The Public Service Loan Forgiveness program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit.
This contrasts with the loan forgiveness of the remaining balance after 25 years of repayment under the income-contingent and income-based repayment plans for borrowers who are not employed full time in public service jobs.
The public service loan forgiveness program has several restrictions:
- Term: The forgiveness occurs after 120 monthly payments made on an eligible Federal Direct Loan. Periods of deferment and forbearance are not counted toward the 120 payments. Payments made before October 1, 2007 do not count. Likewise, only payments on a Federal Direct Loan are counted.
- What is forgiven? The remaining interest and principal are forgiven.
- Employment: The borrower must be employed full-time in a public service job for each of the 120 monthly payments.
- Eligible Loans: Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. Borrowers in the Direct Loan program do not need to consolidate in order to qualify for loan forgiveness. Borrowers in the FFEL program will need to consolidate into Direct Loans. Although Perkins Loans are not eligible for public service loan forgiveness, if they are included in a Federal Direct Consolidation Loan the entire consolidation loan, including the Perkins Loans, is eligible for public service loan forgiveness.
- Eligible Repayment Plans: Borrowers may use income-based repayment, income contingent repayment, standard repayment or a combination of these repayment plans. Payments made under other repayment plans (e.g., extended repayment and graduated repayment) do not count. To maximize the amount of forgiveness, borrowers should use income-based repayment.
- Taxability: Public service loan forgiveness is not taxable under section 108(f) of the Internal Revenue Code. See Taxability of Student Loan Forgiveness for additional details.
Employer Certification Form
The US Department of Education has an employment certification form and instructions. Use of the employment certification form is recommended but not required. It is best, however, to submit the form annually or whenever the borrower changes employers to ensure that the qualifying service is properly recorded.
Upon submission, the US Department of Education’s servicer will inform the borrower whether the employment reported on the form satisfies the requirements for public service loan forgiveness. Borrowers will also be able to track their progress toward obtaining public service loan forgiveness.
After the borrower has fulfilled the requirements for public service loan forgiveness (i.e., made 120 qualifying payments while working full-time in a qualifying public service job), the borrower will need to file a PSLF application to obtain the loan forgiveness. A link to this form will be added to this web site when it becomes available.
Obtaining a Federal Direct Consolidation Loan
To obtain a federal direct consolidation loan, contact the US Department of Education.
If you have not yet consolidated, you can seek a federal direct consolidation loan in order to obtain an income contingent repayment plan. Federal direct consolidation loans are available if you haven’t been able to obtain a FFEL consolidation loan, income sensitive repayment terms acceptable to you or if you have defaulted on your FFEL loans.
Be sure to ask for income-contingent repayment or income-based repayment. The consolidation loan application does not currently include a checkbox for requesting these repayment plans, so you must ask for it separately.
The US Department of Education web site provides additional information about public service loan forgiveness.