Jumping through all the hoops of Public Service Loan Forgiveness can be an excruciating experience for borrowers.
Complicating matters are the various temporary programs that create limited exceptions for some — but not all — borrowers.
Today we will focus on the current employer requirement of PSLF. I’ll also cover the temporary exceptions and how to correct issues.
Qualifying for PSLF Requires Ten* Years of Public Interest Employment
* The asterisk in this title is doing some heavy lifting.
Some borrowers mistakenly believe that their loans are forgiven if they worked at a PSLF employer for ten years. Sadly, the rules are not that simple.
The next level of understanding for borrowers is the realization that the real requirement is 120 certified payments. For a payment to get certified, the borrower must work full-time for an eligible employer, be on an eligible repayment plan, and have eligible loans.
Unfortunately, 120 certified payments still aren’t enough. To have the loans forgiven, the borrower must also be employed at an eligible employer when they apply for forgiveness and when the loans are forgiven. This little-discussed requirement comes directly from the Code of Federal Regulations, 34 CFR § 685.219(c)(1)(ii).
For borrowers who submit their PSLF application after ten years of PSLF employment, additional public service is required to have the loans forgiven.
Why is this Confusing?
This element of PSLF confuses borrowers for a couple of reasons.
For starters, a misunderstanding is easy because the borrower doesn’t need to work for their PSLF employer currently. If you worked for an employer from 2010 to 2017, it is still possible to certify that time towards PSLF. It still counts.
Making things even more confusing is that the ten-year requirement for PSLF does not have to be consecutive. You can work seven years in a PSLF job, spend four years in the private sector, and then return and work the remaining three years needed to earn PSLF.
These two provisions cause many borrowers to mistakenly believe there isn’t a current employer requirement for PSLF.
The Limited Waiver on PSLF: During the Covid-19 payment and interest pause, the Department of Education created a temporary program to help borrowers qualify for PSLF who didn’t meet all the requirements.
A noteworthy aspect of the Limited Waiver is that it waived the current employer requirement. Thus, borrowers who applied for PSLF before October 31, 2022, could have their loans forgiven even if they didn’t meet the current employer requirement.
Servicer Processing Speed and the PSLF Timeline
Borrowers need to be employed by a PSLF employer at the time of their application for forgiveness and when the loans are forgiven.
These two requirements put federal loan servicers squarely in the PSLF timeline equation.
If MOHELA, the current servicer for PSLF borrowers, has a massive backlog and is delayed in processing applications, borrowers may have to stay in their jobs considerably longer than the ten years required by statute.
The processing aspect of a PSLF application becomes crucial for borrowers who want to move to the private sector or retire.
Further complicating things is the fact that processing times can vary. If things are slow for MOHELA, they may get through your application quickly. If they are overwhelmed, delays could be considerable.
How does a borrower time their PSLF application?
For most borrowers, PSLF application timing doesn’t matter. I suggest submitting PSLF paperwork on a yearly basis. This approach makes it easier to track progress, identify mistakes, and it prevents you from having to reach out to former employers years later. Submitting PSLF paperwork takes little time and provides peace of mind.
However, if you are nearing 120 certified payments, the timing matters considerably.
My suggestion would be to call MOHELA several months before you believe that you will hit 120 payments. Explain your situation. Point out that you want to apply and get approved as quickly as possible after you hit 120 payments so that you can move on to retirement or another job. They should be able to tell you the current processing times so that you can submit your application at the ideal time.
The timeline is less important for borrowers that plan to stay in their current job. Once you qualify for PSLF, additional payments can be refunded. In other words, if MOHELA processes things slowly and you make 123 payments, the three extra payments should be refunded.
The Lesson: Don’t Leave Your PSLF Job Until Your Loans are Forgiven
The big takeaway here is that you shouldn’t quit your PSLF job on your tenth anniversary.
Mistakes happen. Servicers and borrowers are both guilty of errors when performing their PSLF analysis.
Stay at your PSLF job until the loans are actually forgiven. Once your loans are forgiven, and you have the letter certifying your forgiveness, you can safely move forward free from your federal student loans.
Sherpa Tip: Even if the current employer requirement didn’t exist, staying at your current job until the debt is discharged is still the best practice.
You don’t want to be in a situation where you made a math mistake and have 119 certified payments instead of the 120 that you originally estimated.
Fixing Mistakes After Leaving Your Job
Some PSLF mistakes are catastrophic. If you discover after nine years of employment that your employer doesn’t count towards PSLF, that time is gone forever.
Fixing the current employer requirement doesn’t require starting from scratch. Your current employer doesn’t have to be the PSLF employer where you worked for ten years.
For example, suppose you worked for the federal government for 11 years and then quit. You certified 120 payments, but you no longer work for the government. You won’t qualify for PSLF, but you can fix it by getting any other PSLF-eligible job.
The fix is to find full-time work at any PSLF-eligible employer. Start a new application, and you should be good to go.
It’s certainly not an easy fix, but a few months of working at your local school or for the city government can mean massive loan forgiveness.