8 Tips For Public Service Loan Forgiveness
Are you interested in pursuing a public interest career after law school with the government or a nonprofit? Law school graduates in public interest do important work that benefits society, whether as prosecutors, public defenders, legal aid attorneys, or non-lawyers. If you are interested in public interest work and plan on taking out loans for law school, make sure you understand the Public Service Loan Forgiveness program (PSLF). PSLF is a federal program that forgives your student loans if you work in the public interest.
In this post, we’ll go over 8 tips on PSLF.
8 Tips For Public Service Loan Forgiveness
Tip #1: PSLF is not guaranteed. It’s up to Congress to keep the program alive
PSLF was put in place by Congress in 2007, and Congress could decide at any time to end the program. While Congress may decide to “grandfather in” borrowers who took out loans relying on PSLF, new borrowers may end up shut out. Keep in mind that PSLF is not a sure thing.
Tip #2: PSLF is a loan forgiveness program, not a scholarship program
PSLF does not provide you with money to pay for law school. Instead, once you’ve worked in public interest for a number of years and qualified for the program, PSLF forgives your outstanding loan balance. This means that you will need to make your student loan payments up to the point that you’ve qualified for forgiveness.
Unlike other federal loan forgiveness programs, PSLF does not treat the forgiven amount as taxable income, so you will not have a large “tax bomb” to pay once the loan is forgiven.
Tip #3: Make sure you have the right kind of loans
PSLF only works with federal student loans; private loans from a bank don’t qualify. Also, PSLF will only work for loans in the William D. Ford Federal Direct Loan Program (also known as Direct Loans). All other federal loans (such as Federal Perkins Loans) don’t qualify.
If you have loans that are not Direct Loans, or multiple Direct Loans, you can consolidate them into a Direct Consolidation loan, so that instead of having multiple student loan payments each month, you only have to pay one. But be beware: PSLF requires that you make a certain number of “qualifying payments” on your loan. If you consolidate your loans, those original loans disappear, as do those qualifying payments. You may end up starting over again, which will delay your loan forgiveness.
Tip #4: Make sure you have the right repayment plan
You must be on an Income-Driven Repayment plan (IDR). You can choose between four different IDR plans: (1) Income-Based Repayment; (2) Income-Contingent Repayment; (3) Pay As You Earn; and (4) Revised Pay As You Earn. Each of these plans have different ways of calculating your monthly payments, including how spousal income is considered. Use the Department of Education’s Repayment Estimator to estimate how much you will pay under each.
You could also qualify for PSLF under the 10-Year Standard Repayment Plan, but under that plan, you would pay off your loan before qualifying for forgiveness, so it’s not worth it.
Tip #5: Work full-time for a qualifying public service employer
First, you must make sure that you are working for a qualifying employer. A qualifying employer is a U.S. government organization at any level (federal, state, local, tribal) or a 501(c)(3) nonprofit. In some situations, a nonprofit that is not a 501(c)(3) could still qualify, but you should check with the Department of Education to make absolutely sure. A foreign government agency or intergovernmental organization does not qualify.
Second, you must work full-time. For PSLF, you are generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater. If you work part-time for multiple qualifying employers (e.g., two nonprofits), you could still qualify if your total time worked is at least 30 hours per week.
Tip #6: Choose FedLoan as your servicer and make 120 qualifying payments
When you first take out your student loan, you have multiple options for student loan servicers (Nelnet, Great Lakes, etc.). But if you’re thinking of pursuing PSLF, you should choose FedLoan from the start. FedLoan is the only servicer that works with PSLF. Unfortunately, FedLoan has received a lot of complaints, so you may be tempted to go with a different servicer and transfer the loan over later. But the transfer process can take months, and some repayment history may get lost in the transfer, so your best bet is to start with FedLoan. Make sure to document everything that you send in to FedLoan!
You need to make 120 qualifying monthly payments on your loan, which means you must pay the full amount due on your bill and no later than 15 days after your due date.
Tip #7: Certify your employment and income annually
In order to prove that you are working in public service, you will need to submit an Employer Certification Form (ECF). Both you and your employer need to sign the ECF. We suggest submitting the ECF once a year to make sure that your qualifying payments get counted. Some borrowers have tried waiting multiple years to sign the ECF, only to find that their employer went under and no one was available to sign.
Since you will be on an Income-Driven Repayment plan, you will also need to certify your income annually. Once you sign up for an IDR plan, you will get notifications from the Department of Education when it’s time to recertify.
Tip #8: Read up on PSLF
This blog post is just a short intro to PSLF. PSLF is a complicated program, and you need to work through your own individual situation. Make sure to read the Department of Education’s website on PSLF, but also read other reputable sources on PSLF. Check out our six essential questions and answers to know on Loan Assistance Repayment Programs (LARP) for law students. One additional useful resource is Summer, a social enterprise founded in partnership with Yale that helps borrowers navigate the student loan process.
Borrowing money for law school is a big decision. If you are planning on using PSLF, make sure you fully understand the program before you commit to taking out those loans.
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