(FAQs) FOR PUBLIC SERVICE LOAN FORGIVENESS
1. What Direct Loan Program repayment plans qualify under the PSLF Program?
The 120 required qualifying payments must be made under one or more of the following Direct Loan Program repayment plans:
• The IBR Plan
• The Pay As You Earn Repayment Plan
• The ICR Plan
• The 10-Year Standard Repayment Plan
• Any other Direct Loan repayment plan, but only payments that are at least equal to the monthly payment amount you would be required to pay under the 10-Year Standard
2. Are loan amounts forgiven under PSLF considered taxable by the IRS?
No. According to the Internal Revenue Service (IRS), student loan amounts forgiven under PSLF are not considered income for tax purposes. For more information, you should check with the IRS or your tax advisor.
3. If I have Federal Family Education Loan (FFEL) Program loans, Federal Perkins Loan (Perkins Loan) Program loans, or Health Professions Student Loans, can I take advantage of PSLF?
PSLF is available only for Direct Loans. However, borrowers with FFEL Program loans, Perkins Loan Program loans, or Health Professions Student Loans who are interested in PSLF may consolidate those ineligible loans into a Direct Consolidation Loan (which is eligible) and then make 120 qualifying payments on the Direct Consolidation Loan while employed by a qualifying public service organization to receive PSLF. Note that payments you made on the FFEL Program loans, Perkins Loans, or Health Professions Student Loans before they were consolidated into the Direct Loan Program do not count toward the required 120 qualifying payments.
4. Are private, nonfederal education loans eligible for PSLF?
No. Private and other nonfederal education loans are not eligible for PSLF, nor can they be consolidated into a Direct Consolidation Loan.
5. Are Direct Loans that are in default eligible for PSLF?
No. Defaulted Direct Loans are not eligible for PSLF. However, a defaulted loan may become eligible for PSLF if you consolidate or rehabilitate the loan, and then make qualifying PSLF payments on the new Direct Consolidation Loan or the rehabilitated loan.
To consolidate a defaulted Direct Loan, you must first make satisfactory repayment arrangements on the loan. You can do this either by making three consecutive, voluntary, on-time, full, monthly payments on the defaulted loan prior to consolidation, or by agreeing to repay the new Direct Consolidation Loan under the ICR Plan, Pay As You Earn Repayment Plan, or the IBR Plan. Any payments made as part of the satisfactory repayment arrangements prior to consolidating your defaulted loans do not count toward the 120 qualifying payments for PSLF.
To rehabilitate a defaulted Direct Loan, you must contact the holder or servicer of the defaulted loan to establish a rehabilitation agreement under which you will be required to make nine on-time, voluntary, full, monthly payments within 20 days of the scheduled due date within 10 consecutive months.
6. I consolidated my Direct Loans after I made qualifying monthly payments on those loans while working in a qualifying public service organization. Do the payments made prior to the consolidation count toward the 120 payments required for PSLF, or will I be required to make 120 additional payments on the new Direct Consolidation Loan?
You will need to make 120 qualifying payments on the new Direct Consolidation Loan. Qualifying payments that you made on Direct Loans prior to consolidation do not count toward the 120 required payments for PSLF.
7. What are the specific loan repayment requirements for loan forgiveness under the PSLF Program?
You must have made 120 separate, on-time, monthly payments (after October 1, 2007) on the Direct Loans for which you are requesting PSLF forgiveness while employed full-time by a public service organization. Each of the monthly payments must have been made for the full scheduled installment amount and no later than 15 days after the scheduled payment due date. Each payment also must have been made under a qualifying repayment plan
8. Will any of the payments I made on my Direct Loans prior to October 1, 2007, count toward the required 120 payments for PSLF?
No. Under the law that established the PSLF Program, only payments made after October 1, 2007 may be counted toward the required 120 separate, on-time, monthly payments for PSLF.
9. Must the required 120 separate, monthly payments for PSLF be consecutive payments?
No. The payments do not have to be consecutive payments; but you must be employed by a qualifying public service organization at the time you make each of the 120 qualifying payments.
10. If I pay more than my scheduled monthly student loan payment amount, can that additional amount be counted as more than one qualifying payment for PSLF? For example, if I make a single payment that is equal to three monthly payments, will that amount be counted as three separate payments toward the required 120 separate monthly payments?
No. You must make 120 separate monthly payments. Lump sum payments that exceed the scheduled payment amount do not count as separate payments. There is a limited exception to this requirement for Peace Corps and AmeriCorps volunteers.
If you make a payment that exceeds the scheduled payment amount, and the excess amount is equal to or greater than your scheduled monthly payment, the excess amount will be treated as being intended to cover one or more future payments unless you request that the excess amount not be treated as being intended for future payments. Depending on the size of the excess payment, it is possible that your next due date could be a month or more in the future from the date you made the extra payment amount. If you make subsequent payments while your account is “paid ahead”, those payments will not count toward PSLF.
If you request that your extra payment amount not be applied to future scheduled payments, the excess amount will not advance the due date of your next scheduled payment, and any subsequent monthly payments you make (if otherwise qualifying) will count toward the required 120 payments
11. If I return to school and qualify for an in-school deferment on my Direct Loans that are in repayment, can I decline the deferment and make qualifying PSLF payments while I am in school?
Yes. You may decline an in-school deferment on your loans that are in repayment status and make payments on those loans while you are in school. If you decline your in-school deferment, any qualifying payments you make will count toward the 120 required payments for PSLF. Remember, you must be employed full-time by a public service organization while you attend school for your payments to qualify for PSLF.
12. May I waive the six-month repayment grace period on my Direct Subsidized Loans and Direct Unsubsidized Loans and begin making qualifying PSLF payments early?
No. Under the law that governs the Direct Loan Program, you may not waive the six-month grace period on a Direct Subsidized Loans or Direct Unsubsidized Loan that begins after you are no longer enrolled in school at least half-time. Direct Subsidized Loans and Direct Unsubsidized Loans only enter repayment at the end of the six-month grace period. Any payments made on a loan during the grace period, when you have no legal requirement to make payments, will be applied to reduce outstanding interest or loan principal and will not count as PSLF-qualifying payments.
13. If my scheduled monthly payment under IBR, Pay As You Earn, or ICR is zero, does each month during which my required monthly payment is zero count towards the required 120 separate, monthly payments?
Yes. Any month when your scheduled, monthly payment under IBR, Pay As You Earn, or ICR is zero will count toward your required 120 qualifying payments if you are also employed full-time by a qualifying public service organization during that month.
14. Do partial payments under a qualifying repayment plan count towards eligible monthly payments?
If you make multiple partial payments that total at least your full scheduled monthly payment amount, and you make those payments no later than 15 days after the scheduled payment due date for that month’s payment, the series of partial payments will count as a one single qualifying, monthly payment for PSLF.
15. I am in the process of rehabilitating a defaulted Direct Loan. Will my full, on-time, voluntary payments that I make as part of my loan rehabilitation agreement count toward the required 120 payments for PSLF?
No. Payments made on a defaulted Direct Loan under a rehabilitation agreement are not payments that are made under a PSLF-eligible repayment plan and therefore are not PSLF-qualifying payments.
16. What kind of documentation do I need to keep to show that I worked for a qualifying PSLF employer while making the required 120 payments on my Direct Loan(s)?
The PSLF servicer will confirm that your employer is a qualifying public service organization based on the information provided on the Employment Certification form that you submit. In some cases, the PSLF servicer may require additional documentation about your qualifying employment. Therefore, you should keep records that identify your employer, demonstrate that your employer meets the definition of a public service organization, show your dates of employment with that employer, and demonstrate that you were a full-time employee.
17. What should I do after I have made all of the 120 qualifying payments?
You must submit an application for Public Service Loan Forgiveness.
Please note that the earliest any borrower could qualify for Public Service Loan Forgiveness is October of 2017. Therefore, there is no application for forgiveness yet. The application will be released closer to the time when the first borrowers will qualify for forgiveness.
18. When I have made my 120th qualifying payment while working for a qualifying public service organization and am ready to submit my loan forgiveness application, do I need to submit any other documents to the PSLF servicer?
Yes. Even if you had submitted Employment Certification forms to ED’s PSLF servicer during the entire period when you were making your 120 qualifying payments, you will need to submit one additional Employment Certification form to verify your current full-time employment with a qualifying public service organization at the time you submit your PSLF application.
If you did not submit any Employment Certification forms, or if you did not submit forms for some of your employers or for only some of the time, you will need to provide one or more Employment Certification forms, as necessary, to cover your entire period of qualifying public service employment (including your current employment) at the time you submit your loan forgiveness application.