It’s no secret that rising college costs have forced many students to assume debt. One problem with the high cost of college and correspondingly high student debt has been a reluctance on the part of college graduates to consider careers in public service. Graduates may feel pressured to take private-sector jobs because they can earn a higher salary, and that will help them reduce the burden of student loans faster. In an effort to relieve the financial pressure and encourage people to take these types of jobs with nonprofits or the government, Congress passed a debt forgiveness program for public service employees in 2007. This is called the Public Service Loan Forgiveness Program, usually shortened to PSLF.
How to Qualify for Public Service Debt Forgiveness
According to the Federal Student Aid website, the following kinds of employers may make debtors eligible for this program:
- Local, state, and federal government organizations
- Tribal governments
- Nonprofit organizations with tax-exempt status
- Certain nonprofits that don’t qualify for tax-exempt status but provide qualifying services
Qualify services include early childhood education, public health, public safety, and more. As a note, employment with labor unions, for-profit companies, political parties, and even many nonprofits that aren’t tax exempt do not qualify for the program.
How Does the PSLF Work?
If a debtor qualifies for this forgiveness program, they are given a monthly payment based upon their income. Typically, they make payments for a minimum of ten years, or 120 payments. Qualifying payments must be made within 15 days of the due date, while the loan isn’t in default, and while employed full time. Full time is usually defined as working at least 30 hours a week, but an employer’s definition could be different. It is also possible to take part-time jobs with two different eligible employers to qualify.
Some other kinds of forgiveness programs require the borrow to declare the amount forgiven as income in the year that the loan is dismissed. This program does not have that requirement, and that’s a big advantage. Borrowers do need to certify their eligibility for this program. Since the law requires at least 10 years of payments, and the first student loan debtors won’t qualify until 2017, nobody has actually had their loans forgiven under this program yet. However, it’s possible to apply for the program today and make payments that are based upon income.
Which Kinds of Student Loans Qualify for Forgiveness Under PSLF?
Only loans that were taken out under the federal William Ford Direct Loan program qualify. There are other kinds of student loans that may not qualify. However, it might be possible to qualify anyway if these loans get consolidated under the Direct Consolidation Program. However, the only payments that will qualify for the 120 payments will be those that were made after the ineligible loans have already been consolidated.
This program is so new that nobody has been in it for ten years, and the rules are fairly complex. Still, it promises to help encourage many college graduates to serve their communities in public service jobs. If you think you qualify, or if you would like to consider a career in public service, this is a good time to research this program to help reduce the burden of college debt.