Most student loan borrowers know that federal government student loans can be forgiven after 10 years of Public Service Employment. Unfortunately, there is some fine print that borrowers should understand. In this edition of the Sherpa Mailbag, we will take a look at Gene’s question about what is required for Public Service Loan Forgiveness (PSLF) employment time to count. If you have a question for the Student Loan Sherpa, Ask Us.
Over the last seven years, I have made about 80 PSLF qualifying payments. During that time, I was on three months Administrative (processing) Forbearance and three months of Hardship Forbearance.
Will the months of Administrative Forbearance or Hardship Forbearance count as qualifying payments?
Public Service Loan Forgiveness Requirements
As seen in our detailed breakdown of the Basics and the Fine Print on Public Service Loan Forgiveness, time towards the required ten years, or 120 months, basically has three basic requirements:
- Eligible Loans – Not all federal loans are eligible. This includes certain Plus loans as well as FFELP loans. However, some loans can be made eligible through federal direct consolidation.
- Eligible Repayment Plan – Only certain repayment plans will count towards PSLF. The income-driven plans such as IBR, PAYE and REPAYE count, but the graduated and extended repayment plans are not eligible.
- Eligible Employer – Only employers that fall within the Department of Educations definition of public service will count. This includes most government agencies and 501(c)(3) non-profits.
Because there is room for confusion within these requirements for PSLF, we suggest sending in an employment certification form on a yearly basis to your federal servicer. This is the best way to track progress and ensure that you are meeting all of the necessary requirements.
Forbearances and Deferments and PSLF
Unfortunately for Gene, deferments and forbearance will not count towards the required 120 payments for Public Service Loan Forgiveness. This is because a forbearance or deferment means that no payment was made pursuant to an eligible repayment plan. (Note: $0 payments on an income-driven repayment plan can count)
In Gene’s case this rule can be especially frustrating because he spent 3 months on an administrative forbearance. Administrative forbearances are usually the result of slow processing or errors on the part of the student loan servicer. Sadly, there is no mechanism in place to get these months to count towards PSLF.
Avoiding PSLF delays due to Forbearances and Deferments
Borrowers working towards PSLF should all be on Income-Driven Repayment (IDR) plans. One of the key requirements to stay enrolled in the IDR plans is to certify your income on a yearly basis. Missing certification deadlines can cause delays in enrollment and force a forbearance or deferment. It can also cause an interest capitalization, which can be expensive.
Federal student loans can be forgiven after ten years of public service. Unfortunately, there are other hoops that borrowers have to jump through.
If you are working for a Public Service Employer but your loans are on a deferment or a forbearance, the time will not count towards loan forgiveness.