Public Service Loan Forgiveness: What It Is & How It Works?

Shatakshi Sinha
Public Service Loan Forgiveness - theislandnow

As a public servant, you should be able to enjoy the benefits of the job, including the Public Service Loan Forgiveness program.

However, you can only enjoy the benefits if you know how it works. And you’re probably here because you want to know how. You’re not alone. 

A survey shows that about 30% of denied PSLF claims are due to incomplete paperwork, and slightly over 2% of claims are accepted.

So, we’ve decided to help out with a quick guide to public service loan forgiveness for those who need it most, to help them get into the small 2% of accepted claims.

How PSLF Loan Forgiveness Works?

Public service loan forgiveness is a program that helps borrowers who work in public service professions by forgiving their federal student loans. If you qualify, your remaining loan balance will be forgiven after you make 120 qualifying payments.

Qualifying Payments

To qualify for Public Service Loan Forgiveness, you must make 120 eligible, on-time payments on your Direct Loans. Each payment must be made while you are working full-time in a qualifying public service job. 

These payments do not have to be consecutive, but they must be on time and when you’re not in grace, loan deferment, or schooling period to count toward the 120 payments required for forgiveness.

Repayment Plans

You can choose any repayment plan when making qualifying payments, including income-driven repayment plans such as Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE).

However, choose an income-driven repayment plan when making qualifying payments. Your monthly payment will be lower than if you paid off your debt under a standard 10-year repayment plan.


The government taxes regular loan debt as income. However, If you receive a discharge of your debt through Public Service Loan Forgiveness, the amount forgiven will become tax-free if it meets the requirements.

What Jobs Are Eligible for Public Service Loan Forgiveness?

The Public Service Loan Forgiveness (PSLF) program is designed to encourage recent graduates to enter qualifying public service professions.

Certain government and non-profit jobs are considered eligible. The qualifications for each profession are different, but some general guidelines apply to most jobs.

For starters, you must be employed by a qualifying employer. It means that you work full-time for an organization that provides qualified public service and is not included in any categories excluded from eligibility.

The same goes for your spouse or family member if the same organization or agency employs them.

Qualifying employers include:

  • Teachers (K-12 and higher education)
  • Government organizations at all levels (federal, state, and local). State government includes any state government department, agency, or political subdivision, such as a municipality or public school district. 
  • Local government includes any town, city, or county government department, agency, or political subdivision. 
  • Certain tax-exempt 501(c)(3) organizations such as hospitals and other healthcare providers; AmeriCorps volunteers working in the FEMA Corps; Peace Corps volunteers; VISTA volunteers; Volunteers in Service to America participants; and Veterans Opportunity Corps members who have been placed in positions of employment with a non-profit.

PSLF Eligibility:

The PSLF program began in 2007 and has since eliminated over $10 billion in student loan debt. The program forgives federal student loans for borrowers who have worked in public service for 10 years or more.

The program was created to encourage students to pursue public service careers, including teaching, law enforcement, social work, and other occupations.

The following types of student loans are eligible under the PSLF program:

Direct Unsubsidized Loans are available to all students. However, you may have to pay interest while in school. Still, your federal loan servicer will not charge you interest on Direct Unsubsidized Loans if you are enrolled at least half-time and maintain satisfactory academic progress.

Direct Subsidized Loans are available only for students who demonstrate financial need. They are subsidized by the federal government (the government pays the interest that accrues while you are in school).

You may have to pay interest while in school. Still, your federal loan servicer will not charge you interest on Direct Subsidized Loans if you are enrolled at least half-time and maintain satisfactory academic progress.

Direct PLUS Loans are federal loans that parents can take out to pay for their children’s education. Unfortunately, these loans don’t offer forgiveness programs and must be repaid on a fixed schedule.

However, suppose you have a PLUS loan and qualify for Public Service Loan Forgiveness. In that case, half of the remaining balance of your Direct PLUS Loans will be forgiven after 120 qualifying payments.

Direct Consolidation Loans can be eligible for Public Service Loan Forgiveness if you first consolidate them into an eligible federal student loan.

To consolidate your direct consolidation loans into an eligible federal student loan, you must do one of two things:

  1. Combine all eligible direct consolidation loans into one new direct consolidation loan.
  2. Combine all eligible direct consolidation loans into another eligible federal student loan that’s already been consolidated.

What If I’ve Already Made Payments Using The Wrong Loan Type Or Repayment Plan?

If you’ve already made payments on your loans using the wrong loan type or repayment plan, don’t panic! You can ask your loan servicer to change the type of loan you are using or the repayment plan you are on.

You can also ask them to recalculate how much you’ve paid toward your student loans and what remains. If they say no, there’s still hope. You may be able to appeal their decision to a third party, like the Department of Education.

Suppose the wrong payment type was used (such as an income-driven repayment plan instead of a standard one). 

In that case, you can fill out the public service loan forgiveness form, request partial loan forgiveness from your servicer, and ask them to recalculate your payments using the correct repayment plan. 

If this does not result in complete forgiveness, you may still be able to apply for the total cancellation of any remaining balance on your loan.

If you made payments that were too large or too small because of an error in your monthly payment amount, you might also be eligible for partial loan forgiveness.

When submitting your application for cancellation of remaining debt, include documentation showing that you made payments that were too large or too small because of an error in your monthly payment amount.

This documentation should include any written communications between yourself and your servicer regarding this issue, such as emails or letters sent by either party; it should also include any records showing how much money was paid directly from one account versus another (if applicable).

6 Steps to Qualify for Public Service Loan Forgiveness?

If you’re interested in Public Service Loan Forgiveness (PSLF), the program is designed for those who work in government or non-profit organizations. 

A lot goes into qualifying for PSLF, so we’ve compiled this guide to determine if you’re eligible for PSLF. 

To qualify for Public Service Loan Forgiveness (PSLF), you must work in a public service job. The federal government does not pay for a public service job but is done by a qualifying employer. 

This can include:

  • Federal, state, or local government agencies
  • 501(c)(3) nonprofits

The next step is verifying that your loans and employment qualify. If you need more clarification about eligibility, you can use the PSLF Employment Certification Form (ECF) to confirm your employment and loan eligibility.

Once you’ve completed the form, it will be sent to your loan servicer, who will then send it to the U.S. Department of Education, which will evaluate its accuracy. If everything checks out, they’ll send it back to your loan servicer so they can update their records.

You can apply for an income-driven repayment plan through The government offers four income-driven programs, each with rules and requirements. You’ll need to fill out an application and provide tax information so that they can calculate what your monthly payment amount will be.

The program requires that you certify your employment every year to be eligible for a public service loan forgiveness waiver. To do this, you’ll need to submit the Employment Certification for Public Service Loan Forgiveness Form, which you can find on the Federal Student Aid website.

You can track your progress toward Public Service Loan Forgiveness by logging in to the National Student Loan Data System (NSLDS).

This system will show you how much you owe, when your first payments are due, and how much of your loan has been forgiven. You can also use this system to find out if there are any issues with your loans or servicer.

Submitting your application is the final step in qualifying for Public Service Loan Forgiveness. Once you’ve completed all of the steps above, you can fill out and submit the PSLF application online. The application can be found on the Federal Student Aid website.

Once your application is submitted, you will receive a notification via email if you are eligible for PSLF. If you do not qualify for PSLF, you may still be able to apply for an income-driven repayment plan or consolidate your loans to become eligible for PSLF later on.

What Options Do You Have If You Don’t Qualify for PSLF?

You might not be out of luck if you don’t qualify for PSLF. There are still a few options that can help you pay off your loans and save money.

If you don’t qualify for PSLF, consider paying off your loans.

It might sound like a daunting task, but you can do it! Here are some tips to help you get started:

  1. Start by making a budget and sticking to it. You may want to make some sacrifices to pay off your loans faster, but be sure that you don’t sacrifice your long-term financial goals—like retirement or buying a home—to pay off your student debt sooner!
  2. Try automating your payments if possible so they come out of your checking account automatically monthly. This will make you less likely to miss payments or forget about them altogether!

Consolidating your loans is an excellent alternative if you don’t qualify for PSLF. In addition, consolidation can be a good option if you have multiple loans with different interest rates and want to simplify your payment process or if you want to combine several of your federal loans into one loan with a lower interest rate.

If you’ve been making payments on your student loans for more than ten years, then we recommend that you consolidate your loans after ten years instead of PSLF because it’s more likely that you’ll be able to pay off the new consolidated loan in 10 years or less.

If that’s not an option for you, then continue reading below!

You can consolidate your federal student loans into a new Direct Consolidation Loan. 

There are four different types of Direct Consolidation Loans:

  • Direct consolidation loan
  • Consolidation with a subsidized interest rate
  • Consolidation with an unsubsidized interest rate

Income-Driven Repayment Plans

If you don’t qualify for PSLF, there are still ways to lower your student loan payments. Income-driven repayment plans allow you to pay a percentage of your income toward your loans and even forgive some or all of the remaining balance after 20 or 25 years of payments. 

There are four income-driven repayment plans: Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR), and Income Sensitive Repayment (ISR).

Pay As You Earn is a plan that caps your monthly payment at 10% of your discretionary income and forgives any remaining balance after 20 years of qualifying payments.

To qualify for PAYE, you must have taken out loans after October 1, 2007, and received a disbursement on or after October 1, 2011, be currently enrolled in school at least half time; not be in default on any federal student loans; have no adverse credit history as determined by the U.S. Department of Education; and have no outstanding federal student loans owed to any other holder (such as a parent or spouse).

This plan was created in December 2015 and is available to any borrower who has taken out a federal student loan since September 30, 2007. It’s also based on your income and family size.

Still, unlike PAYE, it doesn’t require you to make payments for 20 or 25 years before qualifying for forgiveness because it only requires payments for ten years before qualifying for forgiveness—and then only if your loan balance is under $50,000 after ten years of on-time payments while enrolled in an approved repayment plan like REPAYE (which includes PAYE).

Income-based repayment plans base your monthly payment on your income and family size. Depending on your situation, this could mean lower or even no payments.

Under these plans, the amount of money you owe will be forgiven after 20 or 25 years. If you qualify for PSLF, income-driven repayment plans may be an option if you can afford the standard repayment plan.

This plan helps borrowers who took out loans in the past 30 years and have not paid off their debt in 25 years or more, or in 20 years, for those who took out loans before July 1, 1994. It also allows borrowers who pay more than 15% of their monthly income toward their student loans to lower their payments.

If you don’t qualify for PSLF, you might still be able to refinance your student loans.

Refinancing is an excellent option if you have a high balance or want to lower your monthly payment. Also, if you’ve been paying off your loans for a while, refinancing can help you save money on interest over the life of your loan.

Refinancing can also help if you’ve had trouble making payments and want to consolidate your loans into one manageable payment. 

Refinancing can also help if you’re looking to consolidate other debt with your student loans (like credit card debt) or if you want to ensure that certain types of income aren’t counted toward how much money is left on each loan after 20 years of payments.

Should You Apply for A Public Service Loan Forgiveness?

Public Service Loan Forgiveness is an option for borrowers with federal student loans. It allows them to have their remaining balance on their loans forgiven after they make 120 qualifying payments while working full-time in a public service job.

But should you apply? It depends on your situation and goals. Here are three things to think about before you decide:

You need to make at least $55,000 per year to qualify for Public Service Loan Forgiveness, but if your household income is higher than that, your monthly payments will be higher than what they would be if your income were lower. 

If so, the odds of getting approved for Public Service Loan Forgiveness are pretty good—as long as you meet all the other requirements listed above. 

If not, then it’s unlikely that you’ll get approved for this program anyway because of how much money you make each year or where you work now (or plan on working).

Benefits of the PSLF Loan Forgiveness Program

The Public Service Loan Forgiveness program has changed many people’s lives by allowing them to have their loans forgiven. It helps you repay your student loans while enabling you to pursue a public service job.

Here are some benefits of the Public Service Loan Forgiveness Program:

  • You may qualify for complete forgiveness after ten years of making qualifying payments (120 payments). If you work for a qualified employer, then you will not have to make any payments toward your loans after this period.
  • You do not need to pay for the loans forgiven under this program because your lender will wipe them out after ten years of qualifying payments.
  • When you become eligible for loan forgiveness under this program, there is no tax obligation on the forgiven amount. Instead, your lender will send Form 1099-C at the end of each year and report how much was forgiven during that year. However, this amount has no tax liability if it is considered income from employment or qualifies as an excluded benefit under Section 127 of the Internal Revenue Code (IRC).
  • The remaining balance will be forgiven if you work full-time for ten years in a public service job.
  • There is no cap on the amount of money that can be forgiven through this program, which means your debt could be completely eliminated!

FAQs Regarding Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is a federal program forgiving federal student loan debt for borrowers who make 120 qualifying monthly payments on their Direct loan while working full-time at specific public service organizations, non-profit organizations, and government agencies.

To be eligible, you must:

  • Be employed full-time by a non-profit or government employer;
  • Make 120 qualifying payments on your eligible federal student loans while working in public service; and
  • When you submit your application to forgive your federal loans, there is no outstanding balance on your federal loans.

Only federal Direct Loans are eligible for PSLF. However, if you have other types of federal loans, you can consolidate them into a Direct Consolidation Loan and then apply for PSLF.

Suppose your consolidation loan is not a Direct Consolidation Loan. In that case, it will only qualify for PSLF after the consolidation unless you change it to one by completing an application with FedLoan Service and applying for a new loan number. 

You must make 120 qualifying payments on your Direct Loans to be eligible for PSLF. These payments may be made as part of an income-driven repayment plan or through other plans such as the Pay As You Earn Repayment Plan (PAYE). 

To apply for Public Service Loan Forgiveness, complete and submit the Employment Certification for Public Service Loan Forgiveness form (Employment Certification form) to your loan servicer after you’ve made each of your 120 payments while working full-time in public service employment.

Yes, you can still apply for PSLF if you work for a 501(c)(3) non-profit organization. However, the employer must be qualified and meet the requirements to receive student loan funding from the federal government.

Conclusion: Are Public Service Loans Being Forgiven?

As you can see, Public Service Loan Forgiveness is a complex program to understand. Determining what it entails, who is eligible, and the requirements is tricky. However, we’ve simplified it in this article.

The key takeaway from this is that if you are qualified for Public Service Loan Forgiveness, it provides the benefit of a lower payment at a 15% income-based repayment plan while also going after your loans to get them forgiven after ten years.

You must work with a loan servicer (the government or your private lender) to receive this benefit because they will make sure you meet all of the eligibility requirements to get it.

If you’re on an income-based repayment plan, then simply apply for PSLF with your servicer every year so that they know you still qualify.

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