Details of the Public Service Loan Forgiveness Program
Whether college graduates have become more humanitarian or are strategically availing themselves of the Public Service Loan Forgiveness (PSLF) Program, it is clear that more graduates are entering public sector jobs. According to The New York Times, in 2009, 11 percent more college graduates worked for non-profits than in 2008. The uptick in interest in non-profits continued, post-recession, as The Nonprofit Quarterly reported that 43 percent of non-profits surveyed in the annual Nonprofit Employment Trends Survey2012 advised of plans to increase the number of their staff members. In addition to the personal benefits of working for a non-profit, a career in public service may be a smart route for students who graduate with their diploma in one hand and their federal loan repayment schedule in the other.
Overview of PSLF
In 2007, Congress enacted PSLF with the specific intent to encourage college graduates to enter public service jobs. Painting the program with broad strokes, PSLF provides that if borrowers make 120 qualifying payments while working full-time for qualifying public service organizations, then the balance of their eligible federal loan debt will be forgiven.
Qualifying for PSLF
If you are in federal student loan debt and seriously contemplating a career in public service, or you have snagged one of these coveted spots already, you are advised to familiarize yourself with Federal Student Aid (FSA), an office of the U.S. Department of Education, which is the point of contact for PSLF.
The loan forgiveness program does not apply to private student loans. Eligible loans are limited to those administered under the William D. Ford Federal Direct Loan (Direct Loan) Program. Loans under the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan Program may be eligible for forgiveness if they are consolidated into a Direct Consolidation Loan.
An Employer Must Be a Qualified Public Service Organization
Now that you know which loans are eligible, the important next step is to learn the qualifying criteria. First, your employer must be a qualified public service organization, such as:
- A federal, state, or local government organization
- A not-for-profit organization with a 501(c)(3) designation from the Internal Revenue Service (IRS)
- A private not-for-profit organization, which does not have a 501(c)(3) designation if it provides certain public services (check with FSA for details)
120 Payments Must Be Made Under a Qualifying Repayment Plan
Borrowers will need to work with their federal student loan lenders to set up a qualifying repayment plan. Only payments made under qualifying repayment plans will count toward the 120 payment requirement. When you work with your lender on a repayment plan, make sure that you enter into a PSLF qualifying repayment plan.
Borrowers are encouraged to track their employment. To streamline the process, FSA provides guidance on how to track your periods of eligible employment. At that exciting point in the future, when you believe you have met all of the program criteria, you will need to apply for PSLF in order to receive loan forgiveness. The first class of PSLF success stories will not arrive until 2017, as program completion takes at least 10 years.
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