Public Service Student Loan Forgiveness: The Basics and the Fine Print

Michael Lux Basics, Blog, Student Loans 8 Comments

Public Service Student Loan Forgiveness is a much discussed topic, but very rarely are all the important details covered.  In order to get the government to forgive your student loan debt, the details are critical.  Failure to meet any requirement could be a very expensive mistake.

Breaking up the terms of Public Service Student Loan Forgiveness makes for a tedious read, but it is the only way to ensure that nothing gets missed.

The Basics

If you work in a public service job and enroll in an eligible repayment plan, your eligible federal student loans can be forgiven after 10 years of on-time payments, regardless of how much you still owe.

A Public Service Job

If you work for the government or a 501(c)(3) non-profit organization, your job is considered public service.  This definition includes most teachers, social workers, and first responders.  The department of Education has a full list of qualifying employers.

An important note here is that the job you work is not the key detail.  The critical part is who you work for.

Eligible Repayment Plans

As of right now, the eligible repayment plans are IBR (Income-Based Repayment), PAYE (Pay As You Earn), ICR (Income-Contingent Repayment), and the standard 10-year repayment plan.  If you are not enrolled in one of these repayment plans, your payments will not count towards student loan forgiveness.

Later this year, or early in 2016, REPAYE, a new repayment plan, is expected to go into effect.  As of now it seems that REPAYE will be eligible for Public Service Student Loan Forgiveness, but the final terms and details have not yet been released.

10 Years to Forgiveness

In order to get your loans forgiven, the payments need not be consecutive on-time payments.  The real requirement is that you make 120 certified payments… in other words, a total of 10 years worth of payments.

That means that if you make five years of eligible payments, and then leave for a private sector job, if you return, you pick back up where you left off.  It also means that if you are late on a couple of payments seven years down the road, you don’t start from scratch.

Two Important Steps

The first step towards forgiveness is getting your payments certified.  The government has records of the repayment plan you are on, so the part being certified is that you work for an eligible employer.  This certification is done after the fact, meaning your employer fills out a form saying that you did in fact work there.  That form is then processed by your student loan servicer.

Technically speaking, there is no timing requirement to submitting your certification forms.  The certification can be done after all ten years have passed.  Practically speaking, procrastinating on the certification is a terrible idea.  If you happen to be on the wrong repayment plan, or your employer isn’t eligible, you want to find out right away.  Finding out years down the road can be devastating.  Once you have started working for an eligible employer, complete the certification form as soon as possible.  Get your payments certified yearly, or when you make any employer or repayment plan changes.  Not only does this avoid wasting years on the wrong repayment plan, but is also avoids the hassle of tracking down an employer you worked for years ago.

The second step is to complete your application form for Public Service Student Loan Forgiveness.  Because the program was created in 2007, the first people to have loans forgiven will not be eligible until 2017.  As a result, this form does not yet exist.  For now, the important thing is to be aware that it will be necessary once you complete your 120 certified payments.

Miscellaneous Details

We have tried to cover the important details that apply to everyone.  Because each situation is different, there are questions you may have about your specific student loans.  The following Frequently Asked Questions should hopefully address many of these issues.

Not all federal student loans are eligible for Public Service Student Loan Forgiveness.  Determining whether or not your loan is eligible can be somewhat complicated.  Making things extra confusing is the fact that some loans are not eligible, but they can be consolidated into a federal direct consolidation loan and become eligible.

Fortunately, there are resources in place to help you get things under control.  Start by visit the government’s National Student Loan Database.  There you will find a list of all your federal loans, the companies that service your loans, and details about each loan.  Next, visiting the Department of Education website on student loan forgiveness for a list of eligible loans.  If you have loans that are not eligible, call your lender to determine if consolidating them into a federal direct loan will make them eligible.

Note: Some loans, such as FFEL loans are not eligible, but if they become part of a direct consolidation loan, they become eligible and you have no issues.  With other loans, such as Parent PLUS loans, if you consolidate them with eligible loans, like a standard federal direct loan, they become eligible for forgiveness but the new consolidated loan no longer qualifies for IBR or PAYE.  If you have these types of loans, several conversations with your lender and lots of research will be necessary to make sure you don’t mess things up.

Making things even more complicated is the fact that theres is no way to undo a student loan consolidation.  You will need to get things right from the start, so make sure you understand all of the consequences of your consolidation efforts.

It depends upon what loans go into the consolidated loan.  The general rule is that the consolidated loan starts with the minimum of all the loans that went into it.

Example: Suppose you have three federal loans that are about to be consolidated.  Loans A and B each have two years worth of public service eligible payments.  Loan C has only one year worth of eligible payments.  When you combine A, B, and C into the new federal direct consolidation loan, you will have made only one year worth of eligible payments on the new loan. Unfortunately, that extra year you had towards loans A and B is lost.

You may have read that student loans forgiven under IBR and PAYE result in higher taxes.  While that is technically true, as any forgiven debt is treated as ordinary income by the IRS, there is an important exception that only applies to Public Service Student Loan Forgiveness.  If your loans are forgiven after 10 years of public service, there is no additional tax that will have to be paid the year they are forgiven.

Generally speaking, your employer will have to consider you a full-time employee.  However, if you work multiple part-time public service jobs and average at least 30 hours per week combined, you can also qualify for public service forgiveness.

Full details on the hourly requirements are available with the Department of Education.

Absolutely not.  Companies that charge you to consolidate your loans or to sign you up for Public Service Forgiveness should not get your business.  They are charging you for free government services that you can do yourself.  If they advertise special relationships with the Department of Education, they are lying.  No such relationships exist, and government agencies are finally going on the offensive to shut down this behavior.

If you want to pay them just so you can have an “expert” there to prevent you from making a mistake, you will only make things worse.  While this process can be a bit confusing, adding another party only increases the risk of a mistake.  Anyone who played a game of telephone as a child knows that the more people involved in relaying information, the more likely it is to get screwed up.  This is not a service provided by reputable companies and it is a waste of your money.

That all being said, private consolidation of your federal loans is an entirely different thing.  When you go the private consolidation route, your loans cease to be a federal loan, and you no longer qualify for forgiveness programs or federal repayment plans, but you can lower your interest rates.  Private consolidation is an entirely different process, and not to be confused with the sleepy companies offering to consolidate federal loans with the federal government.

Yes.  As long as you are working for an eligible employer during the time your payment is zero, these months will count towards forgiveness.

This is a scenario that most commonly happens if someone starts a new public service job after a period of unemployment.  Your payment can stay at zero dollars per month until it is time to re-certify your income.  At that point your new IBR/PAYE payment will be calculated based upon your most recent tax return.

The zero dollar payment scenario can also happen if you work in public service, but your income is less than 150% of the federal poverty level.

Absolutely.  All that matters is working you way towards the 120 certified payments.  When the new REPAYE plan comes out, as long as it is eligible, you can change plans without losing any time towards forgiveness.  Similarly, if you make a great deal of money one year and lose your IBR eligibility, you can sign up for the standard 10-year repayment plan, and then get back on IBR if your income drops again.

That all being said, if you do change repayment plans, get your payments certified within a few months of starting the new plan.  You don’t want to miss out on a year or more towards forgiveness because of a clerical error.

Not necessarily.  It is definitely possible to spend more money chasing after forgiveness than you would spend just paying off your loans.  It all depends on how the numbers shake out.

Normally when you pay off student loans you want to pay them off as fast as possible because you are in a constant battle with daily interest.  When you are chasing after forgiveness, you want to pay as little as possible each month with the goal being to have as much forgiven as possible.

The problem with going after forgiveness is that you still have interest added each month to your loan and many federal loans can have interest rates over 8%.  Additionally, as your salary increases, your IBR and PAYE payments will also go up.  By the time your debt is forgiven, there could be very little left to forgive, and you may have spent a ton on interest over the past 10 years.  Depending on how the math plays out, you might be better off paying off locking in a lower interest rate with a private student loan refinancing company and just paying off the loan in full.


It is the big question, but there is no way to know the answer for sure.  However, we do know the following:

  •  Congress would have to pass a law and have it signed by the President in order to eliminate the Public Service Student Loan Forgiveness Program.
  • Even if the program was eliminated, existing borrowers could potentially be “grandfathered in”.

The only thing that borrowers can do at this point to ensure that Public Service Forgiveness sticks around is to vote for candidates who won’t change it.

At present there is no cap on the Public Service Student Loan Forgiveness Program, meaning that whatever debt you have after 120 payments is completely gone.

That being said, there is growing support for putting a ceiling on Public Service Forgiveness.  When the President hinted at exploring a cap, we made our feelings known.

If a cap on public forgiveness is ever created, it will take a change in federal law, and even then, existing loan holders could be grandfathered in.

Putting a limit on forgiveness is by no means inevitable, but it is a possibly that borrowers should keep an eye on, and when necessary, speak out against.

  • Mark Miazga

    Any thoughts on my situation where I’ve had loans since graduating in 1996 and have been in public interest work since 2000 but I consolidated right away in 1997 and my type of loan doesn’t qualify for public service forgiveness unless I re-consolidate. What I don’t know is whether the clock starts over for the ten years after I re-consolidate or whether I would get credit for my payments going back to 2007. I’ve dealt with GLHESC and the Department of Education and can’t get a straight answer although one rep recommended re-consolidating and then asking for the credit back to 2007 when 2017 comes along. I just want to know it’s likely to be granted before incurring the added fees involved in re-consolidating. ([email protected])

  • Lori

    I talked to the PSLF people today only to find that even though I consolidated correctly in 2011, that I’ve either been early making payments (how is that even possible?! I pay them when I get paid), late (hasn’t happened), or not paid enough (also hasn’t happened) and that in the past 8 years of my service to the public as a 911 operator and police dispatcher, only 18 of my 70+ payments have counted. How do you work around that?

    • That is awful. Have you looked into filing a complaint with the CFPB? Counting only 18 of 70 payments is terrible.

    • Lori

      I didn’t know I could, but I will now! I got a ‘payment history’ from the FedLoan Servicing people ‘explaining’ why my payments didn’t count. They claimed I was in forbearance when I wasn’t, said my payments were all late (which I never was) or too early (they don’t have it in EXPLICIT writing, but making a payment anything more than 30 days early is grounds for not counting a payment). Also, since I only found out about the program in 2011 and consolidated once I knew, they refused to count any of my 4 years prior to that. I requested a review and we’ll see what they say, but I plan to do everything I have to to get this righted. Cause if not, what’s the point? I could have been done with my loan in 2 years instead of another 6-8….

    • You are definitely in good company with the PSLF issues.

      I’m shocked by how often people are running into this issue.

    • Lori

      I’m not surprised now that I’ve been through it. It’s how the government will be able to avoid actually helping those in public service.

  • Angie Bardysh

    I have a terrible situation. My student loans are in my mom’s name but I have been making every payment. I have known about the forgiveness rule since I started paying my loans in 2009, but my mom did not know of the law, and failed to tell me until two days ago that she works in a non-profit and has for the past 18 years. We have checked our loan, and it is the correct loan for the forgiveness plan, but we are on the wrong repayment plan. I have been paying around $650 a month for the past 8.5 years, and we were told we would need to resign up and non of the payments I have made will count toward forgiveness. I need to make 120 new payments! To me, this seems absolutely insane. Is there any way around this rule? I believe the payments I have been making are more per month than the qualifying repayment plans would be. I am utterly devastated, and I have no idea what to do. I just can’t believe all of the money I have paid would not count. Is there anything I can do?!?!