A popular federal student loan forgiveness program for borrowers who devote their careers to public service has undergone multiple changes over the last few years, including a major recent change currently being implemented by the Biden administration. While some of the reforms have clearly benefited borrowers, they also have resulted in a confusing and overlapping patchwork of relief. Determining eligibility, and figuring out how to apply, can be a full-time job itself.
Public Service Loan Forgiveness (PSLF): The Original Rules
Public Service Loan Forgiveness (PSLF) was enacted by Congress and signed by President Bush in 2007. The program allows federal student loan borrowers to get their federal student loans forgiven by working for nonprofit or public organizations for at least 10 years.
PSLF has had very strict eligibility criteria. The program requires borrowers to make at least 120 “qualifying payments” to get their student loan balance forgiven. Each of these payments must comply with several requirements:
- Payments must be made on a Direct federal student loan. Other types of federal student loans, such as FFEL loans and Perkins loans, don’t qualify (these loans can qualify if consolidated into a federal Direct consolidation loan, but only payments on that Direct consolidation loan would count).
- Payments must be made under an income-driven repayment plan such as ICR, IBR, PAYE, or REPAYE. Payments made under the 10-year Standard plan also qualify, although this would repay the loan in full by the 10-year point. Payments made on other repayment plans, and payments that are not made in full or on time, may not count.
- The borrower must make payments while working in qualifying public service employment, defined as full-time, W-2 employment working at least 30 hours per week for either a domestic government or public entity or a 501(c)(3) nonprofit organization. Borrowers can also qualify by cobbling together multiple part-time public service employment positions if their total hours average at least 30 per week.
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Because of PSLF’s complicated eligibility criteria, and due to alleged mismanagement of the program by the Department of Education and its contracted loan servicers, the program suffered from extraordinarily high denial rates of 98% or more.
