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Stanley Tate
#1 Student Loan Lawyer
Updated on January 5, 2023
Federal employees qualify for student loan forgiveness through certain programs, such as Public Service Loan Forgiveness and Income-Driven Repayment Plan Forgiveness. But don’t be fooled into thinking that being a civil servant automatically qualifies you for this benefit. You’ll need to work for a government agency and make monthly payments for at least a decade before the U.S. Department of Education even considers wiping away your federal student loan debt.
Ahead, learn how government workers can get student loan forgiveness.
Public Service Loan Forgiveness Program
Federal employees may be eligible for the Public Service Loan Forgiveness (PSLF) program after putting in 10 years of full-time work at a government agency and making 120 qualifying payments. But don’t think that’s all it takes – you’ll also need to have Direct Loans and be making payments under a qualifying repayment plan like income-based repayment to qualify for this benefit.
Fortunately, the Biden administration recently overhauled the program’s eligibility requirements during the Covid pandemic to make it easier for public servants to have their remaining student loan debt forgiven tax-free. In the past year alone, the Education Department has delivered over $30 billion in relief to nearly 400 thousand borrowers, many of whom are in the federal workforce.
Related: PSLF Waiver Explained
Here’s how the changes work:
First, you’ll get credit for any payment made towards PSLF after the program started, regardless of your repayment plan or whether you made it on time, for the full amount due, or in a lump sum.
Second, you’ll get credit for months spent in certain types of deferment or forbearance, such as military service, economic hardship, or cancer treatment.
Finally, payments made towards non-Direct Loans (like Federal Family Education Loans and Perkins Loans) will now count towards PSLF, even if they were made before you consolidated your loans.
If you’re in the federal workforce and have Direct Loans, don’t miss out on the chance to potentially eliminate your student debt thanks to these recent changes. Even if you still have FFEL or Perkins Loans, you can still get in on this opportunity — just make sure to consolidate your loans into a Direct Consolidation Loan by May 1, 2023. The Federal Student Aid website, StudentAid.gov, is the place to go to submit a consolidation application and create an employment certification form using the PSLF Help Tool.
What employers qualify for PSLF?
A qualifying employer means working for a government organization at any level, a not-for-profit organization that’s tax-exempt under Section 501(c)(3) of the Internal Revenue Code, or a non-profit organization that’s not tax-exempt under that section but provides certain types of qualifying public services (like schools, public libraries, public hospitals, law enforcement agencies, military organizations, and volunteers with AmeriCorps and Peace Corps).
Income-Driven Repayment Plan Forgiveness
New government employees who’ve made student loan payments for years might qualify for a second forgiveness program that clears their remaining balance. Income-driven repayment plans not only offer borrowers affordable monthly payments but also carry a bonus: loan forgiveness after 20-25 years of payments.
You can take advantage of this program by switching to one of the four types of income-driven repayment plans:
Income-Based Repayment
Income-Contingent Repayment
Pay As You Earn
Revised Pay As You Earn
Normally, you’d have to start making payments under an IDR Plan to start the clock for loan forgiveness. But the Education Department is doing something a little different in light of mistakes made by the student loan servicers they hired to manage their loan portfolio. It’s reviewing borrowers’ accounts to count past payments and time spent in long forbearances and certain deferments — except in school deferments — towards the 240 or 300 payments needed for cancellation.
Related: What is the IDR Waiver?
Millions of people stand to benefit from these one-time fixes, with at least 40,000 people having their remaining balance immediately forgiven.
Want to see if you qualify for loan forgiveness? Make sure your loans are owned by the Education Department. If you’ve had to keep paying on your federal loans during the pandemic, you must consolidate those loans into the Direct Loan Program before July 1, 2023. You can log in to StudentAid.gov with your FSA ID to check your loans and payment history and see if you’re eligible.
Learn More: Income-Driven Repayment Plan Forgiveness
Federal student loan repayment programs
The federal government offers agencies the ability to pay off up to $10 thousand in employee student loan debt per year. Agencies may do this to attract or keep highly qualified individuals, but the total repayment may not exceed $60,000. Employees can still qualify for PSLF and IDR Forgiveness while receiving this benefit.
To be eligible, employees must sign a service agreement to remain with the agency for at least three years (unless separated involuntarily) and repay benefits if separated for cause or poor performance. They must also maintain acceptable performance.
Repayment only covers student loans authorized by the Higher Education Act of 1965 and the Public Health Service Act, which includes privately-held federally-insured loans from educational institutions or banks. It does not include private student loans from lenders like SoFi and Citizens Bank.
Eligible loans include:
Direct Loans, including Parent PLUS Loans.
Federal Family Education Loans (FFEL Loans), including Stafford Loans.
Federal Perkins Loans.
Health Education Assistance Loan Program Loans.
Federal agencies paid out $76.7 million in repayment benefits to almost 10 thousand employees in 2020, according to a report from the Office of Personnel Management.
To apply, check with your supervisor for details on the program. And if you’re looking to join the federal workforce, visit the agency’s website to learn what benefits they offer student loan borrowers.
Bottom Line
You have a few options to consider if you’re a government employee looking to get your student loans forgiven. One of the best choices for those with high balances may be to combine Public Service Loan Forgiveness with student loan repayment assistance. This strategy could put you on track to be rid of your federal loans within a decade while paying the least amount.
For those who began a federal job after they had already been paying off their loans, income-based repayment forgiveness and the pending waiver may lead to forgiveness after 20+ years of making student loan payments. Don’t miss out on the possibility of loan relief – evaluate all your alternatives and find the one tha works best for you.
