If you’re one of the 62% of college students that graduate with some form of student loan debt, you are likely investigating the many different options that exist for repayment. One popular repayment option is Public Service Loan Forgiveness (PSLF).
PSLF was introduced in October 2007. It allows borrowers who make 10 years of qualifying payments (120 total payments) and work for an employer in the public service sector to have their loans completely forgiven.
The first eligible borrowers for PSLF would have completed their 10 years of payments in October 2017. But the most recent statistics released by the Department of Education in April 2021 show that just 5.5% of PSLF applicants have been approved. In this article, we're going to look at the biggest PSLF errors that cause rejections and how you can avoid them.
If you’ve been denied from PSLF and are looking for the best repayment strategy, consider checking out Chipper. Chipper is a service that can help you analyze the different repayment and loan forgiveness options and determine which one might be right for you.
What Is Public Service Loan Forgiveness (PSLF)?
As previously noted, Public Service Loan Forgiveness is a program that was first introduced back in 2007. It allows graduates who make 120 qualifying payments and work for a qualifying employer to have their loans completely forgiven.
The Public Service Loan Forgiveness program is only an option for borrowers who have Direct Loans or who consolidate other federal loans into a Direct Loan. You must also be on an income-driven repayment plan, such as Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income Contingent Repayment (ICR) or Income-Based Repayment (IBR).
If you've made payments on a non-qualifying repayment while working for a qualifying employer, you may eligible to apply for Temporary Expanded Public Service Loan Forgiveness (TEPSLF). Of the 5.5% of applicants who were approved for PSLF forgiveness in April 2021, 3.4% qualified through TEPSLF.
How To Qualify For PSLF
Even if you're eligible for PSLF based on the type of loans that you have and the type of repayment plan you are on, you must also work for a qualifying employer. The following types of jobs and employers qualify for Public Service Loan Forgiveness:
It’s important to understand that it's your actual employer whose occupation is relevant for the purposes of qualification under PSLF. For example, if you’re a government contractor, that is not the same as being employed by a governmental organization.
The Biggest PSLF Errors That Cause Loan Forgiveness Denial
The US Department of Education has called out eight common PSFL errors that can cause denial. Here's the list:
The #1 way to avoid these PSLF errors that cause denial is by remembering to fill out your Employment Certification Form (ECF) each year. Rather than make 10 years of payments only to find out that you aren’t eligible for PSLF, filling out your ECF every year is a way to make sure that all of the kinks are worked out up front.
How To Avoid These PSLF Errors
Filling out the ECF isn't the only step you can take to steer clear of PSLF problem. Here are a few more suggestions for how to avoid PSLF errors.
Most of these ways to avoid PSLF errors can be adroitly summed up by saying “Look at all the mistakes we just mentioned. Now don’t do any of them!”
If you still have questions about whether PSLF fits your specific situation, check out Chipper and let it help you analyze the different repayment and loan forgiveness options to determine which one might be right for you.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.