Did you hear there’s a repayment plan with $0 payments? Or that you can postpone payments for as long as you want? Well, with student loan info, sometimes the toughest thing is figuring out the fact from the fiction (and everything in between). These differences could literally cost you, so we enlisted loan expert Ashley Norwood to bust the myths. Today: eligibility for Public Service Loan Forgiveness.
The Consumer Finance Protection Bureau (CFPB) announced a couple of months ago that approximately one-quarter of those working in the U.S. may be eligible for Public Service Loan Forgiveness (PSLF), and most don’t even realize it.
How could that be true?
A Very, Very Brief Look At PSLF
PSLF eliminates (“forgives”) the federal student loans of employees who work full time at public or nonprofit institutions while making 120 eligible student loan payments.
To qualify, your loans must come from the Direct Loan program, and you must make all 120 payments on or after October 1, 2007 (as well as under specific repayment programs: standard repayment, income-based repayment, Pay As You Earn, or income-contingent repayment). Because of this, no one will be eligible for forgiveness until October of 2017. (For more details, see this article.)
But back to that one-quarter of employees. You’d think someone who did public service work would know it, right? Well, here’s where the mythbusting comes in.
Job Vs. Employer
Most people associate PSLF with well-known public service jobs, like teaching, social work, or nursing. However, your job doesn’t determine whether you qualify—your employer does. Makes a big difference, right?
So, you may be eligible for forgiveness if you meet all the other criteria and work full time for an eligible employer. And that’s the same for everyone at that employer—from the CEO to the maintenance staff.
What Is An Eligible Employer?
Good question! You need to work for one of the following:
- A government organization, which includes federal, state, local, tribal organization or college/university, or public child or family services agency
- Peace Corps
- A tax-exempt nonprofit under 501(c)(3) of the IRS tax code (check with your employer)
- A nonprofit organization that provides one of following public services:
- Emergency management
- Military service
- Public safety
- Law enforcement
- Public interest law services
- Early childhood education
- Public service for individuals with disabilities and the elderly
- Public health
- Public education
- Public library services
- School library or other school based services
Phew! Long list, right? That means there are a lot of potentially eligible employers out there. You may even be working for one right now.
What’s even better is that your payments don’t have to be consecutive. You can bounce in and out of the public or nonprofit workforce without penalty (other than taking longer to get your loans forgiven). Just remember that only eligible payments made during eligible employment count.
An Exception To Every Rule
Unfortunately, labor unions and partisan political organizations are not eligible—even if they are nonprofits. (Don’t kill the messenger.)
Also ineligible: religious organizations engaged in religious activities that are related to religious instruction, worship services, or any form of proselytizing. But, religious organization employees would be eligible as long as the previous statement doesn’t describe what you are employed to do. For instance, professors at a Catholic or Baptist college would be eligible.
Contact your student loan servicer if you have questions, and make sure to download the PSLF Employment Certification to track your eligible employment and payments. If you don’t submit that certificate once a year, it will be up to you to prove you worked at an eligible employer come forgiveness time.
If you still aren’t eligible for PSLF, check out our eBook to see if you may be eligible for any other forgiveness programs.
Have a question about PSLF? Just Ask our experts or post it in the comments below.