The Ultimate Guide to Public Service Loan Forgiveness

One year ago, the first round of public servants became eligible for Public Service Loan Forgiveness. These early recipients were the first to have their Direct student loans forgiven with the PSLF program.

With growing awareness of the program, and an increased number of income-driven repayment plans, more and more people are becoming eligible for loan forgiveness. Are you a person who could become eligible for loan forgiveness? Find out in our ultimate guide to student loan forgiveness.

If you want to get any questions answered around PSLF or how to apply outside this guide, check out Chipper. Chipper is an app that allows you to connect your student loans, see the best repayment plan, and see if you qualify for loan forgiveness like PSLF or Teacher Loan Forgiveness. Check out Chipper here >>

What Is Public Service Loan Forgiveness?

Public Service Loan Forgiveness (PSLF) is a federal program that allows loan forgiveness for qualified employees who work full-time for a variety of employers. Full-time work requires working at least 30 hours per week.

After 120 on-time payments (10 years) of federal student loans (more on that below), qualified applicants will have the remainder of their federal loans forgiven.

Qualified employers of public service jobs include:

• The government (including military, law enforcement, schools. and universities)
• Tax-exempt not-for-profit 501(c)(3) companies; including tax-exempt hospitals, tax-exempt charitable organizations, tax-exempt educational institutions, etc. (It’s important to note that if you’re a member of clergy or your work is religious in nature, you may not receive exemption. To qualify you must spend at least 30 hours per week on work that doesn’t have to do with proselytizing, conducting worship services, or providing religious instruction.)
• Peace Corps or AmeriCorps
• Other non-profit organizations that provide one of the following services:
  • Emergency management
  • Military service
  • Public safety
  • Law enforcement
  • Public interest law services
  • Early childhood education (including licensed or regulated healthcare, Head Start, and state-funded prekindergarten)
  • Public service for individuals with disabilities and the elderly
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in healthcare practitioner occupations and healthcare support occupations, as such terms are defined by the Bureau of Labor Statistics)
  • Public education
  • Public library services
  • School library or other school-based services

Advocacy groups, political groups, and labor unions are not qualified employers.

How Does the 120-Payment System Work?

To actually get loan forgiveness, you have to make 120 “qualified” payments on your student loans. Qualified payments have to meet the following criteria:

• You were employed full-time by a qualified employer
• Your loans were not in deferment, forbearance, or default
• The payment was made after October 1, 2007
• Made on time and in full (paid the full installment amount - not just what your bill says -  within 15 days of the due date). As of August 2020, prepayments are allowed, but you can see our full article on Pay Ahead Status and PSLF and why we still caution against this.
• Under a qualified repayment plan (One of the most important things to understand is the requirement of being under a qualified repayment plan. Qualified repayment plans include any income-driven repayment plans. These include monthly payments of $0 that might accrue if you’re earning a wage below the poverty line. Payments made under the Standard Repayment Plan for Direct Consolidation Loans would qualify for PSLF purposes only if the maximum repayment period was set at 10 years. If you have Direct Consolidation Loans, be sure to combine the loan with an income-driven repayment plan.)

The 120 payments don’t have to be consecutive. So if you take a few years off of public service work, you can come back in where you started.

If you do make a large lump-sum prepayment, that payment will potentially count as qualifying payments (given employment certification is on file and all other eligibility conditions are met) under the PSLF Program for up to 12 months or until the next time their income-driven repayment plan is due for certification, whichever comes first. We still don't advise this, but it does help with the pay-ahead status issue. See the announcement here.

Typically, if you consolidate your loans, the clock on the 120 payments restarts. That’s right. The clock on the 120 payments resets when you consolidate your student loans. The best time to consolidate your student loans is at the beginning of the loan forgiveness process. The second best time is never.

However, if you have old FFEL Loans or Perkins Loans, you're able to consolidate them before October 31, 2022 and have those prior payments count towards PSLF. See the Biden PSLF Simplification here. The important part is you still need to consolidate to a Direct Loan, and you must have Employment Certification Forms (ECFs) for the qualifying payments.

Some tips for making the most out of PSLF:

• Don’t make larger payments than are necessary.
• Don’t make more than one payment per month.
• Get on an income-driven repayment plan right away.
• If you want to consolidate your loans, do so as soon as you graduate from college.

When Does the Clock Start for My 120 Loan Payments?

You can begin making qualifying PSLF payments once the in-school deferment and grace period on your loans ends. If you want to start making payments right away, consolidate your loans and begin repayment immediately.

Warning: Consolidating loans can “reset the clock” on PSLF! Remember, consolidating your federal loans resets the clock on Public Service Loan Forgiveness. Don’t consolidate if you’ve already made eligible payments under PSLF. The only exception is consolidating old FFEL or Perkins Loans - but this must be done before October 2022.

How Do I Apply for Public Service Loan Forgiveness?

First, you’ll want to complete and submit the Application and Employment Certification form for Public Service Loan Forgiveness annually or when you change employers.

Note: This form was updated in November 2020, and is used for both PSLF and TEPLSF, for employment certification and applying for forgiveness. You can still submit the prior form, but we recommend everyone switch to the new form.

You’ll mail the form to:

U.S. Department of Education
FedLoan Servicing
P.O. Box 69184
Harrisburg, PA 17106-9184

After you submit this form, MOHELA will become your loan servicer. At this point, MOHELA will review your loan payment history to determine how many qualified payments you made. If you had multiple employers, be sure to submit multiple Employment Certification forms.

Each year, you should continue to submit your Employment Certification form. But you should also save IRS W-2 documents and other documents that can prove you were a full-time employee. This will make it much easier for FedLoan Servicing to track your payments (and you’ll avoid major hassles once your 120 payments are complete).

MOHELA allows you to check on the number of payments you’ve made through its account access area.

Once you’ve reached 120 payments (congratulations!), you can apply for student loan forgiveness.

You can simply upload the form to MyFedLoan.org/FileUpload or mail it in to:

U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184

MOHELA will let you know that your application is approved, and you’ll receive notifications of loan balances of zero!

Note: Fedloan Servicing was previously the loan servicer who handled PSLF. However, since they will no longer be a loan servicer for Federal loans, MOHELA is taking over the PSLF eligible loans.

Which Loans Are Eligible for PSLF?

Private student loans are not eligible for loan forgiveness. PSLF is only a program for student loans of the Federal Direct Loans type. These include:

• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans (Editor's Note: See the warning about this as previously written in this article.)

If the loan isn’t on the list above, it’s not eligible for loan forgiveness.

Important Note Regarding FFEL and Perkins Loans: President Biden announced that there will be a limited waiver until October 31, 2022 for prior payments that were made under FFEL or Perkins Loans. However, to qualify, you must consolidate your loan into a new Direct student loan AND have employment certifications on file for those past payments. Learn more here.

If you're looking to consolidate your old FFEL loans, check out this guide: Student Loan Consolidation.

Are Direct Consolidation Loans Really Eligible?

Direct Consolidation Loans are eligible for loan forgiveness, but with several important caveats.

First, if you and your spouse consolidated onto a Direct Consolidation Loan, and only one of you met the employment requirements, the portion of the balance attributable to the qualified employee is forgiven. The rest is not.

Additionally, joint consolidation loans from the Federal Family Education Loan (FFEL) Program cannot be forgiven.

Finally, any time you consolidate your federal loans, you restart the 120-payment requirement.

Are FFEL Loans Forgivable?

Typically, no. But President Biden announced a waiver that past payments that were made under FFEL or Perkins Loans will count for PSLF. However, to qualify, you must consolidate your loan into a new Direct student loan AND have employment certifications on file for those past payments. Learn more here.

Up until June 2010, Federal Family Education Loan (FFEL) Program loans were one of the biggest federal loans issued to student borrowers. Unfortunately, these loans were not issued by the U.S. Department of Education, and do not qualify for PSLF.

You could consolidate these loans into a Direct Consolidation Loan, but that will reset the clock on your PSLF.

Is Loan Forgiveness Taxable?

One of the best perks of PSLF is that the loan forgiveness is not taxable. No matter how much interest you’ve accrued, the full balance of the loan is forgiven, and the amount forgiven isn’t taxed.

What Happens to PSLF If I Default on My Loans?

If you’re on an income-driven repayment plan, you should never default on your loans. Paying your student loans should be one of your highest financial priorities.

That said, any debt in default is not counted as a qualifying payment on your loan. That includes any time you spend “rehabbing” the loan to current status.

Keep your student loans out of default by prioritizing repayment. Remember, if your income adjusts downward (say you lose your job), you can reset your repayment plan in the middle of the year.

Will Public Service Loan Forgiveness Still Be Around?

PSLF is one of the favorite punching bags for Congress. An act of Congress could eliminate the program today. That said, it’s more likely that the rules for qualified employment will be narrowed rather than the program being completely eliminated.

If you’re very worried about it, you may want to continue making the standard payments on your student loans. Just remember, all of the potential changes are just proposals. Check out the full list of Trump Student Loan Forgiveness Proposals here.

Temporary Expanded PSLF (TEPSLF)

In 2018, Congress created Temporary Expanded Public Service Loan Forgiveness. This program is designed to help borrowers who were on the wrong repayment plan, but otherwise would have been eligible to have their loans forgiven under PSLF.

This is a complicated exception to the program, and it only applies to certain borrowers on the wrong repayment plan (not wrong loan type of disqualified employment). 

We break down the full requirements and how it works here: Temporary Expended PSLF (TEPSLF)

Final Thoughts

PSLF is a great program, but it does require you follow very strict rules to get your loans forgiven.

If you're unsure about what to do or how to fill out the certification forms, check out Chipper and see if it can help you better track your PSLF eligibility.