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Is The PSLF Program Worth It? Here’s What You Need To Know

PSLF Program

You can find several reports out there showing how difficult it is to qualify for the PSLF program. Some borrowers believe that their student debt will disappear after ten years of working for a nonprofit organization or the federal government. 

However, reports indicate that only 96 people have received student loan forgiveness after the first candidates qualified for the PSLF program. That’s only one of approximately 30,000 candidates. So what’s happening? Is the Public Student Loan Forgiveness (PSLF) worth it? 

This guide will show you everything you need to know about this loan forgiveness. So with that said, let’s begin. 

What Is The PSLF Program? 

Public Service Loan Forgiveness is a government program that forgives student loan debt for employees in specific nonprofit and public jobs. After you’ve made 120 qualifying payments while working for an approved nonprofit, it cancels the remaining balance of your federal student loans.

For the most part, this means that you’ll have to work for ten years before PSLF can forgive your debt. But, of course, after ten years of payments, your loan sum may be significantly lower than when you began. 

However, PSLF forgiveness could still be a significant financial help if you owe student loans. But there are some things you should know about the PSLF. 

PSLF Doesn’t Apply To All Students 

Only federal government direct loans are eligible, excluding non-direct federal and private student loans.

Not Every Student Receives Payment Of Zero Dollars

One of the best aspects of the PSLF program is that you can choose an income-based repayment plan with a lower payment each month than the standard plan.

Some borrowers’ payments drop to zero because they have massive student debt and low income working on PSLF. But the less popular advantage is that you can make qualifying payments even with zero dollars. 

How Difficult Is It To Qualify For The PSLF Program? 

After ten years, employees in the public service should be eligible for student loan forgiveness. While there is some red tape to work through and some concerns that may need to be resolved, loan forgiveness is achievable. 

Is there anything in the PSLF that makes having the loans forgiven difficult? Yes. As the earlier reports of a 99% rejection rate suggested, is it nearly impossible? Let’s find out.

Is The PSLF Program Difficult To Qualify?

There are three main requirements for Public Service Student Loan Forgiveness:

  • You must have federal direct loans to be eligible for forgiveness. Some government loans are not direct loans. But you can consolidate them into a direct loan to make the loans eligible.
  • Employer Eligibility. Not all employers are considered public service. Borrowers who work for the government or a 501(c)(3) organization should be able to prove their eligibility.
  • Qualified Repayment Plan. PSLF isn’t available for all federal repayment programs. Income-Based Repayment, PAYE, and REPAYE are the most prevalent PSLF qualified plans.

If you meet these three requirements and make 120 payments, you qualify to have your federal loans forgiven.

If you opt for the PSLF program, you should complete an annual employer certification form. The form indicates that you work for a qualified employer. But it also initiates a check to ensure that they have qualified loans and that they’re on the right repayment plan. 

Why Were The 99% Borrowers Rejected? 

Borrowers have been turned down for a variety of reasons. But you can avoid most of them. So let’s go through them. 

Applications That Are Missing Information

Applicants who submitted incomplete applications accounted for a surprising percentage of rejections. A total of 28% of the first batch of applications were turned down due to incomplete or missing information.

This makes it easier to keep track of a borrower’s progress toward the required 120 payments. But unfortunately, most borrowers apply in error to keep track of their progress rather than get credit for the whole ten years. 

Luckily, you can use the PSLF Help Tool recently developed by the U.S. Education Department to help you complete any necessary documentation. 

Expectant Applicants

Some applicants know their loan debts won’t be forgiven, yet they apply. However, given the numerous errors in loan servicing, this strategy makes sense. These borrowers hope that their student loans will be forgiven, knowing that they’re not eligible. 

Inadequate Student Loan Payments 

Borrowers who have been accepted recently must have followed the correct repayment plan when PSLF began. And also must have made no pauses in their public sector work. 

It’s not uncommon for borrowers to miss some months of payments that would otherwise be certified due to problems completing income-driven repayment programs. So, many of the rejected applicants may be borrowers who have made nearly 120 payments but are still short.

Filling The Wrong Form

Most borrowers don’t know that the employment certification and loan forgiveness forms are almost the same. Borrowers who apply for PSLF are usually recommended to fill out an annual employer certification form. 

Wrong Loan Repayment Plan

Many PSLF applications would be denied due to the borrower enlisting in an ineligible repayment plan. Extended and graduated repayment plans will be the most frequent ineligible repayment programs. 

The good news is that there is a temporary legislative fix in place to assist these loan borrowers. Here’s where you can learn more about the repair.

Ineligible Student Loans

If a loan isn’t qualified for PSLF, it can usually be consolidated through the Direct Loan Consolidation program. But, on the other hand, that borrower will have to start over on their journey to 120 payments. 

This will become less of a concern as time goes on, as direct government loans accounted for only a small percentage of all loans given in 2007, but they now account for practically all new loans.

Factors That Will Make The PSLF Program Improve Its Success Rate 

PSLF Program

There will be numerous significant events in the coming years that will dramatically improve the PSLF rejection rate. Here are some of them: 

The Widespread Availability Of The Employment Certification Form

We all know how crucial the ECF is for people watching their progress toward PSLF. It’s designed to keep you from having problems like this when you apply. 

Beginning in 2022, borrowers will have had the ECF for ten years. Because there’ll be no surprises when you apply, the mistake rate for applications will be significantly reduced.

Direct Loans Are Now The Most Common Student Loan Type

Beginning in 2010, the FFEL Program was phased out, and Direct Loans became the most common route for students to borrow. That’ll be big when PSLF candidates have suitable loans and don’t have to do anything unusual to qualify.

The IBR Becomes Widely Available

This happened at the end of 2009, as far as we know. As a result, PSLF borrowers in 2019 would have been able to employ IBR rather than the far more complicated ICR. This will significantly increase the number of eligible borrowers.

If you weren’t expecting PSLF because of negative press, you should reconsider as 2020 ushers in the first somewhat significant group of debtors who will be eligible for tax-free forgiveness. In addition, more borrowers will commit to the 10-year process of qualifying for the program once they see how it works.

Pros And Cons Of The PSLF Program 

Pros 

If You Already Planned To work At A Nonprofit 

While some people consider the public sector restrictive, others regard it as a calling. If you work as a teacher or a social worker, it’s only natural to pursue student loan forgiveness. Why not take advantage of the perks since you’ll be working in a qualifying position?

PSLF Program Is Ideal If You Have High DTI

Lawyers, doctors, and other high-profile professionals frequently graduate with student loan debts in the thousands of dollars. 

Typically, their salaries are sufficient to satisfy their debt obligations. However, psychologists, teachers, and social workers, for example, don’t make as much money, even though they generally require multiple degrees to practice.

If you make $60,000 a year and owe $120,000 in student loans, PSLF may be a good option for you. You could save more money for retirement, a down payment on a home, and other savings goals by lowering your monthly student loan payments.

Payments Under The PSLF Program are cumulative.

Fortunately, the 120 qualifying payments every month don’t have to be made simultaneously or by the same employer. So you may work for three years at a nonprofit, then a couple of years in the private sector, and still be eligible for PSLF. 

This feature promotes labor mobility, but only inside government and nonprofit organizations.

Keep in mind that the PSLF is not a payment plan. Payment options include PAYE REPAYE and IBR. You may keep making payments and switching between part-time and full-time employment as you gradually build credit toward the required ten years of a full-time job. 

If you don’t qualify for Public Service Loan Forgiveness, you might be able to acquire IDR forgiveness on the same payment schedule for 20 to 25 years. But, naturally, if you aren’t participating in PSLF, you will owe taxes on the forgiven debt.

You owe no taxes for forgiving if you use PSLF.

Cons 

Your Salary Options Are Limited

PSLF has a terrible reputation since students must work for at least ten years in the nonprofit or government sector. They don’t have to stay in the same job for the duration of the program, but they must work for a qualifying employer.

Regrettably, these professions virtually always pay less than those in the private sector. Therefore, it’s a good idea to analyze the statistics to determine if you’re genuinely losing money by trying for PSLF if you might earn a significant amount more working in the private sector.

If You Can’t Save Much, Don’t Bother.

Working toward PSLF takes ten years of dedication, a decade of making sure your employer qualifies, and a decade of completing the necessary paperwork consistently and precisely.

It’s a complete and quite confusing system, so it might not be worth the trouble unless you’re going to save a significant amount of money. 

If you still plan to pursue the PSLF program, there are some things you need to know. We’ll go through them in the next section. 

What You Need To Know Before Find A Public Service Job 

What Is A Public Service Job? 

Working in the public sector is a definite way to qualify for federal loan forgiveness if you want to pay off your student loan debt. You can also be eligible for state and employer-sponsored repayment aid programs.

A public service job is employment with the government or a nonprofit organization, and it encompasses a wide range of positions and organizations. Below are some examples: 

  • Public health and military services jobs 
  • Public service law and law enforcement positions 
  • College, university, and public school jobs, and that includes teaching and administrative roles
  • Peace Corps and Americorps 
  • State, federal, tribal, and local government agencies
  • Other positions in the 501 (c) (3) nonprofit organizations 

Employers who are not nonprofits don’t qualify. For instance, political organizations and labor unions are not included in this category. In addition, working for a company with a government contract that’s not a PSLF-eligible employer will also disqualify you.

So before you accept a job, consult its human resources department if the company is PSLF-eligible. You could also file a PSLF Employment Certification Form through the Department of Education to double-check its eligibility.

Questions To Ask Before You Work In Public Service 

PSLF Program

How Much Will You Earn? 

Your pay is determined by your employer and the type of work you do. Therefore, the ratio of your wage to your student loan debt is crucial. If your loan balances are high compared to your wage, searching for public service positions could be beneficial. 

And that’s because you could pay less under an income-driven repayment plan and have more forgiven through the PSLF program.

Find out how much you’ll earn and how it affects your student loans in the future. 

Find Out If Your Salary Your PSLF eligibility. 

The amount of money you make doesn’t influence whether or not you are eligible for PSLF.

However, on an IDR plan, you must make 120 monthly payments over ten years; thus, your income level may be a decisive factor in whether you have a lingering loan debt that will be forgiven at the end of ten years.

Do Your Student Loans Qualify For The PSLF Program? 

Your student loan may not be qualified for PSLF, even if your potential public service position is. Fortunately, disqualifying federal student loans (Perkins and FFEL) can be consolidated into a Direct Consolidation Loan that is PSLF eligible.

Other Alternatives To The PSLF Program 

If you don’t meet Public Student Loan Forgiveness requirements, look for other options. Below are some of the alternatives you can consider: 

Look Into Other Loan Forgiveness Options. Although PSLF is one of the most popular federal forgiveness programs, it’s not the only one. However, be wary of loan forgiveness scams as you search.

Maintain Your Income-Driven Repayment Plan. After 20 or 25 years, depending on the plan, all four IDR plans will forgive your outstanding sum. Unlike PSLF, however, the forgiven student loan amount is taxable.

Refinance Your Student Loans. Student loan refinancing can help you save money and get out of debt sooner by lowering your interest rate. On the other hand, federal loans are no longer eligible for forgiveness programs or IDR plans once they’ve been refinanced. To qualify, you must have good credit and a stable financial situation.

In all, don’t expect that the PSLF will become simple anytime soon. On the contrary, it can be complex to navigate, but student loan forgiveness is still possible. 

Final Thoughts 

So should you pursue the PSLF program? The answer depends on you. Public Student Loan Forgiveness could be a bonus to pursuing the career you’ve always wanted if you’re naturally drawn to the government or nonprofit organization. PSLF, on the other hand, may not be enough to begin a career in public service if you are burdened by federal student debts and are open to any work. So go through this guide as you weigh your options. And remember that there are other alternatives to student loan forgiveness. So cover each area before you make your final decision.