I can’t tell you how many folks I meet working in higher education and volunteering at a local non-profit that don’t know they are eligible for Public Service Student Loan Forgiveness (PSLF). School systems, including universities, are (almost) all 501(c)(3) not-for-profit organizations. It drives me crazy that HR and Benefits offices aren’t helping employees take advantage of this program!
But I get it, the program is confusing, people are skeptical and most folks do it wrong. I wrote in my last blog post that PSLF didn’t work for me. I had around 20k in student loan debt and if I had waited the 10 years to apply for forgiveness, it wouldn’t have saved me any money in the long run with the interest rates at the time. So I buckled down and paid off my total debt in 2.5 years. Most graduates don’t walk across that stage with under 20k of debt. Average student loan debt is just under $30,000 but that goes up if you pursue graduate and professional degrees.
So let’s go over some of the misunderstanding and mistakes people make when considering and applying for student loan forgiveness:
- Myth: “I work for a private university. I’m not eligible for PSLF.”
- Myth: “Applying for the program is too hard, so it’s not worth it.”
- Truth: Well this one is partly true. Applying for the program is confusing, but that doesn’t mean it’s not worth it. If you have 100k in debt and you are eligible for an income based repayment plan paying around $450 a month for 10 years, that’s a total payment of $54,000. Meaning you get to apply for forgiveness for $46,000. So a bit of work on the front end and throughout the 120 payments is definitely worth the opportunity to get 46k forgiven.
- Myth: “If I make two payments a month, I can apply for forgiveness in 5 years instead of 10!”
- Truth: This truth was a hard one for me to accept. If I could have made double payments for 5 years, I could have gotten (in my quick math) around 8k of my student loans forgiven. But I don’t take chances with debt, so I called FedLoan Servicing and asked. The very nice woman gently told me that’s not how PSLF works. Payments must be made on a monthly basis, consecutively for 120 payments (i.e. 10 years). I was real salty about that truth for quite some time. Later, I noticed studentaid.gov added a FAQ about this question, so I wasn’t the only person hoping for that option.
The eligibility requirements for PSLF are important, so listen up! For the PSLF program you must:
- Work for a qualifying employer
- Work full time for a qualified employer throughout the duration of the program
- Have direct loans or consolidate your loans into a direct loan
- This is another step that most people mess up. Make sure your loans are eligible!
- Be in a qualifying income-based repayment plan
- This is another step that is glossed over. Make sure you are in the right plan to be eligible for the program.
- Submit the employment certification form annually or when you change employers
- Make 120 qualifying payments
Studentaid.gov has a super helpful tool to help you navigate PSLF. And, in my experience, calling them is also a great option if you feel stuck or confused. This program wasn’t the right option for me in my debt free search, but I believe it always worth (re)searching options that can help you become debt free!
Note: This article is intended to provide information about Public Service Loan Forgiveness (PSLF) and should not be construed as financial or legal advice. Please consult a loan servicer, a financial advisor, or the federal government with any specific questions about the program.