How To Get Public Service Loan Forgiveness: Best Practices

In today's world, many students are understandably concerned about their student loan debts.

Until September 2020, the government had been providing relief by temporarily pausing student loan payments due to the COVID-19 pandemic. However, the Supreme Court rejected a significant proposal from the Biden Administration to forgive up to $20,000 in loans per borrower.

Given these challenges, many students actively seek practical solutions for debt relief. One such solution gaining attention is the use of loan software. This technology simplifies the loan management process, making it more accessible and manageable, even as the rules surrounding student loans continue to change.

Moreover, there are alternative avenues for assistance, such as the Public Service Loan Forgiveness (PSLF) program, which can provide relief to eligible borrowers.

The program can be complex, so it's important to grasp how it works to figure out if you qualify and to ensure you receive credit for your efforts.

Let's continue reading to delve deeper into the details.

The history of PSLF

The PSLF is a student loan repayment initiative signed into law in 2007 by President George Bush as a response to the growing student loan crisis. It was designed to reward graduates who entered public service careers such as nonprofit work, teaching, or government jobs. 

To be eligible, applicants need to work in the public service field for ten years before qualifying to have their loans forgiven. The first batch of eligible recipients hit their ten-year mark in 2017, and participants applied in waves.

The results? 

According to Forbes, 640 borrowers received public service loan forgiveness based on approximately 132,000 processed applications. That's less than 0.5%. 

How did a program designed to forgive such a large number of student loans manage to reject 99% of the people who applied for it? 

The answer is in the details. 

How PSLF works

The PSLF initiative aimed to incentivize post-graduation career choices that involve public service.

If you qualify for PSLF, you can get your remaining student debt forgiven after making ten years' worth of monthly payments, for 120 payments, while you work for the government or a nonprofit. 

Use the PSLF Help Tool on the student aid website to determine your eligibility based on the types of loans you and your employer have.

PSLF requires public service employees with federal student loans to certify their full-time employment with a government or nonprofit organization through a designated form known as the PSLF Form. This form necessitates confirmation of past or current employment by the employer.

The submitted form is then reviewed to ensure it's complete and to determine whether your loans and employment meet the criteria for the PSLF Program.

PSLF went through temporary changes because of the Coronavirus pandemic.

• Starting in March 2020, all federal student loans were placed under interest-free forbearance, and there were no required payments until October 2023. 
• During this time, the Education Department has temporarily adjusted the rules regarding which payments will be considered for forgiveness under PSLF through a one-time IDR account adjustment.
• For those pursuing PSLF, this adjustment means that a wider range of previous payments will be considered for forgiveness, provided you were working for a qualified employer when making those payments. 
• As a result, PSLF applicants who have completed at least 120 payments after this recount will have their remaining balance forgiven. For other borrowers, this change will bring them closer to achieving forgiveness.

How to apply for the PSLF program

If you believe you meet the criteria for the PSLF program, here's a step-by-step guide to kickstart the application process using the PSLF help tool:

• Utilize the help tool to verify if your employer qualifies as a public service agency or organization. 
• Ensure that your loans qualify by contacting your loan servicer. If they aren't direct loans, you must convert them into a direct consolidation loan to proceed. 
• Once you've identified the necessary steps for qualification, create a PSLF form.
• Prepare and sign your PSLF form, and provide the email address of an authorized representative at your employer to sign your form and verify your employment annually.

The PSLF help tool process can typically be completed in under 30 minutes.

If you manually submit your form, you must send it to MOHELA.

• Address: U.S. Department of Education, MOHELA, 633 Spirit Drive, Chesterfield, MO 63005-1243
• Fax: 866-222-7060.
• If MOHELA is already your servicer, you can upload your PSLF form on MOHELA's website.

The form is then reviewed to ensure it's complete and determine whether your loans and employment qualify for the PSLF Program.

Suppose your PSLF form is approved for forgiveness. In that case, you'll be notified that the balance of your eligible federal direct loans will be forgiven. If you made payments after the 120th qualifying payment, those will also be refunded to you.

If it's determined that you are not eligible for loan forgiveness, you will be notified of this information and provided with the reason(s) you were determined to be ineligible. 

PSLF qualification problems 

Mastering the PSLF program can be challenging at times. Several problems can occur:

• Ineligible loans. Federal loans are eligible for PSLF, but private loans are not, as they are issued by individual companies rather than the government. Federal Family Education Loan (FFEL) and federal Perkins loans are eligible when consolidated into a Direct Consolidation Loan.
• Ineligible repayment plan. Payments won't qualify for PSLF if you don't enroll in an Income-driven payment plan.
• Paying early or late. You can make one qualifying payment per month. Early or extra payments won't get you to 120 payments faster. Payments missed or more than 15 days late won't qualify, either.
• Deferment or forbearance. Payments are suspended, and you don't get credit for 120 payments during deferment or forbearance periods unless you're on active duty military service. 

Why PSLF applications get rejected

As expected, there has been a significant surge in applications for the PSLF program. What's noteworthy, however, is the substantial number of rejections. The high rejection rate can be attributed to several factors, the most prominent being a widespread misunderstanding of the program's requirements. 

While these requirements may seem straightforward initially, they only scratch the surface of the program's intricacies. Many applicants who believed they met the basic criteria discovered, sometimes years into their repayment journey, that they did not qualify or had overlooked crucial details.

The primary reasons for the rejection of most PSLF applications appear to fall into four main categories:

Applicants did not work for a qualifying employer

The first mistake many applicants make is assuming they qualify for public service loan forgiveness based on their work. The reality is that your qualification for the program is based on who you're employed by, not the nature of your work.

Types of employers that qualify under PSLF:

• 501(c)(3) charities
• Federal, state, local, or other government organizations
• A nonprofit that’s not a 501(c)(3), but does meet other public service requirements
• AmeriCorps or the Peace Corps

It's not enough to hold a position with one of these employers. You must be employed full-time and complete an employment certification form every year. 

If you switch jobs and your new employer doesn't qualify, the clock on your student loan forgiveness path is paused until you begin working for a qualified employer again.

Applicants forgot to submit an employment certification form

The employment certification form isn't something you can set and forget. Neglecting to verify whether your employer counts as a qualifying employer or updating your employment information is one of the main reasons applications get rejected.

You should be submitting an employment certification form:

• Upon starting your first public service job
• Annually, after you start working in public service
• Anytime you switch employers

One of the main requirements for the program is working in public service for ten years while making loan payments. This step helps create a paper trail that makes it easy for the government to track your work in public service.

Applicants did not have qualifying loan types

This is the trickiest part of the public service loan forgiveness program. To qualify, your loans must be direct or federal. A direct loan is a type of loan in which an institution lends directly to the borrower and involves no third-party lenders. These can include non-bank institutions, the government, or banks.

Qualifying repayment plans include all income-driven Repayment (IDR) plans:

• Income-contingent Repayment (ICR)
• Income-based Repayment (IBR)
• Pay As You Earn (PAYE) 
• Revised Pay As You Earn (REPAYE) 
• Standard 10‐Year Repayment

If you have loans that don't qualify as direct loans, you can consolidate your loans. If you consolidate your loans, however, it resets the clock on your time in the program. For example, if you've been working toward a PSLF program for six years and then consolidate your loans, you start back at square one and have to make ten more years of payments.

This is the most important step to get right at the beginning. You don't want to do all the work of tracking your employers, paying your loans, and collecting the right information only to find out your loans don't qualify.

These repayment plans don't qualify for PSLF:

• Standard Repayment Plan for Direct Consolidation Loans
• Graduated Repayment Plan
• Extended Repayment Plan

Applicants didn't provide enough information

This reason for rejection can be the most confusing (and frustrating) because it's vague. In many cases, applications are rejected initially because there isn't enough information to prove you qualify for the program. An easy way to remedy this? Keep track of everything. Ten years is a long time, and misplacing important documents or files is easy. 

Alternatives to PSLF

While PSLF can erase substantial debt, it's not universally available, even for federal student loan borrowers. 

If you're seeking alternative avenues for relief, here are some worth considering:

• Income-driven repayment forgiveness. Such plans extend for 20 or 25 years, and any remaining balance is forgiven at the end of this term. This form of forgiveness is currently non-taxable.
• Teacher loan forgiveness. If you qualify as an eligible teacher or work for an educational service agency, you might be eligible for up to $17,500 in teacher loan forgiveness after five full and consecutive academic years of full-time work.
• Loan repayment assistance programs. Many loan repayment assistance programs by federal agencies help you make progress on your debt in exchange for your service. Eligibility often depends on your occupation, including roles like military service, public defense, legal work, or healthcare. Additionally, some states have programs that offer repayment assistance to eligible residents.

Plan and join the 1%

If you're considering a career in a government agency or a not-for-profit organization, you may find relief from your student loan debt through the PSLF program.

To enhance your chances of success, starting the application process sooner rather than later is a good idea, especially if you're uncertain whether your loans qualify for the program.

It's important to remember that careful planning and thorough documentation are crucial for overcoming common challenges in the process. 

While it does require a decade of consistent payments and qualifying employment to be approved, the potential for complete debt forgiveness makes the effort worthwhile.

Ten years is quite a stretch, so make managing important documents a breeze with the top-notch document management software.