Consumer IQ

Do You Qualify for Public Service Student Loan Forgiveness?

Public Service Loan forgiveness is a program for government and public service workers to earn federal student loan forgiveness after 10 years of repayment under select repayment plans for the remainder of their loan balances. However, in order to earn student loan forgiveness, you must follow strict eligibility guidelines. According to the Department of Education, an application will soon be available for you to keep track of your progress towards earning student loan forgiveness.

Does your job qualify?

You may look at your workplace with a glance and assume you’re not working for the government or a nonprofit organization, but you may be wrong.

According to the public service loan forgiveness eligibility guidelines, employees of the following organizations will be considered for the program: private hospitals and universities, public interest law services, and emergency management. Also included are certain specific occupations and some non-profit employees.

What kind of loans do you need?

Your loans must be consolidated into Direct Loans. If you have at least one loan with Direct Loans and a loan that’s with a private bank under the federal student loan system, you may get the bonus of a small interest rate discount when you consolidate. (Check out Will Obama’s Executive Order on Student Loans Help You?)

Which payments count?

You must make 120 payments (10 years) before your student loans qualify for forgiveness. Your payments must be made under the income-based, income-contingent or standard repayment plans.

The good news: Your payments started counting if you worked in a public service field after July 1, 2007. It’s possible that you only have to send in checks or watch your money slip away from your bank account via direct debit for 6 more years. It also doesn’t matter how old your loans are. If your loans are 10 years old, and you still owe after 10 years of making payments on a qualifying repayment after July 1, 2007, your remaining balance is forgiven.

The bad news: Your payments only started counting in 2007 if your loans were held by Direct Loans and you meet all other conditions. Second, if you don’t qualify for a reduced payment under income-based or income-contingent plans, you’re  paying off your loan in 10 years anyway. Thus, your forgiveness amount is $0.

Does it matter how much you owe?

No. You could owe $10,000 or $150,000 and still have your remaining balance forgiven, provided you meet all conditions.

What if you return to school or receive an allowed payment reprieve?

Anything you pay while on an official payment reprieve doesn’t count, but you can resume counting the 120 payments needed while working in public service afterwards.

How do I sign up?

Although there will be a form to keep track of your payments in January, there isn’t a formal contract to fill out when you begin repayment. You need to verify with Direct Loans that your job title and place of employment qualifies. You must then make sure all your loans are with Direct Loans and that you have selected an appropriate repayment program. When you fulfill your agreement, you fill out the paperwork for loan forgiveness.

When in doubt:

Once you know you want to apply for public service loan forgiveness, make sure you call Direct Loans whenever you have any questions. You won’t get a warning letter in the mail if you violate terms of the program because you don’t sign a contract until you receive your loan forgiveness. You don’t want to give up thousands of dollars of student loan forgiveness because of one misstep.

Reyna Gobel is a freelance journalist who specializes in financial fitness. She is also the author of Graduation Debt: How To Manage Student Loans and Live Your Life.