501(c)(3) and nonprofits that provide a public service qualify for tax-free student debt relief under the Public Service Loan Forgiveness Program.
Public Service Loan Forgiveness is a program designed to encourage federal student loan borrowers to work in careers that better society: teaching, military service, law enforcement, social work, religious service, and nonprofits doing public service work. PSLF promises nonprofit employees tax-free forgiveness after making 10 years' worth of payments while working full-time.
The Covid-19 pandemic has brought about two significant changes to the PSLF Program:
- First, if you work for an eligible employer, you get credit towards forgiveness even though your loans are in forbearance.
- Second, the U.S. Department of Education temporarily relaxed the rules to let you get credit for payments made towards FFEL Loans going back to 2007.
You can use the PSLF Help Tool on the federal student aid website to see if your current or former employers are eligible for the program.
Read on to learn how to qualify for nonprofit student loan forgiveness and alternatives if your job isn't eligible.
If you work for a nonprofit, are your student loans forgiven?
Your student loan debt isn't automatically forgiven because you work for a nonprofit. You qualify for the Public Service Loan Forgiveness Program after making 120 monthly loan payments. The payments must be made:
- Under a qualifying repayment plan — Standard or an income-driven repayment plan.
- For the entire amount due.
- On-time — within 15 days of your due date.
- On or after Oct. 1, 2007.
- While you're working full-time for a qualifying nonprofit employer.
What nonprofits qualify for student loan forgiveness?
Not all nonprofit organizations qualify for PSLF. Eligible nonprofit employers include:
- 501(c)(3) nonprofits.
- Charter schools.
- Nonprofit organizations that don't have 501(c)(3) status — e.g., 501(c)(6) employer — but provide a qualifying public service as their primary purpose.
- Religious organizations.
- AmeriCorps or the Peace Corps.
Government organizations at all levels — city, state, and federal — meet the program's eligibility requirements.
Learn More: List of Qualifying Employers for PSLF
How to apply for nonprofit student loan forgiveness?
There are two pathways to apply for nonprofit student loan forgiveness:
- The Public Service Loan Forgiveness Program
- The PSLF Waiver
The PSLF Program is the original program that's given borrowers trouble since the beginning. It's the one that less than 1% of applicants received forgiveness under. The PSLF Waiver is a temporary expansion of PSLF. It provides the relief Congress tried to offer borrowers with the Temporary Expanded Public Service Loan Forgiveness Program (TEPSLF). From now through Oct. 31, 2022, applying for the PSLF Waiver will give you credit towards PSLF for any payments you made on your federal loans, regardless of the type of loan you had or the payment plan you were in.
In effect, PSLF and this limited waiver are the same forgiveness opportunity. The PSLF Waiver is simply an attempt by lawmakers to fix a broken program to give nonprofit and government employees the cancellation they deserve. The steps of applying are the same for both.
Step 1 - Have the correct type of loans.
Only loans made under the Direct Loan Program are eligible for PSLF. You can consolidate other types of federal student loans — FFEL Loans and Perkins Loans — into a Direct Consolidation Loan to make them eligible for the program. Private student loans are never eligible.
Parent PLUS Loans, including Direct Consolidation Loans that paid off parent loans, don't qualify for the limited waiver, but they are PSLF-eligible.
List of which loans qualify for PSLF:
- Direct Loans
- Federal Family Education Loans — Stafford Loans and Parent PLUS Loans if consolidated into a Direct Loan.
- Perkins Loans — if consolidated into a Direct Loan.
Joint spousal consolidation loans made under the FFEL Loan program cannot be consolidated into a Direct Loan.
Step 2 - Work full-time for a qualifying employer.
Your job title, description, or role with the nonprofit doesn't change your eligibility. The only thing that matters is that the nonprofit you work for is a 501(c)(3) or provides a qualifying public service.
You have two options to find out if your nonprofit is eligible:
- Use the PSLF Help Tool on studentaid.gov.
- Send an employment certification form to the contractor that oversees PSLF for the Education Department, FedLoan Servicing. You can submit the form every year when you do your annual recertification or wait until you're eligible for forgiveness and certify your employment retroactively.
Full-time work is at least 30 hours per week. If you work for two nonprofit employers and your part-time work at both employers averages out to at least 30 hours per week combined, you may still qualify.
Step 3 - Move to an IDR plan.
Most borrowers will save the most money by making all qualifying payments on one of the income-driven repayment plans. Even if you have a low income, you'll always have a payment amount you can afford. However, if you're a high earner or have Parent PLUS Loans, your payments may be cheaper under the 10-Year Standard Repayment Plan.
Step 4 - Make 10 years' worth of payments.
You must make 120 monthly payments before you're PSLF-eligible. The payments don't have to be consecutive. You can pause payments with a deferment or forbearance and then start making payments again. You can also change jobs. For instance, you switch from a qualifying nonprofit to a job that doesn't qualify. When you return to a qualifying employer or start making payments again, you'll pick up where you left off.
Two things to note.
- First, student loan payments count toward PSLF only when they're made while you're working for a qualifying employer.
- Second, as of August 2020, lump-sum and early payments made before your recertification deadline count toward the 120 needed for forgiveness. For example, if your monthly bill was $100 and you paid $1100, that would count for your next eleven payments.
Step 5 - Apply for student loan forgiveness.
After making your final payment, submit the PSLF application. You have to keep working full-time for a qualifying employer when you apply.
If you didn't certify your employment each year, submit an employment certification form or your current employer and each employer you had while making the 120 payments. You can skip this step if you've been at the same nonprofit employer since Oct. 1, 2007.
Once received, FedLoan Servicing will notify you. You're not required to make payments while your application is processed. Any payments made in excess of 120 will be refunded to you once the eligible loans are forgiven.
Your nonprofit employer doesn't qualify for PSLF? You have other options.
You're not alone if you learn the nonprofit you work for doesn't meet PSLF's strict requirements. There are other options.
- Check out other forgiveness opportunities. PSLF is just one of the student loan forgiveness programs the federal government offers borrowers.
- Stay in an income-driven repayment plan. IBR, ICR, PAYE, and REPAYE will forgive your remaining balance after 20 or 25 years, depending on the plan and if you borrowed federal loans for graduate school. Right now, the forgiven amount is tax-exempt. But that may change in 2026.
- Check out refinance opportunities. If you have a good credit score and enough income to cover your credit card bills and other expenses, student loan refinancing can save you money and help you get out of debt faster by lowering your interest rate. Before you refinance federal loans, know that they'll no longer be eligible for federal benefits like loan forgiveness and income-based repayment options.