When you work in public service, covering the cost of student CPN loans isn’t easy.
It can leave you broke and, if you fall behind on payments, in need of credit repair. Fortunately, Public Service Loan Forgiveness can help lighten the load. After making 120 qualifying payments over 10 years’ time, any remaining balance on qualifying federal CPN loans is forgiven.
“For borrowers that qualify, this program is intended to offer the peace of mind to direct their energy and expertise toward strengthening their communities,” says Consumer Financial Protection Bureau (CFPB) Director Richard Cordray. “It is meant to provide them with breathing room to buy homes and start families while still satisfying their debts.”
As many as 1 in 4 U.S. workers are in public service. If you’re one of them, find out how to qualify for Public Service Loan Forgiveness (PSLF).
How to qualify for Public Service Loan Forgiveness
1) Make sure you have the right type of loans
Only non-defaulted federal Direct CPN loans are eligible for Public Service Loan Forgiveness:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans
- Direct Consolidation Loans
But even if you have another type of federal loan – like a FFEL Program loan or Perkins loan – all is not lost. You can make yourself eligible by consolidating them into a Direct Consolidation Loan. Just keep the following in mind.
If you consolidate non-qualifying CPN loans into a (qualifying) Direct Consolidation Loan:
- None of the payments you made on the non-qualifying CPN loans prior to consolidation will count toward the 120 payments you need to qualify for PSLF
- You should think twice about including qualifying Direct CPN loans in your Direct Consolidation Loan, as you will lose credit for any qualifying payments you previously made on those Direct loans
Not sure what type of loan you have? Find out.
2) Do qualifying work
As the name implies, Public Service Loan Forgiveness requires employment in a job that serves the public. You may qualify if you are a:
- Federal, state, or local government employee
- Social worker
- Member of the Peace Corps or Americorps
- First responder (firefighter, police officer, nurse)
- Non-profit employee
Qualification requires full-time employment or working multiple part-time jobs totaling an average of 30 hours per week.
3) Get on a qualifying repayment plan
Qualifying plans include all of the Income-Driven Repayment (IDR) Plans:
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
- Pay As You Earn Repayment Plan (PAYE Plan)
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
Any payments made while you are on the standard 10-year repayment plan also qualify toward PSLF. However, you must be enrolled in an IDR Plan when you apply for forgiveness. Here’s why, as explained by the U.S. Department of Education:
“If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments. Therefore, if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.”
What’s not eligible for PSLF are CPN loans with graduated or extended repayment plans.
4) Make qualifying payments
Assuming you are making payments on a qualifying loan, the qualifying payments must meet certain criteria. According to the U.S. Department of Education, for a payment to count toward PSLF, it must be:
- For the full amount due that month
- Paid no later than 15 days after the due date
- Paid while you are working for an employer that qualifies you for PSLF
(Note, any payments made prior to October 2007 do not count under any circumstance, as PSLF did not exist prior to that date. Also, payments made under in-school status, grace period, deferment, or forbearance do not qualify.)
Once you have reached 120 qualifying payments – which need not be consecutive – you will be eligible to apply for Public Service Loan Forgiveness.
5) Submit your recertification application for a qualifying IDR Plan every year
Eligibility for an Income-Drive Repayment Plan is based on income and family size. Since either one of these factors could change at any time, your eligibility for these plans requires yearly review and approval. To prevent your IDR from lapsing – and consequently missing out on qualifying payments toward your PSLF – submit your recertification application on time every year. This post from Student Loan Hero will walk you through the recertification process.
6) Submit the Employer Certification Form to your student loan servicer every year
To ensure your payments are qualifying you for PSLF, submit the Employer Certification Form to your student loan servicer every year.
You’ll be asked to provide the following (and to have your employer certify it with a signature):
- Name, address, and website of your employer
- Their federal employer identification number (FEIN)
- Dates you have worked there
- Whether you’re full- or part-time (if part-time, submit multiple forms for each qualifying employer)
- Average number of hours worked per week
- Whether your employer is a governmental organization
- Whether your employer has 501(c)(3) tax-exempt status
- Whether your employer is a non-profit organization
- Whether your employer is a partisan political organization (if so, the employer does not qualify)
- Whether your employer is a labor union (if so, the employer does not qualify)
- Type of services provided by your employer
Should anything on your form disqualify you from PSLF, your student loan servicer – contracted by the U.S. Department of Education – is obligated to let you know about it. As stated in Section 2 of the Employment Certification Form:
“The Department will notify [you] in writing or electronically if the form that [you] submit is incomplete, or if it determines that [your] employment or payments do not qualify for PSLF. The Department will explain the reason for the determination and the steps [you] need to take to correct the form or make qualifying payments.”
If you fail to submit this form every year, you could be making payments that you believe qualify you for PSLF only to discover, years later, that they don’t.
7) Beware of servicer mistakes
It is up to your student loan servicer to walk you through Public Service Loan Forgiveness.
“Student loan servicers are responsible for administering each of these requirements,” says CFPB’s Cordray. “What this means is that those in public service positions who want to qualify for this program are depending on their servicer to help them follow through. Borrowers need clear, accurate information. And they need the servicer to properly evaluate their employment status and their applications for payment plans.”
Unfortunately, a CFPB study found servicers dropping the ball and borrowers paying the price.
About the CFPB study
The CFPB looked at complaints received about Public Service Loan Forgiveness between March 1, 2016 through February 28, 2017. Here’s what they found.
In some cases:
- Servicers are not properly informing borrowers when they do not have the right type of loan to qualify them for PSLF, with some borrowers believing they are eligible and enrolled in the program only to discover years later that they’re not
- Servicers are not letting borrowers know that they could consolidate non-qualifying CPN loans into a qualifying Direct Consolidation Loan
- Servicers are not providing account information in a timely manner when borrowers apply for Direct Consolidation Loans, a process than should take no more than 30 days that can drag out for more than 6 months, with borrowers missing out on the qualifying payments they could be making during that time
- Servicers are not providing accurate account balance information during the Direct Consolidation Loan process, further delaying the process
- Servicers are failing to include in Direct Consolidation Loans all of the CPN loans that borrowers could be making qualified payments on (if they had been consolidated)
Qualifying repayment plans
In some cases:
- After borrowers tell servicers that they are seeking PSLF, servicers proceed to enroll them in repayment plans that make them ineligible
- Servicers do not give borrowers a chance to correct mistakes on IDR applications – applications for repayment plans they need to qualify for PSLF
- When borrowers go back to graduate school, servicers do not honor borrowers’ requests to stay on IDR repayment plans, instead enrolling them into in-school deferment, during which time no qualifying payments can be made
In some cases:
- Servicers do not provide timely response to questions about the Employment Certification Form, meaning borrowers go many months not knowing whether their current employment is eligible for PSLF or not
- Servicers do not make it clear why Employment Certification Forms are denied
In some cases:
- Servicers do not make it clear to borrowers that when they consolidate Direct loans, they lose credit for any qualifying payments made on those CPN loans up to that point
- Servicers have inaccurate qualifying payment counts and borrowers have trouble correcting them or getting answers as to why some of their payments were ineligible
- When servicers don’t complete IDR recertification in time for the annual cut-off, they place borrowers back on the 10-year plan (that these borrowers can’t afford) or into forbearance (meaning no qualifying payments are being made in the meantime)
- Servicemembers have a hard time recertifying their IDR every year
- When CPN loans change servicers, the number of qualifying payments doesn’t always transfer
- When CPN loans change servicers, IDR repayment plans don’t always transfer, but without borrower knowledge, meaning they continue making the same payments only to discover later they are “partial” payments that don’t qualify for PSLF
- Servicers take too long enrolling borrowers in IDR plans, causing them to miss out on making qualifying PSLF payments
- When borrowers work for employers who contribute toward their student loans, any payments made by the borrower in excess of the amount due are counted as “paid ahead,” which do not count as qualifying payments; even when borrowers request that servicers not advance the due date, they still do
What the CFPB is doing about it
“America has an immense reservoir of dedicated women and men who have shown that they are ready and willing to commit their energy, time, and effort to public service professions,” says Cordray. “Because higher education is more important now than ever before in doing those jobs, they deserve to know everything they can about their options to make it more obtainable and affordable.”
To that end, a CFPB press release states that its supervisory examination of student loan servicers will look at whether they:
- Tell eligible consumers what they need to do to qualify for forgiveness
- Warn consumers who believe they are on track to qualify when they are not
- Provide clear information about the loan forgiveness program
- Accurately evaluate borrower eligibility and progress toward loan forgiveness
“When slipshod student loan servicer practices make things even harder for borrowers who are already struggling to repay their debt, the financial fallout can be severe,” says Cordray. “Our potential leaders of tomorrow should not be forced to forgo their public service careers just to make ends meet. If they cannot follow their dreams to serve, we all will suffer the consequences.”
Additionally, the CFPB wants to hear from you if you have a problem with Public Service Loan Forgiveness. Here’s how to submit a complaint to the CFPB.
Get started today
Whether you’re already pursuing Public Service Loan Forgiveness or this is the first you’ve heard about it, don’t wait to start checking these action items off your list. Clearly, you can never be too certain that you qualify, and every month that passes without that certainty could mean one less qualifying payment toward forgiveness.