There are a myriad of student loan forgiveness programs, repayment plans and ways to refinance student loan debt. Unfortunately, there is nothing simple about these programs and a few missteps could mean you’ve made yourself ineligible for student loan forgiveness or you never took advantage of a program when you had the chance. So, what happens if you worked in public service for 10 years? Can you still get credit towards Public Service Loan Forgiveness?
The Short Answer
No, you cannot get retroactive credit for Public Service Loan Forgiveness if you worked those jobs prior to 2007. You may be able to on jobs worked since October 1, 2007 and took out the eligible loan after 2007.
The Longer Answer
Public Service Forgiveness Program launched October 1, 2007. Anyone who worked eligible jobs before that date could not retroactively count his or her service towards PSLF. You also can’t get credit if you put in time after 2007, but are unable to get your supervisor from the job to sign off. For each job you worked, you’ll need to file an Employment Certification for Public Service Loan Forgiveness form. You could wait the full decade to fill these forms out, but it would require tracking down supervisors who may have retired from positions or moved on to other jobs or are just impossible to get in touch with. It’s also important to keep in mind, working in public service alone doesn’t make you eligible.
Requirements to be Eligible for Public Service Loan Forgiveness
Only Federal loans disbursed after the program went into effect are eligible for Public Service Loan Forgiveness, private loans such as those with Discover or Wells Fargo are not eligible. In addition, you must have certain types of Federal loans. These include:
- Loans received under the William D. Ford Federal Direct Loan Program. This includes: Federal Direct Stafford/Ford Loans (Direct Subsidized Loans), Federal Direct Unsubsidized Stafford/Ford Loans (Direct Unsubsidized Loans), Federal Direct PLUS Loans (Direct PLUS Loans)—for parents and graduate or professional students, Federal Direct Consolidation Loans (Direct Consolidation Loans).
- It should be noted that parents who work in public service and receive a Direct PLUS loan could be eligible for this program. But it’s a little complicated. In order to have a remaining balance after 10 years, you’d need to enroll in an income-driven repayment plan. Parents are not eligible for income-based repayment (IBR) nor pay as you earn (PAYE). The only eligible plan would be Income-Contingent Repayment (ICR). In order to be eligible for ICR, the parent would need to have the Direct PLUS loan be turned into a direct consolidation loan. Then the loan eligible for ICR.
- Other federal loans that have been consolidated into a Direct Consolidation Loan
- Payments made on Federal Family Education Loans or Federal Perkins Loans do not count towards the 120 required payments
WARNING: Don’t wait too long to do a direct consolidation and enter an income-based repayment program, because consolidation restarts the clock. You’ll only be getting credit towards your 120 payments once you have consolidated the loans and started your income driven repayment plan. Any payments you made prior are not eligible. You can learn more about this in the Payments that Count Towards PSLF section below.
You must have full-time employment (typically at least 30 hours a week) with a qualifying employer.
Qualifying employers include: government organizations at any level (federal, state, local, or tribal), not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, and some other not-for-profit organizations will count if they provide certain qualifying public services – you’d need to reach out to your loan servicer for details.
You must make 120 qualifying monthly payments in order to get forgiveness. These payments do not need to be consecutive, but have to have been after October 1, 2007. Qualifying payments cannot be made when you are: in-school status, in the grace period, in deferment, in forbearance or in default. Making a larger payment than required also doesn’t count for two. There is one catch: certain rules do allow AmeriCorps or Peace Corps volunteers to use their Segal Education Award or Peace Corps transition payment to make a single “lump sum” payment that may count for up to 12 qualifying PSLF payments.
You must be in a qualifying repayment plan in order to be eligible.
Payments that Count Toward Public Service Loan Forgiveness
- Pay As You Earn
- Income Based Repayment
- Income Contingent Repayment
- The 10-year standard repayment plan – however, under this plan you actually wouldn’t have any loans left to forgive at the end of ten years when the forgiveness kicks in to cover the remainder of your loans. If you’re repaying on this plan, you should switch to an income-drive repayment plan.
What if I Have a Graduated Repayment Plan or Extended Repayment Plan?
The graduated repayment plan starts with low payments that increase every two years. The repayment period can last 10 to 30 years. The extended repayment plan provides fixed or graduated payments that are made for up to 25 years.
Payments made under these plans are not eligible for credit towards PSLF. If you’re currently enrolled in a graduated or extended repayment plan and believe you’d otherwise be eligible for PSLF, you can switch to an income-driven repayment plan in order to make qualifying monthly payments.
What if I Change Jobs During the 10 Years?
Let’s be realistic, odds are not high you’ll stay with the same employer for the decade it will take you to become eligible for PSLF. Each time you change jobs, you can submit the Employment Certification for Public Service Loan Forgiveness form to both prove eligibility and ensure you’re on track.
It’s highly recommended that you submit this form annually or at least each time you change jobs. If you don’t do it when you switch jobs, you will be required to submit this form for each job you held during the ten-year period when you officially submit for forgiveness.
Let’s use an example:
You worked at Happy Helpers (an eligible non-profit) from December of 2011 until August of 2014.
In September of 2014, you started working in the Parks and Recreation department of your local government (an eligible government position).
You didn’t fill out an employment certification form while you worked at Happy Helpers, but you were making payments under the IBR program. As long as you can get your supervisor from Happy Helpers to verify your employment and sign off on the Employment Certification for Public Service Loan Forgiveness form, then you can get retroactive credit.
However, if during your time working at Happy Helpers, you were making payments on a Federal Perkins Loan that wasn’t rolled into a Direct Consolidation Loan, your time in public service won’t help because you weren’t making qualifying payments.
What Happens at Forgiveness Time?
Loan Forgiveness Won’t Just Be Automatic
No one can guide you through the end of PSLF yet, because not a single person has become eligible. The program launched in 2007, so the first wave of forgiveness won’t happen until 2017.
Currently, the government has stated you will need to submit the PSLF application in order to receive loan forgiveness. You can’t even get a sneak peak at the application though, because it’s still under development.
Just be sure you have all your Employment Certifications filled out. You can also allow the government to keep track of your progress towards forgiveness. Submit your employment certifications to FedLoan Servicing, which is the U.S. Department of Education’s federal loan servicer for the PSLF Program. This should also help prevent any nasty surprise of discovering part, or all, of your services was ineligible.
Will I Get Taxed?
One of the biggest perks of PSLF is that the IRS won’t consider the forgiven debt income. This means the forgiven amount will be tax-free. That’s a big win, especially for people with tens-of-thousands of dollars that will get forgiven.