26 Oct 2016

Making the Most of the Public Service Loan Forgiveness Program

Making the Most of the Public Service Loan Forgiveness Program

Interested in public service? Mired in student debt? You’re not alone. Luckily, the Federal Public Service Loan Forgiveness (PSLF) program can help even the most indebted early career psychologists successfully manage student loan repayment.

Congress approved the PSLF program in 2007 as part of the College Cost Reduction and Access Act to encourage more people to take jobs in public service and the nonprofit sector.[1] The program allows student borrowers to have their Federal Direct Loans[2] forgiven after making 120 “qualifying” payments over at least 10 years.

However, forgiveness is not automatic, the details matter, and the system can be confusing to navigate. To qualify for the program, borrowers must ensure they are employed in the right kind of job, have the right kind of loans, and participate in the right kinds of payment plans.

It’s critical, therefore, to understand the details and nuances of the program, so you can decide whether it is the right option for you.

The Right Kind of Job

PSLF is available only to people in certain types of jobs in the public sector. And it is important to note that in most cases eligibility is based on the status of the employer, rather than on the specific job duties of the borrower.

Under the PSLF program, public service employment is defined as full-time paid work for the government, nonprofit organizations with 501(c)(3) tax-exempt status, as well as a few additional nonprofit organizations. Government employment includes local, state, federal and tribal governments; government entities; and government agencies. Contractors not directly employed by a government are excluded.

“Full-time” is an annual average of at least 30 hours per week, unless the employer requires a greater number of hours for full-time status. Borrowers may work more than one part-time position and still be in the “right kind” of job if their combined hours total at least 30 hours a week on an annual average.
Borrowers are also allowed to change jobs while they continue to work toward the 120 qualifying payments as long as their job is in the public sector.[3] And borrowers may document their employment by submitting annual Employment Certification Forms.

The Right Kind of Loans

Only Federal Direct Loans are eligible for PSLF. Students borrowing before July 2010 might have borrowed federal student loans from a bank or private lender through the FFEL program (Federal Family Education Loans). Borrowers must first consolidate FFEL loans into a Direct Consolidation Loan before they can make a payment that counts toward PSLF.

Private student loans are not eligible for PSLF and cannot be included in a federal Direct Consolidation Loan.

The Right Kind of Payment Plans

Qualifying monthly payments include payments made under any of the available income-driven repayment plans. Payments made under a standard 10-year repayment schedule also technically qualify toward PSLF. However, because borrowers in a standard 10-year term will not have anything left to forgive after making 120 payments, an income-driven repayment plan is a necessary step toward forgiveness.

Unfortunately, borrowers must choose from an increasingly bewildering array of income-driven plans. There are five:

  • Income-Contingent Repayment
  • Income-Based Repayment
  • Pay As You Earn
  • Income-Based Repayment for New Borrowers
  • Revised Pay As You Earn
Although the plans are similar in many respects, they also differ in significant ways, including how payment amounts are calculated and how spousal income is treated. Learn more about Income-Driven Repayment Plans.

Payments made more than 15 days late do not count toward forgiveness. Also, only one payment per month may be counted toward the 120 required payments, so payments made in advance of the due date may not qualify. Qualifying payments do not need to be consecutive.

After making 120 qualifying payments, borrowers will be required to submit an application for forgiveness and demonstrate that they have met the requirements of the program. The forgiveness application has not yet been released, but it is expected to become available in 2017.

There is lots of red tape, the details are tricky, and getting the documentation right is important, but the PSLF program provides the affordable payments and loan forgiveness that today’s public-service-minded psychologists need. Learn more about Public Service Loan Forgiveness (PDF)

How to ensure you have eligible loans:

  • Visit the National Student Loan Data System at nslds.ed.gov.
  • Check that every loan has the word “Direct” in its name. For example: Direct Unsubsidized, Direct PLUS, or Direct Consolidation.
  • Any loans that do not include the word “Direct” in the name are not yet eligible for Public Service Loan Forgiveness.
  • Learn more about the pros and cons of consolidation and visit studentloans.gov to submit an electronic consolidation application.

Heather Jarvis is an attorney and a nationally recognized expert specializing in student loan law. She has provided award-winning student loan education and consultation for universities, associations and professional advisors since 2005. For more information, visit askheatherjarvis.com.


[1] Mitchell, Josh. “5 Things About Public Service Loan Forgiveness.” The Wall Street Journal. November 20, 2015.

[2] Public Service Loan Forgiveness Program (PDF)

[3] U.S. Department of Education

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