Discovering The Truth About Funds

An Overview of the Public Service Loan Forgiveness Program

The federal government’s Public Service Loan Forgiveness Program, which began in 2007, is a program that forgives federal student loans of borrowers with a full-time eligible job (above 30 hours a week) and has completed 120 eligible in-full and on-time payments within 10 years. Qualifying student loan repayment plans that the loan payments can be made under include Standard Repayment, Income-based Repayment (IBR), Pay As You Earn Repayment (PAYE), Revised Pay As You Earn (REPAYE), and Income-contingent Repayment (ICR).

For most borrowers, an income-based repayment plan is preferable because it allows them to minimize their monthly student loan repayment, and at the same time have a bigger part of their loan forgiven. The Standard Repayment plan, on the other hand, assumes student loans will all be paid off in 10 years’ time. In short, if you select this plan, no loans will need to be forgiven at the end of the repayment period.

Forgiveness-Eligible Student Loans

Under the Public Service Loan Forgiveness, only two types of student loans are eligible – Direct Loans and Federal Direct Consolidation Loans.

Federal Direct Unsubsidized and Federal Direct Subsidized Stafford/Direct Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans are the four types of Eligible Direct Loans.

Student Loans Not Eligible for Forgiveness

Three types of student loans are not eligible under the Public Service Loan Forgiveness program, and these include Private Student Loans, Federal Family Education Loans (FFEL) and Federal Perkins Loans. But this rule makes a few exceptions.

Direct Loans & Private Loans

>> If you have both a Private Loan and a Direct Loan, the Direct portion is eligible.

Federal Perkins & FFEL

If you consolidate these two loans, then they are automatically eligible, but only Consolidation Loan payments will be counted toward the 120 payments. Any previous payments made prior to consolidation do not count.

Applying for Public Service Loan Forgiveness

After you’ve completed 120 qualifying monthly payments, you can submit a Public Service Loan Forgiveness Application. In the meantime, while not required, submit the Public Service Loan Forgiveness Employment Certification Form yearly or each time you switch jobs to help you monitor your progress in meeting the requirements for eligibility. This form establishes each year that you have met all employment requirements for the program.

Your next step is to submit the form and employer’s certification to FedLoan Servicing, which is under the Department of Education. FedLoan Servicing will tell you if you’re eligible and update you on the number of qualifying payments you’ve made, along with how many more you need to make before you qualify for loan forgiveness.

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