Public Service Loan Forgiveness
What is it?
Through the College Cost Reduction and Access Act of 2007, Congress created the Public Service Loan Forgiveness Program which encourages individuals to enter and continue to work full-time in public service jobs while making 120 payments on their student loans. Basically, it is about making the right payments on the right loans, and being employed at the right job.
This means one payment a month for 10 years. The incentive for this service is loan forgiveness for any remaining debt. Qualifying payments do not have to be consecutive. You can take time off from your employment in public service, during which time payments made would not count toward the 120 required payments. However, payments will begin to count again when you are back in eligible public service employment.
Since borrowers must make 120 monthly payments on their eligible federal student loans beginning after October 1, 2007 before they qualify for the loan forgiveness, the first cancellations of loan balances will not be granted until October 2017.
Loans Eligible for Public Service Loan Forgiveness
Any non-defaulted loans made under the Federal Direct Loan Program are eligible for loan forgiveness. This means you may need to consolidate your past loans into Direct Loans with the Department of Education, if you do not have Direct Loans already. The following types of loans may be consolidated into the Direct Loan Program: Federal Family Education Loan (FFEL) Program loans, which include Subsidized Stafford Loans, Unsubsidized Stafford Loans, Federal PLUS Loans - for *parents, and graduate or professional students, Federal Consolidation Loans (excluding joint spousal consolidation loans), and
Federal Perkins Loans**. IIT University Loans, Neuman Loans, BAR Loans, and private loans are not eligible.
*NOTE: To qualify for forgiveness of a parent PLUS loan the parent borrower, not the student on whose behalf the loan was obtained, must be employed by a public service organization.
**NOTE: To consolidate just a Federal Perkins Loan into the Direct Loan Program, you must also consolidate at least one FFEL Program loan or Direct Loan.
The borrower must not be in default on the loans for which forgiveness is requested. The borrower must be employed full time by a public service organization:
- When making the required 120 monthly loan payments
- At the time the borrower applies for loan forgiveness
- At the time the remaining balance on the borrower's eligible loans is forgiven.
Which Loan Repayment Programs Qualify for Public Service Loan Forgiveness
The 120 required payments must be made under one or more of the following Direct Loan Program repayment plans while employed in public service:
- Income Based Repayment (IBR) Plan (not available to parent Direct PLUS Loan borrowers)
- Income Contingent Repayment Plan (ICR) (not available to parent Direct PLUS Loan borrowers) - was originated before IBR, thus not as advantageous, for more information about ICR see our page on IBR.
- Standard Repayment Plan with a 10-year repayment period (However, if a student makes 10 years worth of payments, there will be nothing to forgive, thus it is not a good choice for Public Service Loan Forgiveness.
- Any other Direct Loan Program repayment plan, but only payments that are at least equal to the monthly payment amount that would have been required under the Standard Repayment Plan with a 10-year repayment period may be counted toward the required 120 payments.
Loan Consolidation does not count as a qualifying loan repayment plan.
For more information about the repayment plans available in the Direct Loan program, please click here.
IMPORTANT NOTE: The Public Service Loan Forgiveness Program provides for forgiveness of the remaining balance of a borrower's eligible loans after the borrower has made 120 payments on those loans. In general, only borrowers who are making reduced monthly payments through the Direct Loan Income Contingent or Income Based repayment plans will have a remaining balance after making 120 payments on a loan.
What types of public service jobs will qualify a borrower for loan forgiveness under this program?
The borrower must be employed full time (in any position) by a public service organization, or must be serving in a full-time AmeriCorps (vista volunteer) or Peace Corps position. You may also hold two part time positions that equal at least 30 hours per week. Past service at a qualifying job does not count, due to the program being effective as of October 2007. For purposes of the Public Service Loan Forgiveness Program, the term "public service organization" means:
- A federal, state, local, or Tribal government organization, agency, or entity (includes most public schools, colleges and universities);
- Judicial clerkship (non-volunteer)
- A public child or family service agency; A non-profit organization under section 501(c)(3) of the Internal Revenue Code that is exempt from taxation under
- section 501(a) of the Internal Revenue Code (includes most not-for-profit private schools, colleges, and universities);
- A Tribal college or university; or
- A private organization that is not a for-profit business, a labor union, a partisan political organization, or an organization engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing) and that provides the following public services -
- Emergency management;
- Military service;
- Public safety;
- Law enforcement;
- Public interest law services;
- Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten);
- Public service for individuals with disabilities and the elderly;
- Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations);
- Public education;
- Public library services; and
- School library or other school-based services.
Not Eligible Public Service Agencies
- International Positions (i.e. United Nations)
- Labor Unions
- Membership Organization
Amount forgiven does not count as taxable income through Public Service Loan Forgiveness. However, if a borrower does not complete the commitment to public service, and is under the Income Based Repayment Plan, any amount forgiven after the programs 25 year repayment term, will be count as taxable income.
As the date of this publishing, there is no official Public Service Loan Forgiveness Form. We recommend that you keep your own documentation such as hire letters/W-2's, until more guidance is provided by the Department of Education.
- National Student Loan Database Service:
- Review your loans to make sure you have right type of loans to be eligible.
- Consolidate your loans into the Direct Loan Program: You will need to consolidate any eligible loans into the Direct Loan Program. See our Consolidation Information page for details.
- Make the right payment: sign up for one of the qualifying loan repayment plans (IBR will be the most advantageous) with Direct Loans. See our IBR page for details.
- Be employed in the right job