How to get your federal student loans forgiven

student loan

Having your federal student loans forgiven can seem like something out of a fairy tale. But it is, in fact, possible. 

That said, getting your loan forgiven can be an extremely confusing task, full of barriers and stipulations. To make things easier for you and save you the preliminary research, we’ve broken down many of the most popular and safest ways you can forgive your student loans and provided tips to improve your chances of forgiveness. 

Note: The Department of Education has stopped payments, interest, and collections on debts on federal student loans owned by the US Department of Education. 

Public Service Loan Forgiveness (PSLF)

PSLF is a program that was created in 2007 to encourage able college graduates to pursue careers in the public service sector. The idea is that qualified borrowers who work full-time (30+ hours a week) in public service are eligible to have their loans forgiven after 120 qualifying payments. If paid on time, this should take 10 years. 

What are the eligibility requirements for PSLF? 

  • PSLF is only available to those with federal student loans called direct loans. All loans included in the William D. Ford Federal Direct Loan (Direct Loan) program qualify. Examples of qualified loans include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. 
  • Loans from the Federal Family Education Loan Program (FFEL) and the Federal Perkins Loan Program (Perkins Loan)You do not qualify for PSLF. But, according to the Department of Education, you may be eligible if you consolidate your FFEL or Perkins loans into a Direct Consolidation Loan. However, it’s important to note that payments you made on your loans before you consolidated them don’t count. 
  • For at least 10 years, you must be employed by a US federal, state, local, or tribal government, work for an eligible nonprofit organization, or be a full-time AmeriCorps or Peace Corps volunteer. Government jobs include public school teachers and employees, law enforcement officials, and those in public law and public health, among others.
  • In most scenarios, you must work at a nonprofit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code to qualify for PSLF. However, in some cases, you may qualify for PSLF if you work for a nonprofit organization that is not tax-exempt but provides certain types of qualified public services. 
  • You must have an income-based payment plan, which means your monthly payment is based on your monthly income. Eligible plans include an income-based payment plan, an income-contingent payment plan, a Pay As You Earn payment plan or a revised payment plan.
  • Payments made under a standard 10-year payment plan also qualify. However, under the standard 10-year repayment plan, you would have paid off all of your loans once you’ve made the 120 required PSLF payments. Therefore, there will be no loan balance left to forgive. If you want PSLF, you must change to an income-based payment plan.
  • You must make 120 “qualified payments” before you are eligible to have your loans forgiven through PSLF. To be considered a “qualified payment”, payments must be made after October 1, 2007, must be made under a qualified payment plan, must be for the full amount due as shown on your bill, must be made no later than 15 days after your due date, and must be done while employed full-time by a qualified employer.

Note: You can only make qualified monthly payments when you are prompted to make a payment. Therefore, you cannot make a qualifying monthly payment while your loans are in school, the six-month grace period after graduation, a deferment, or a forbearance. 

The best way to ensure you are approved for PSLF 

In particular, borrowers have had great difficulty receiving PSLF. As of April 2020, 180,798 applications for PSLF have been processed. Of these, 177,422 have been rejected and 3,376 have been approved. 

So to make sure you’re on the right track, the Department of Education suggests that you submit a Public Service Loan Forgiveness: Employment Certification form each year or when you change employers. 

The government can then use the information you provide on the form to let you know if you’re making the right payments and doing everything you need to do to get your student loans forgiven.

Borrowers who believe they are eligible for PSLF can use the form, but the Department of Education requires those who change jobs to complete the form when they do so. If you do not file the Employment Certification Form when you change employers, you will need to complete a separate form for each employer you worked for while making the 120 qualifying monthly payments when you apply for PSLF. 

The Department of Education also offers a PSLF Help Tool, which can: 

  • Help you understand more about the PSLF program and what you need to do to increase your chances of having your loans forgiven;
  • Help you better determine if your employer qualifies for PSLF;
  • Help you better determine if your loans qualify for PSLF;
  • Help you decide which PSLF form to submit; 
  • “Generate a partially completed form for you to take to your employer for signature, and then to send to FedLoan Servicing”; and 
  • Use the information the department has about your federal student loans to explain other actions you must or must take if you want to receive PSLF.

If you are eligible for PSLF and have made the 120 qualifying payments, it is time to apply for PSLF. 

Those who qualify for loan forgiveness will be notified that any remaining balance on eligible Direct Loans will be forgiven. That includes all outstanding interests and principal. And if you made additional payments, after the 120 qualifying payments required, those additional payments will be refunded to you. 

If your PSLF application is denied because some of your payments were not made under a qualified repayment plan, you may still be eligible for help through the Temporary Extended Public Service Loan Forgiveness Program (TEPSLF). However, only a very small number of these requests are approved. 

If you still have questions or concerns about the PSLF process, it may be helpful to refer to the Department of Education’s PSLF 

Income-Driven Payments for Forgiveness

If you have an income-driven repayment plan and make on-time payments for 20-25 years, depending on the plan, the remaining balance on your loan will be forgiven after that period. It doesn’t matter what field you work in. 

There are four income-based payment plans:

  • Income-Based Reimbursement Plan (IBR);
  • Income-Contingent Payment Plan (ICR);
  • Pay What You Earn (PAYE) payment plan; and 
  • Revised Pay As You Earn (RPAYE) Payment Plan. 

Forgiveness under income-based payment plans

Our IBR Plan qualifies you for forgiveness after 25 years of on-time payments but is also available only to those who demonstrate that they cannot afford the payments under the standard 10-year repayment plan. 

Our ICR Plan also qualifies you for forgiveness after 25 years of on-time payments. You do not have to prove financial hardship. It is available to any borrower with eligible federal loans.

Our PAYE Plan qualifies you for loan forgiveness after 20 years of on-time payments. This plan is only available to those who demonstrate financial hardship to the point that they cannot afford to make payments under the standard 10-year repayment plan, but borrowers can stay in the program after their financial hardship is resolved. 

Our REPAYE Plan qualifies you for loan forgiveness after 20 years of on-time payments if you’re paying for undergraduate study, or 25 years if you’re paying for graduate or professional study. The REPAYE plan is similar to the PAYE plan, but you do not have to prove financial hardship. It is available to any borrower with eligible federal loans. 

Request an income-based payment plan

Consistent on-time payments under an income-based repayment plan will qualify you for loan forgiveness. However, if you do not currently have an income-based payment plan, you will need to apply.

Contact your loan servicer if you have questions. They can help you decide which income-based payment plan is right for you. 

From there, you’ll need to apply called an Income-Based Payment Plan Application. You can submit it online or on a paper form, which you can get from your loan servicer. 

For additional information, consult the complete guide offered by the Department of Education. 

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By Michael Caine

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