Public Service Loan Forgiveness

Public Service Loan Forgiveness

Did you know if you work in the public sector, your loans can be forgiven after 120 qualifying monthly payments?

If you work for a city, state, federal organization or a non-profit you may qualify for the Public Service Loan Forgiveness program. The position at your place of employment is not considered for PSLF, but you must be consolidated and in a income driven repayment plan. The balance on your federal student loans after 120 qualifying payments is forgiven.

Public Service Loan Forgiveness

Under the Public Service Loan Forgiveness Program, eligible borrowers will have their federal student loans forgiven after 120 qualifying payments (10 years). Currently there are no limits on the amount that can be forgiven and forgiveness is not taxable income. 

It’s extremely important to understand that certain steps need to be taken to qualify for this program. Many borrowers wrongfully believe that by just working in the public sector, their loans will be forgiven in ten years. This is unfortunately not the case, as most borrowers do not have the right loan types, or are not in the correct repayment plan. Make sure you take the necessary steps to make your payments count!


Who Qualifies for This Program?

Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for Public Student Loan Forgiveness purposes. Additionally, the type of services that these public service organizations provide does not matter for Public Service Loan Forgiveness purposes.

Federal, State, Local Government Yes
Non-Profit 501(c)(3) Yes
Non-Profit in Public Services Maybe, see below.

A private non-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying public service organization if it provides certain specified public services. These services include emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly. The organization must not be a labor union or a partisan political organization. Generally, the type or nature of employment with the organization does not matter for Public Service Loan Forgiveness purposes. However, when determining full-time public service employment at a not-for-profit organization you may not include time spent participating in religious instruction, worship services, or any form of proselytizing.

What Types of Loans Qualify?

To qualify for Public Service Loan Forgiveness, you must have the following loan types:

  • Direct Subsidized / Unsubsidized
  • Direct Consolidated Loans
  • Direct PLUS
  • Direct Stafford Subsidized / Unsubsidized
This means that private loans do not qualify under any circumstance, as well as other federal loan types. Loans in default also do not qualify.

Have Federal Loans that Don’t Qualify–Consolidate Them

Many borrowers do not have Direct Loans and thus would not qualify for the program in their current scenario, but fortunately there is a way to convert your federal loans into Direct Loans. The Direct Loan Consolidation program will take all of your federal loans, and consolidate them into one new Direct Loan. If you do not have Direct Loans but want to apply for Public Service Loan Forgiveness, you will need to consolidate your loans. You can attempt the yourself, or, Student Debt Relief is a private company that for a fee, can help you through this process.

Making Qualifying Payments

For you 120 payments to count towards forgiveness once you have Direct Loans, you must also:

  • Be employed a qualifying public service organization at the time of payment
  • Be making payments in the Income Based Repayment plan, Income Contingent Repayment, or Pay As You Earn Plan. These three plans will give you a payment that is calculated based on your income and family size. Below are the estimated payments in the IBR program depending on family size and income. Loan balance and interest rates are not used in the calculation of the payment.


  • Make your payment on time. On time is defined as being within 15 days of the scheduled payment date. Payments that are made in a lump sum, or in advanced for future months are not counted as qualifying payments.

Please note, the 120 payments do not have to be consecutive

How Much Can Be Forgiven?

Currently, there is no maximum amount that can be forgiven.

What is considered full time employment?

You must meet your employers definition of full-time, however there must be a minimum of 30 hours of work per week. For the purposes of full-time employment, time spent participating in religious instruction, worship services, or any form of proselytizing does is not counted. For teachers of other employees of a public service organization that are under contract for at least 8 out of 12 months, you meet the full-time standard if you work at least 30 hours per week during your contractual period. If you work in two separate public sector, or non-profit jobs, you meet the requirement if the combined hours at both positions is 30 hours or more per week in combination.

What is the History of this Program and Why does it Exist?

In 2007 congress created the Public Service Loan Forgiveness program. This program was designed to reward those who choose a lower paying job in the public sector, or non-profit organization.

An Example of How Public Service Loan Forgiveness Can Work:

Example: Borrower is earning $40,000/yr with a family size of 4. The loan balance is $48,000, with an interest rate of 6.875%. Borrower could qualify for an income based payment of $52/mo. After making 120 qualifying payments, borrower would have paid $6,240 in student loan payments, and the balance of $48,000 – $6,240 = $41,760 would be forgiven. This does not include interest that would also be forgiven, and assumes that the persons income and family size will not change for ten years.

Other Benefits of Enrolling in the Income Based Programs:

Under the income based programs your payments are calculated based on your income, not on how much you owe. This can often provide borrowers relief from large payments they are otherwise unable to make. In some cases, for those with very low income, the monthly payment could be as low as $0.00 per month depending on the income and family size of the applicant. The payment, regardless of how low it is (even $0.00) would count towards your forgiveness.

How Do I Get Started?

You have two options to apply for the public service loan forgiveness program. The first it to make all the necessary changes to your student loans as required and explained in the above yourself, and then apply for the forgiveness once you have taken all of those necessary steps through the Department of Education. The second would be to hire a private organization to assist you with the whole process and to complete the work for you. The work of the private entity would be to make sure your loan types are correct, your repayment plan is correct, so after 120 payment your loans are forgiven. If you prefer to hire someone to provide you this service, give us a call at 855-730-2071