Student loan debt continues to be one of the major financial crises in the country. The federal government understands this and has come up with many student loan forgiveness programs. While some programs provide a limited amount of forgiveness, there are few programs that forgive the full balance amount of the student loan, including both the principal amount and the interest. However, this is possible only if you qualify for the student loan forgiveness program.
The Public Service Loan Forgiveness Program happens to be one of the top student loan forgiveness programs that the government has introduced. Read on to know more about this program and whether you are eligible for it or no.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program is a student loan forgiveness program that the Congress started in 2007. This program was initiated to forgive the loans of the students who are employed with a non-profit and public-service organization after their graduation. If you are eligible for Public Service Loan Forgiveness, then you are expected to make 120 qualifying payments or 10 years of payments, after which the remaining balance of your loan will be forgiven. Peace Corps volunteers, teachers or working staff in a public school, and government employees are some of the people who can avail the benefits of the Public Service Loan Forgiveness Program.
The best thing about this program is that it does not mention a dollar bracket for the amount forgiven, which means your entire remaining balance is written off. Another advantage of this program is that the forgiven loan amount does not come under taxable income.
Eligibility criteria for the Public Service Loan Forgiveness Program
Eligibility for the Public Service Loan Forgiveness Program pertains more toward the work conducted by the organization than your job profile. This means eligibility depends more on the employer than the employee. Here are some of the main types of organizations that are eligible for the Public Service Loan Forgiveness Program:
- All types of government organizations: federal, state, local, or tribal
- Non-profit organizations that are exempted from tax under Section 501(c)(3) of the Internal Revenue Code
- Non-profit organizations that are not tax exempted under Section 501(c)(3) but provide public services that qualify them for PSLF, such as military, school-based, and public-health services
There are some organizations that conduct public services, but they do not qualify for the PSLF program. Some such organizations are listed below:
- For-profit organizations, including for-profit government contractors
- Labor unions
- Non-profit organizations that do not come under Section 501(c)(3) and do not provide qualifying public services
- Partisan political organizations
Many times, people who are eligible for the Public Service Loan Forgiveness Program are not eligible for the benefits of the program because they are unaware that one needs to have their loan in the Direct Loan Program. Not just that, you should also opt for the correct repayment plan to be eligible for the benefits under the Public Service Loan Forgiveness Program. Here are some of the loan repayment programs that help you qualify for the Public Service Loan Forgiveness Program:
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
Application process of Public Service Loan Forgiveness
You cannot officially apply for loan forgiveness until you have completed 120 qualifying payments or 10 years of payment. However, before that, you will have to fill and submit the Employment Certification form every year to confirm that you are making qualifying payments. You will also have to submit this form, every time you switch your job.
Once you have your Employment Certification form filled with your employer’s certification, you can then mail it to FedLoan Servicing, which happens to be the federal loan servicer of the Department of Education. After reviewing your form, the Public Service Loan Forgiveness Program staff will let you know whether you are making qualifying payments. Thereby, you can keep a track of your payments and make sure that you are going in the right direction that will qualify you for the loan forgiveness. If the staff feels that your form is incomplete, or if they feel that the information provided is not sufficient, then they will ask for additional information or documents that will help them determine whether your employment qualifies for the program. The form also helps to determine whether you have an eligible loan type.
If your employment qualifies for the program, then your payment history will be reviewed. The staff will notify you about the total number of qualifying payments that you have made till now and how many more payments you will have to make before your debt will be forgiven.
If you wish to apply for the Public Service Loan Forgiveness Program, make sure that you gather all the important details from the beginning so that you get the full benefits of the program.