How Back to School Affects Public Service Loan Forgiveness – Forbes Advisor
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Federal Public Service Loan Forgiveness Program (PSLF) is notorious for its strict eligibility conditions. This is what thousands of borrowers learned in 2017 when applying for loan forgiveness. Only a small fraction of the candidates—about 1%– had their loans paid off.
So if you are going the PSLF route, it is important to know how any major change in your life could affect your eligibility status. Here is a guide for PSLF borrowers wishing to continue their education.
How does public service loan forgiveness work?
Borrowers must make 120 monthly payments while working for an eligible employer, usually a government or non-profit agency, after which the remaining amount is written off. The amount remitted is not considered taxable income.
You must be a W2 employee; contractors are not eligible for the PSLF. You must also be a full-time employee or hold two part-time jobs, both with eligible employers, totaling 30 hours per week or more.
Only federal direct loans are eligible for the PSLF. If you have a Federal Family Education Loan (FFEL), you will need to convert it to a direct consolidation loan to qualify for the PSLF. If you have already made payments to the PSLF, do not consolidate any direct loans with your FFEL loans or the countdown to loan cancellation will restart.
If you have Perkins loans, these are eligible for loan cancellation after only five years of service if you hold an eligible position. However, if you consolidate them into a direct consolidation loan, you will need to meet the 120 PSLF payment requirement.
The 120 payments do not have to be consecutive. It is perfectly acceptable to take a break, for example if you are unemployed, changing jobs or going back to school.
While working for PSLF, you should be on a income-based repayment plan (IDR), which uses your family’s size and income to determine your monthly payment. Standard, extended or graduated borrowers student loan repayment plans these payments will not be counted in the PSLF.
How to apply for a pardon for a public service loan
Borrowers are strongly encouraged to file a employer certification form at least once a year and send it to the Ministry of Education. This form will indicate that your loans and your employer are eligible for the PSLF. While you don’t have to file this form every year, it will make the loan forgiveness process easier.
If you wait to submit the form after making 120 payments, you will need to ask each former employer to verify your hire dates. It can be difficult and time consuming, so it’s best to certify once a year.
After completing the form, the government will certify the payments made under that employer. Once you’ve made 120 payments, you can ask for forgiveness.
How to get a credit for PSLF at the start of the school year
When you return to school, your loans are automatically placed under postponement to school, which means you won’t owe any payment. However, if you continue to work full time for a PSLF eligible employer, you can make payments on your loans that will count towards the PSLF.
The first step is to contact each loan officer and ask them to remove the deferral to school from your account. This process may take a while, so be persistent if the deferral doesn’t go away from your account.
Then continue to make your payments as before. Be sure to submit the Employer Certification Form while you are in school to verify that your payments are being tracked correctly.
Does working during higher education count for the PSLF?
Since the PSLF has strict rules on employer eligibility, you shouldn’t assume that just any nonprofit will count.
First of all, you must be an employee of W2. Having an internship, job, or contract work for a nonprofit does not make you eligible.Some graduate students will be eligible for work-study, a federal program that provides students with demonstrated financial need with on-time employment. partial, usually on campus. But since these jobs typically don’t allow students to work more than 30 hours per week, as the PSLF requires, they won’t make you eligible for the program.
Another important consideration is that any new loan you take out to pay for your higher education will not be eligible for the PSLF until you graduate or leave school. Then you will have a six month grace period. After this period, the loans will enter the repayment phase and your monthly loan payments will begin to be recorded in the PSLF. If you make payments on these loans while in school, they will not count towards the PSLF.
What to do after you graduate
If you have taken out more federal loans to pay for your graduate studies, these will have their own schedule for the PSLF and will not be canceled along with your previous loans. If you are starting to work in an organization eligible for the PSLF, you must complete the same Employer Certification form that you used before.
Borrowers should also remember not to consolidate undergraduate and graduate loans. Each time you consolidate loans, all previous PSLF payments are erased, forcing you to start over.
Borrowers should track the number of payments they have made under the PSLF and keep copies of their employer certification forms, ideally in an online cloud storage account. The government will not notify you when you become eligible for a loan forgiveness, so it is your responsibility to do the math and monitor when you are ready to apply.
Once you’ve made 120 qualifying payments, contact your loan officer and ask them to repay the loan. If you’ve completed your Employer Certification Form every year and your payments have been certified, this process should be relatively straightforward.
Other loan forgiveness options
Depending on your reason for going back to school, you may be eligible for loan forgiveness programs in addition to the PSLF. Here are some possible options.
Teacher loan forgiveness
Math, science and special education teachers may be given $ 17,500 in eligible loans, while all other teachers may have $ 5,000 in canceled loans.
Nurse loan forgiveness
Nurses Who join the Nurse Corps loan repayment program can see up to 85% of their loan balance canceled when they work for three years in an underserved or low-income area.
Nurses can work for two years and have 60% of their loans canceled. They also have the option of signing an extension for a third year to get an additional 25% pardon.
Lawyer forgiveness programs
Lawyers have access to several forgiveness programs, including the Department of Justice Student Loan Repayment Program. This requires you to work for the Department of Justice to have $ 6,000 in loans canceled each year, up to a total of $ 60,000.
Lawyers who exercise the function of public defender may request the John R. Justice Program (JRJ), and the amount forgiven depends on the state in which you work.