Public Service Loan Forgiveness
In 2007 congress created the Public Service Loan Forgiveness program. The Public Service Forgiveness Program (PSLF) is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
In some cases, 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.
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 per month.
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.
Under a standard plan, this same person would end up paying $55,423 or $49,183 more !
This assumes that the persons income and family size will not change for ten years.
You must completely understand all the steps that 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 not the case as most borrowers do not have the right loan types or are not in the correct repayment plan.
See If You Qualify For Public Service Forgiveness
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
Private loans do not qualify as well as other federal loan types. Most borrowers do not have Direct Loans and thus would not qualify for the program in their current scenario. 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. It’s also important to know that loans that are in default do not qualify.
At the Student Debt Center, we specialize in assisting borrowers in qualifying, applying and getting enrolled in the program that is most beneficial to them based on their specific circumstances.
How Much Can Be Forgiven?
Currently, there is no maximum amount that can be forgiven.
120 Qualifying Payments
Once you have Direct Loans, you must also 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. Loan balance and interest rates are not used in the calculation of the payment.
Calculate Your Income Based Payment
Payments must be made on time to be considered towards your 120 qualifying payments. 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.
What types of employment qualify?
Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a not-for-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 PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes.
A private not-for-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.
Contact us today to find out what you can qualify for and what your new payments will be under the Public Service Forgiveness Program.
Most Common Job Titles that Qualify for Public Service Forgiveness
- Teacher/School Employees
- Hospital Employees
- City/State Employees
- Non Profit Employees and Others
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 sectors, or non-profit jobs, you meet the requirement if the combined hours at both positions is 30 hours or more per week.
How Do I Get Started?
You have two options to apply for the public service loan forgiveness program. The first step is to make all the necessary changes to your student loans as required and explained above to make certain you meet the qualifying criteria. The second step is to complete and submit all the required paperwork through the department of education to apply for the program and manage that process. You can do all this yourself or you can retain the services of a third party entity such as the Student Debt Center to do all this work on your behalf. The work of the third party entity would be to make sure your loan types are correct, your repayment plan is correct, submit all the proper documentation and manage the entire process of getting you enrolled in the program. This way you can be certain that your loans will be forgiven after 120 on time payments.
If you prefer to retain the services of a company to do all the required work for you, give us a call at 954-780-8266.