August 13, 2023

Public Service Loan Forgiveness

If you are employed by a nonprofit or government and have student loan debt, you may be eligible for loan forgiveness, cancellation, and/or consolidation of Federal student loans under the Public Service Loan Forgiveness program (PSLF). Created under the College Cost Reduction and Access Act of 2007, PSLF allows borrowers who work full-time for nonprofits and government agencies to have their outstanding debt forgiven tax-free on Federal Direct Loans, after making 120 qualifying monthly payments under a qualifying repayment plan. Borrowers could apply for forgiveness under PSLF starting in October 2017, but must meet the stringent requirements.

Why It Matters

More than 43 million people nationwide have education loans totaling more than $1.6 trillion in student debt. Fulltime employees of nonprofit 501(c)(3) organizations, government employees, AmeriCorps and Peace Corp workers, and some other public service organization employees with certain types of student loans can receive forgiveness of outstanding debt after working full time and making payments for ten years. The program helps attract talent to the sector, encourages and incentivizes employees to remain in the sector, and provides relief for public service professionals who are often paid less than other employment opportunities.

Borrowers must certify that the public service employment qualifies under the program, but do not need to do so before applying for forgiveness at the end of the 10-year period. Of the borrowers who have submitted and had employment certification forms approved so far, nearly two out of five (38 percent) borrowers work at 501(c)(3) nonprofit organizations, according to FedLoan Servicing. The remaining 62 percent work in government. Less than 1 percent work at other qualifying organizations.

Who is eligible?

Eligibility Requirements:

  • Loan must be through the Federal Direct Student loan program, specifically the “William D. Ford Federal Direct Loan (Direct Loan) Program”.
  • After 120 payments (this usually takes 10 years) employees in certain public service jobs may be eligible for loan forgiveness as long as their loans are not in default, and their loans are under a qualifying repayment plan.

Qualifying employment includes:

  • Employment with a government agency (federal, state, local or tribal)
  • Employment with a charitable nonprofit tax-exempt under 501(c)(3)
  • Full-time Americorps or Peace Corps members
  • Teachers (full-time) in low-income elementary/secondary school for 5 consecutive years may be eligible for loan cancellation up to $17,500.

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