public service loan forgiveness employer eligibility

How do I know if my Employer is Eligible Public Service Loan Forgiveness?

Michael Lux Blog, Mailbag, Student Loans 0 Comments

This week we received an email from Dave who is in a “quasi-public instrumentality” job.  Dave has done some research and wants to know if his employer is eligible for Public Service Loan Forgiveness (PSLF).  Today we will discuss how to determine PSLF employer eligibility and specific steps that should be taken.  If you have a question for the Sherpa, feel free to ask us.

Dave writes:

Hi Sherpa,

Fellow attorney here…and I’m flummoxed.

While my question might seem highly specialized, I still think it could be more broadly helpful.

Anyway:

I’m hoping to continue making qualifying payments for PSLF at my new job at the Tennessee Education Lottery Corporation (TEL). TEL was created by statute in Tennessee as “a body, politic and corporate, and a quasi-public instrumentality, and not a state agency or department, which shall be deemed to be acting in all respects for the benefit of the people of the state through the operation of a state lottery and in the performance of other essential public functions entrusted to it.” TCA 4-51-101(c).

What the hell is a “quasi-public instrumentality?”  And is it a “governmental entity” for the sake of PSFL?

To attempt to answer my own questions, the only definition to the phrase “quasi-public instrumentality” in TN statute comes in TCA  4-39-101, which provides chapter definitions for Payment of Taxes by State Vendors and Subcontractors.  

“As used in this chapter:

(3)  “State governmental entity” means a state agency, department, board, or commission, or a public corporation or quasi-public instrumentality that performs essential public functions entrusted to it by the state; and”

Should I start celebrating that my work for the Lottery, a “quasi public instrumentality” in TN, indeed qualifies for PSLF? Quasi public instrumentality = state governmental entity under the law, right? Or am I being a first year law student stretching on an exam?

I think there’s meat on the bone with questions about “quasi public instrumentalities,” even if my question might be a little specific for the general audience that finds your site.

Thanks for taking the time,

Dave

Answering Dave’s Question

Dave writes with a highly technical legal question.  If he were to initiate a lawsuit against the Department of Education, the laws cited might become relevant.  Fortunately, for both Dave and the average borrower, a complicated legal analysis is not normally necessary to resolve Public Service Loan Forgiveness Questions.

Employers Eligible for Public Service Loan Forgiveness (PSLF)

There are three main employer types that qualify as public service employers:

  • Government – Including Federal, State and Local
  • Non-Profits – 501(c)(3) Organizations
  • A Private Not-For-Profit Organization – Must have one of the following public service activities as the primary purpose: (1) emergency management, (2) military service, (3) public safety, (4) law enforcement, (5) public interest legal services, (6) early childhood education, (7) public service for individuals with disabilities and the elderly, (8) public health, (9) public education, (10) public library services, (11) school library services, or (12) other school-based services.

How do I know if my employer Qualifies?

People in Dave’s position who are not clear whether or not their employer is eligible should submit an employer certification form.  This form is available on the Department of Education’s website and must be filled out by your employer.  We recommend anyone pursuing PSLF submit this form on a yearly basis to make sure the records stay up to date.

Once submitted, the form will be reviewed for verification that your employer is qualifies as a public service employer.

Not only with the Employer certification form help you verify that your employer is eligible, it is verifies that you are on an eligible repayment plan and that your loans are eligible.  A successful form submission will result in FedLoan servicing sending a letter explaining how many qualifying payments you have made towards PSLF.  Once you get to 120 certified payments, your loans will be eligible to be discharged.

Strategy Limitations

The steps we have outlined so far constitute what we would consider to be the “best practice” for verifying employer eligibility.  However, successful completion of these steps does not guarantee public service loan forgiveness eligibility.  Recently, a lawsuit was initiated by four attorneys who received multiple employer certifications from their loan servicer.  They were on track for Public Service Loan Forgiveness but then the Department of Education changed its mind about their qualification under the 3rd definition of pubic service.  Not only were they told their employer didn’t qualify, but pervious certified payments were retroactively rejected.

If you work for a 501(c)(3) organization or for the government, this specific issue isn’t much of a concern.  However, if you are like Dave or there is some ambiguity about your eligibility, the case should be followed very closely.

We suggest that borrowers in this situation create a savings account or conservative investment account to set aside money for a potential PSLF issue.  If for some reason these borrowers cannot qualify for PSLF, this money set aside can be applied to their loans in an attempt to aggressively pay off the debt.  The saved money will likely earn less interest than the loans generate, so things won’t break even, but it is a good way for borrowers to protect themselves.  If PSLF ends up working out, the money is a great head start for a downpayment on a house or retirement.

Bottom Line

Figuring out whether or not you qualify for Pubic Service Loan Forgiveness should not require a law degree.  For the vast majority of borrowers, it is as simple as submitting a form.