Public Service Loan Forgiveness (PSLF): An Explanation

Published April 2010, last updated September 2010

Public Service Loan Forgiveness is a new program for federal student loan borrowers designed specifically for graduates entering public service careers. It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments.

(During those 10 years, the Income-Based Repayment (IBR) plan can help keep your loan payments affordable.)

Eligibility for Public Service Loan Forgiveness

This program is for people with federal student loans who work in a wide range of "public service" jobs, including jobs in government and nonprofit 501(c)(3) organizations.

You are automatically eligible if:

• You are employed by any nonprofit, tax-exempt 501(c)(3) organization;
• You are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
• You serve in a full-time AmeriCorps or Peace Corps position.

If you don't meet these criteria, the Department of Education's regulations create a two-part test of other circumstances under which you may still be eligible if:

• 1) your employer is not "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;" and,
• 2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.

These definitions of eligible jobs reflect the Department of Education's final regulations for PSLF, as posted in the Federal Register on October 23, 2008.

Public Service Loan Forgiveness is not available for:

• Private (or "alternative") student loans, state loans, and other loans not guaranteed by the federal government.
• Payments made on federal loans in the FFEL program (you’ll have to switch to the Direct Loan Program)
• Payments made under graduated or extended repayment plans.
• Payments made or work performed before October 1, 2007

How PSLF Works

Types of Loans Covered

PSLF covers federal Stafford, Grad PLUS, or consolidation loans as long as they are in the Direct Loan program. Borrowers with loans in the FFEL loan program must switch to the Direct Loan program to get this benefit.

10-Year Clock

Only payments made after October 1, 2007 count towards the 10 years (120 monthly payments, not necessarily consecutive) required for Public Service Loan Forgiveness. Qualifying payments are payments made through the William D. Ford Direct Loan Program in any of the following three repayment plans: the Income Contingent Repayment plan, the Standard (10-year) Repayment plan, and the Income-Based Repayment plan.

To count, these payments must be made while you're working full-time in an eligible job. "Full-time," according to the final regulations issued by the Department of Education, means an annual average of 30 hours per week or the standard for full-time used by the employer, whichever is greater. For people working part-time at two or more qualifying jobs, "full-time" means an annual average of 30 hours across all jobs held. In professions such as teaching, annual contracts that include at least eight months of full-time work will be treated as the equivalent of a full year's employment.

This loan forgiveness program will only benefit people who still owe money on their federal loans after 10 years of eligible payments and employment. If your income is low relative to your debt, and you qualify for reduced payments under IBR (or Income Contingent Repayment) at any time during those 10 years, you will likely have debt left to forgive.

Using PSLF

Borrowers can not “apply” for PSLF yet, and it has no official application at this time. In order to make themselves eligible, borrowers should consolidate their student loans under the Direct Loan Program and should apply for IBR. If you're in the right kind of job and making the right kind of payments through the Direct Loan program, loan payments made as early as October 2007 could count towards the 120 payments that qualify you for PSLF. The earliest date you can be eligible for forgiveness is October 2017 (assuming you make 10 years of uninterrupted payments beginning with the first eligible payment date of October 2007).

If you are interested in other repayment plans, Income Contingent Repayment (ICR) is also available through the Direct Loan program, and all federal loans offer some assistance in cases of economic hardship. If you have a Guaranteed (FFEL) federal loan, you may be able to make lower payments temporarily with repayment plans that increase the amount due over time. Learn more about these and other options from Student Loan Borrower Assistance, the Department of Education, or your lender.