The Public Service Loan Forgiveness (PSLF) program is a United States government program that was created under the College Cost Reduction and Access Act of 2007 (CCRAA) to provide indebted professionals a way out of their federal student loan debt burden by working full-time in public service. It is available to anyone who has a federal loan and is employed by a qualifying public or non-profit entity.
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Qualifying employers
Government organizations or agencies (Federal, State or Local), 501(c)(3) organizations as defined by the IRS, and some other types of not-for-profit organizations providing designated public services qualify for PSLF.
Moreover, the nature of the individual's job responsibilities is not a determining factor in whether the employment qualifies. Only the employer's status as qualifying or not determines whether the employment qualifies.
With limited exception, the individual must be directly employed by the qualifying employer. Therefore, government contractors will not qualify on the basis of their government contracts. Instead, they must independently be a qualifying employer. Another example is the national labs. Employees at national labs such as a Department of Energy or National Nuclear Security Administration Lab, do not qualify on the basis of managing a lab for the government; rather, the managing entity of the lab must be a qualifying employer.
Eligible loans
Any loan made under the Direct Loan Program can qualify for PSLF. In particular, Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Federal Direct Consolidation Loans qualify for PSLF.
Loans in the FFEL program or Federal Perkins Loans will need to be consolidated into Direct Loans. Private student loans are ineligible to be consolidated into a Direct Loan and thus cannot be discharged under the PSLF program.
Qualifying for forgiveness
An individual qualifies for PSLF after making 120 on-time, monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
Those interested in receiving PSLF should regularly submit the "Employment Certification Form" for PSLF. This form will be used by the Department of Education's contractor, FedLoan Servicing, to determine whether an individual's employment and payments qualify for the program.
Qualifying payment plans
Multiple plans are available to those interested in the PSLF program. Those wishing to seek forgiveness under the PSLF should make payments under one of the income-driven repayment plans, including Income Contingent Repayment, Income Based Repayment, Pay As You Earn, or Revised Pay As You Earn.
Borrowers who choose the ten-year standard repayment plan must make 120 payments while being employed in a public service organization (or organizations), after which the balance is forgiven in full and is not liable for taxation.
Future reduction proposals
For his 2015 budget proposal to Congress, President Barack Obama proposed capping Public Service Loan Forgiveness at $57,500 for all new borrowers. Analysis at the website Educated Risk, however, details the difficulty of modifying PSLF: The 2016 Republican budget resolution proposes to eliminate the PSLF program to all new student loan borrowers. A recent GAO report found that the cost of loan forgiveness has been underestimated, leading many commentators to speculate that a new Republican administration and Congress will take steps to curb the problem.