If you get a job with a governmental agency or not-for-profit organization and you have federal student loan debt, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) program.
Currently, if you qualify for this program, and make 120 payments under a qualifying repayment plan while working full time for an employer that falls within PSLF parameters, then the government will forgive the remaining balance of your Direct Loans.
List of Public Service Jobs
You may be asking: What is a public service job? What type of job would qualify me for PSLF?
According to the office of Federal Student Aid, the answer to those questions is that qualifying public service employment is not about your specific role, it’s about who employs you. Their list of public service organizations includes:
• 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
• other types of not-for-profit organizations that are not tax-exempt under Section
• 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
• serving as a full-time AmeriCorps or Peace Corps volunteer
Bullet point three mentions jobs that have a primary purpose of providing “certain types of qualifying public services.” To have the potential to qualify for the PSLF program under this option, you’d need to work for an employer that has at least one of the following as a primary purpose:
• Emergency management
• Military service
• Public safety
• Law enforcement (this includes “organizations that are publicly funded and whose principal purposes include crime prevention, control or reduction of crime, or the enforcement of criminal law”)
• Public interest law services (this refers to “legal services provided by an organization that is funded in whole or in part by a local, state, federal, or tribal government”)
• Early childhood education (this includes “licensed or regulated child care, Head Start, and state funded pre-kindergarten”)
• Public service for individuals with disabilities
• Public service for the elderly
• Public health (this includes “organizations that employ nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics”)
• Public education (this includes “services that provide educational enrichment or support directly to students or their families in a school or a school-like setting”)
• Public library services
• Other school-based services
There are a few types of employers whose employees do not qualify for PSLF. They are:
• Labor unions
• Partisan political organizations
• For-profit organizations, including for-profit government contractors
• Not-for-profit organizations that:
◦ Are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code
◦ Do not provide a qualifying public service as their primary function
You can also use a tool provided by StudentLoans.gov to see if you potentially qualify for forgiveness under the PSLF program.
If PSLF doesn’t work for you,
check out student loan
refinancing with SoFi.
Why You Might Choose the Public Service Path
Working in public service can feel wonderful, knowing that you’re helping to make your community a better place.
Although you can accomplish that by working a for-profit job and also volunteering for a cause that matters, when you work in one of the public service jobs, this is what you’re doing as your vocation, full time—and you can still choose to volunteer for causes you care about on the side.
Pros and Cons of the PSLF Program
While there are advantages to going the public service route and potentially qualifying for PSLF, it is not a guarantee that you will qualify and that it will be worth it in the long run.
The main advantage to PSLF is that after a set time, the balance of your Direct Loans could be forgiven. And the forgiven amounts in this program aren’t typically considered income, which would mean you wouldn’t be taxed on the forgiven amount—that isn’t true of all of the loan forgiveness programs.
You may also pay less on your federal loans each month because you must use an income-driven repayment plan to be eligible to receive PSLF, and that can help with cash flow.
However, as we mentioned above, you may qualify only if you work for certain types of employers. And to take advantage of PSLF, you’ll need to work full-time for a qualifying employer for 10 years and make 120 qualifying payments—and make sure, every year (or if you switch employers), you submit an Employment Certification Form. You also may need to jump through additional hoops to qualify; PSLF is not awarded automatically.
It’s also worth considering that if you work for a for-profit employer, you might make more money than you would at a public service job, which could allow you to pay off your student loan debt more quickly. If you aggressively paid off your student loans in fewer than 10 years, it’s possible that you could pay less in interest than if you made 120 payments under this forgiveness program.
And, if you enroll in the program but then stop working for a qualifying employer, you could end up with a larger outstanding balance because of accumulated interest from the income-driven repayment plan (more loan payments means more interest payments).
A New York Times article, published in May 2018 (“Public Servants Do Get Student Loan Forgiveness. Meet One of the First.”) includes stories from people who struggled to first qualify for the program, and then to get “coherent status updates.”
One doctor mentioned in the article handed her paperwork off to her mother, an attorney, and neither of them could navigate the process successfully. Another person who is struggling to glean the benefits of the program is an attorney who actually works for the Department of Education, which administers the program.
Another challenge is that the PSLF program focuses only on federal student loans so, if you also have private ones, they aren’t eligible for PSLF, even if you work in one of the qualifying public service jobs. Getting loan forgiveness for private loans is highly unlikely, although you may be able to talk to your private lender to obtain more temporary relief measures, such as loan deferment or forbearance if necessary.
In fact, the only times when loan forgiveness seems to happen with private loans is typically under exceptionally dire circumstances, such as if the borrower becomes completely disabled or dies. Even then, there isn’t a formal process for forgiveness.
What to Do If PSLF Isn’t Right for You
So, what do you do if you don’t qualify for PSLF or if you have private loans? One option is to refinance your student loan debt. If you have a good credit history and solid income potential (among other important financial factors), then you might qualify for a lower interest rate, which can reduce the amount of money you’d pay over the life of the loan.
Some lenders, like SoFi, will consolidate federal and private student loans, and then refinance them into one loan. This means that your new lender would pay off all of your old loans, and then, based on terms you agree to, issue a brand new loan to you.
If you refinance your federal loans with a private lender, you would then lose the potential for any federal benefits, including PSLF and income-driven repayment plans, so it’s important to do your homework first: consider your short-term and long-term needs; make sure you’re getting the lowest rate possible; ensure that the lender has the loan programs (fixed/variable) and terms you need; check to see if you’ll have to pay any fees; see what benefits you can gain with your new lender; and find out if the lender you’re considering will first do a soft credit pull before you apply (so you can see what rates you qualify for) that won’t have the potential to affect your credit rating.
Student Loan Refinancing with SoFi
It’s important to remember that you should review all federal repayment options first before refinancing with a private lender. If you do choose to refinance with a private lender, consider SoFi.
At SoFi, you can consolidate federal student loans with private ones, refinancing them into one convenient loan. Plus, there are no hidden fees. And SoFi offers member discounts and career counseling, among other potential benefits. You can use SoFi’s student loan refinancing calculator for an estimate of how much you might save.
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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.