Congress instigated the Public Service Student Loan Forgiveness program in 2007, in order to reward those who choose a lower paying job in the public sector, or with a non-profit organization. Eligible graduates are required to make 120 income-based payments, before the remaining balance will be forgiven, and in a select few cases, they don’t need to pay anything per month, depending on their income and family size. The great thing about the program is that it counts any amount of payment, even $0.00), towards loan forgiveness.
In one example, a borrower is earning $40,000 per year and has a family of four. The loan balance is $48,000, with an interest rate of 6.875%. This hypothetical borrower could easily qualify for an income-based payment of only $52 per month.
After making 120 qualifying payments, they would have successfully paid $6,240 in student loan payments, and the remaining balance would be forgiven. Of course, this is before forgiven interest, and in this hypothetical scenario we are assuming that the persons income and family size will remain constant for ten years.
There is a lot of misinformation about who qualifies for this program. Many borrowers have been led to believe that simply by finding a public sector job, they will receive loan forgiveness within a decade. Unfortunately, not everyone is eligible, so it is rarely so simple. Most borrowers do not have the right loan types, or are not in the correct repayment plan, to qualify for this program, but those who do benefit from it drastically.
Which Loans Qualify?
You are eligible for Public Service Student Loan Forgiveness if you are in one of the following repayment plans:
- Direct Subsidized / Unsubsidized
- Direct Consolidated Loans
- Direct PLUS
- Direct Stafford Subsidized / Unsubsidized
As you may have guessed, private loans do not qualify. They make borrowers ineligible under every circumstance. In addition, other types of federal loans do not qualify.
The majority of borrowers do not have Direct Loans and thus do not qualify for the program without first converting their federal loans into Direct Loans. Thankfully, this is possible, if you take the correct steps.
The Direct Loan Consolidation program consolidates your federal loans into one single Direct Loan. If you do not already have Direct Loans but still want to apply for Public Service Loan Forgiveness, you will first need to consolidate your loans.
Trinity Loan Counselors is a processing team that works through a third-party approach and helps borrowers to find debt relief. The types of services that we offer, and their prices, are listed below. The payments we require borrowers to make are for our time and expertise in processing consolidation documents. Keep in mind that these payments will not be applied to your student loans. Also, if your loans are in default, you unfortunately do not qualify and we cannot provide you with any assistance.
How Much Can You Forgive in Total?
At present, there is no maximum amount that can be forgiven.
120 Qualifying Payments
Once you have consolidated your federal loans into Direct Loans, you must also ensure that you make payments to one of the following: the Income Based Repayment plan, Income Contingent Repayment, or Pay As You Earn Plan.
These three plans are similar in that they provide you with relief that is calculated based on your income and family size. Below are the estimated figures, depending upon family size and income, from a borrower on the IBR plan. Your loan balance and interest rates are not included in the total payment calculation.
It is important to remember that payments must be made on time in order to be considered towards your 120 qualifying payments. This means that they must be paid within 15 days of the scheduled payment date, and payments that are made in a lump sum, or in advance, for future months do not count.
Which Types of Employment Qualify?
Any employer that qualifies include any federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The Public Service Student Loan Forgiveness program does not care what type or nature of employment you have acquired for a tax-exempt organization. They are also not concerned with the type of services that these public service organizations offer. What matters is that they are a qualifying organization.
- Federal, State, Local Government? Yes
- Non-Profit 501(c)(3)? Yes
- Non-Profit in Public Services? Sometimes – see below.
- Not only non-profits qualify. A private non-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may, but only if it falls under a certain category of service, including emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly.
Ineligible organizations include labor unions and partisan political organizations. For the most part, the nature of the employment with the organization does not matter for Public Service Student Loan Forgiveness purposes, but you may not include time spent participating in religious teaching, worship services, or any form of proselytizing, if you are employed by a private religious non-profit.
What is considered full time employment?
Your employer’s definition of full-time might be different than another’s. However, you must complete a minimum of 30 hours of work per week in order to qualify for the program. As far as full-time employment is concerned, any time instructing people about religion, partaking in worship services, or any other style of evangelizing does not qualify.
In some cases, teachers of other employees of a public service organization will be under contract for at least 8 out of 12 months. If this is your situation, you must meet the full-time standard if you work at least 30 hours per week during your contractual period.
It is important to note that those borrowers who work in two separate public sector or non-profit jobs can meet the minimum number of hours spent working by combining the total hours of work at both jobs.
How to Begin
If you are interested in applying for the Public Service Student Loan Forgiveness program, you must consider a few factors.
The first thing you should do is make all the necessary changes to your student loans as we have detailed above. Complete all the necessary steps.
The second step would be to hire a private organization to help you through the process and assist you with any confusing documentation. The work that private entities do involves ensuring that your loan types are correct and that your repayment plan is correct, so that your loans can be forgiven immediately after 120 payments.