qualifying employer, and paid their debts for a decade, only to have their application rejected because they had the wrong loans or paid their loans under the wrong repayment plan.
Congress rushed to create an emergency fix, but the Temporary Expanded PSLF Program only helped student loan borrowers who made payments under a non-qualifying repayment plan (the Extended and Graduated Repayment plan, for example). It did nothing for the thousands of public servants with ineligible Federal Family Education Loans.
The Biden Administration addressed the “wrong-loan” problem last October when it introduced the Limited PSLF Waiver Opportunity. The waiver, which ends October 31, 2022, temporarily relaxed the PSLF Program’s eligibility requirements by giving borrowers credit for:
- Payments made toward FFEL and Perkins Loans.
- Payments made under a non-qualifying repayment plan.
- Late payments.
- Payments for less than the full amount due.
The limited waiver has been a huge success — over 113 thousand public servants have received $6.8 billion in loan cancellation.
Finally, this April, the Education Department said it would use a one-time account adjustment to make up for shoddy record-keeping and forbearance steering by its loan servicers by giving borrowers credit toward income-driven repayment forgiveness and PSLF.
The department will use the IDR Waiver to give PSLF credit to borrowers for time spent in forbearances over 12 straight months or 36 or more months cumulatively.
How the PSLF Program works now
After the recent PSLF changes, the program is effectively four interrelated programs:
- The original PSLF Program.
- The Limited PSLF Waiver.
- The IDR Waiver.
- Temporary Expanded PSLF.
PSLF is the main program that gives public servants relief. It has the same complex rules that led to 99% of all PSLF Program applications being rejected. Those rules remain unchanged, but according to Education Secretary Miguel Cardona, the department is working to change that through the negotiated rulemaking process.
The PSLF Waiver has helped thousands of people from across the public sector receive billions of dollars in loan forgiveness. But the waiver isn’t perfect. Parents who borrowed federal loans for their children are locked out of it.
The IDR Waiver adds to the PSLF Waiver by giving borrowers credit for periods where their accounts were put into extended forbearances. All borrowers, even those with Parent PLUS Loans, qualify for this relief. But those with commercially held FFEL loans will need to consolidate to benefit.
Lastly, TEPSLF is still around, but its benefits have mostly been swallowed whole by the PSLF Waiver. Anything TEPSLF does, the PSLF Waiver can do better — much, much better.
Who qualifies for relief?
Nearly everyone who works full-time for a 501(c)(3) non-profit organization or the local, state, or federal government qualifies for student loan forgiveness after 10 years of service. But some public servants will need to consolidate their loans or change their repayment plan to meet the program’s requirements.
Unfortunately, some borrowers with joint spousal consolidation loans will never qualify unless Congress changes the law.
Eligible loan types for PSLF:
- Federal Direct Loan Program Loans, including Direct Subsidized and Unsubsidized Loans, Graduate PLUS and Parent PLUS Loans, and Direct Consolidation Loans.
- FFEL Loans if consolidated.
- Federal Perkins Loans if consolidated.
- How to Consolidate Student Loans for PSLF
- Do Charter Schools Qualify for Public Service Loan Forgiveness?
How to apply for the PSLF Program
Follow these steps to complete the PSLF Employment Certification Form.
Step 2: Provide current contact information. In Section 1, you’ll need to provide your Social Security Number, birthdate, mailing address, phone number, and email.
Step 3: Check the correct box and sign the application. Section 2 has three boxes that show why you’re completing the form. You can mark as many boxes as apply to your situation.
Check the first box to request an updated count of how much credit you’ve earned towards the required 120 qualifying payments. Read more about PSLF qualifying payments. Check the second box if you believe you’ve already made enough payments to qualify for forgiveness.
Check the final box if you want the student loan servicer to put your account into forbearance while processing your application. You won’t get credit for the required payments when you’re in forbearance.
Step 4: Complete the employer information. Either you or your employer can complete Section 3 of the application. If you’ve worked for more than one qualifying employer since Oct. 2007, then you’ll need to submit separate applications for each job.
How can I check if I worked for a qualifying employer? You can use PSLF Help Tool to search the employer database using the employer’s identification number from your W2.
What if the company is no longer in business, or you have trouble finding someone to sign the form? Complete Section 3 and then go back to Section 2 and mark the box at the bottom of page 1. The Education Department will help you try to certify your employment. Read more about qualifying employers for PSLF.
Step 5: Submit the application to the loan servicer. Until this year, FedLoan Servicing held an exclusive contract with the U.S. Department of Education to service all loans enrolled in the public service program. The department hired MOHELA to replace FedLoan as the program’s administrator after the company announced it was ending its contract with the government at the end of 2022. If you haven’t confirmed your PSLF eligibility, send the certification form to MOHELA for processing.
What if I still have FFEL Loans? Before applying for the PSLF Program, you must consolidate your FFEL loans into a Direct Consolidation Loan. You can consolidate for free at studentaid.gov. If you apply before October 31, 2022, the Education Department will give you credit for any payments you’ve made while working full-time for a qualifying employer starting in October 2007.
Does the IRS tax the amount forgiven by PSLF? No. The remaining balance forgiven under PSLF isn’t treated as taxable income by the IRS.
What counts as qualifying employment for PSLF? Any local, state, federal, or tribal government agency or 501(c)(3) tax-exempt nonprofit organization qualifies for PSLF. This includes military service and volunteering in the Peace Corps and AmeriCorps. But it doesn’t include working for a labor union or partisan political organization.
Can I decline the in-school deferment and make PSLF eligible payments if I return to school? Yes. You can decline an in-school deferment on your loans and make monthly payments under one of the IDR plans.
Timeline for processing PSLF Program applications
When the PSLF Waiver was first announced, FedLoan Servicing took about six to eight weeks to process applications. But this spring, the processing timeline slowed to four to six months.
When it gets your application, FedLoan will notify you that it has received the paperwork and will review it soon.
Next, it will give you an updated payment count under the original PSLF Program rules and TEPSLF. The language in the letter confuses many borrowers expecting to get an updated payment count under the Limited Waiver because it makes it seem like they’re not getting credit for all the payments they’ve made. Don’t worry. You haven’t been snubbed again. Your application is still being processed.
A couple of weeks later, you’ll get a letter showing your updated payment count under the Limited Waiver Opportunity. If you’ve made the required payments, you’ll get a second letter congratulating you on completing the program and showing that your loan balance has been wiped out.
Find the PSLF Program requirements confusing? Let’s talk.
You’re not alone if you’re unsure whether you’re eligible for the PSLF Program. It’s confusing and has many rules that you have to follow strictly. Schedule a free 10-minute call with me to see how I can help.
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