Public Service Loan Forgiveness Program & Special Direct Consolidation

The Public Service Loan Forgiveness Program (PSLF) was created to encourage individuals to enter and continue to work full-time in the public service sector. Under this program, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under qualify repayment plans while employed full-time by qualified public service employers.

The Public Service Loan Forgiveness Program was enacted as part of the College Cost Reduction and Access Act of 2007. Public Law 110-84 was created September 27, 2007 and the final law was published October 28, 2011.

Public Service Loan Forgiveness Program Fact Sheet

Qualified Employment

Full time employment (30 hours per week or more) in any position within a public service organization qualifies for the PSLF program. Full time Americorps or Peace Corps positions also qualify. Staff at for-profit contractors working for public service organizations do not qualify.

Public Service Organizations

The following organizations qualify for public service employment eligibility:

A federal, state, local or tribal government organization, agency or entity (includes most public schools, colleges and universities)
A public child or family service agency
A non-profit organization under section 501(c)(3) of the IRS Code that is exempt from taxation under section 501(a) that provides a public service (and is not a labor union or a partisan political organization)
Working at a non-profit that you have established is eligible for PSLF, as long as it falls under section 501(c)(3) of the IRS Code.

Full Time Employment

To qualify for the PSLF program you must work an annual average of at least 30 hours per week. (For a contractual or employment period of at least 8 months, an average of 30 hours per week.)
You can work at more than one place of employment, but you cannot combine hours from separate employments to reach the 30 hours per week required. If you work at more than one public service job, one must average 30 hours per week to qualify for PSLF.
Vacation or leave time (e.g. Family or Medical Leave Act) is not considered in determining average hours on annual or contractual basis.
If there is a gap in your employment or if you work at a employer for a time that does not qualify as a non-profit organization, you will be required to continue making payments toward your loan, but these payments will not count toward the 120 required payments for the PSLF program.

Eligible Loans for PSLF Program

Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans
Direct Consolidation Loans

Special Direct Consolidation*

Your undergraduate loans may not be federally held, which means that they are not eligible for loan forgiveness. Loans held by other lenders may be eligible if they are consolidated into a Direct Consolidation Loan, including:

FFEL Subsidized or Unsubsidized Stafford Loans
FFEL PLUS Loans (for Parents and Graduate/Professional Students)
FFEL Consolidation Loans (excluding joint spousal consolidation loans)
Federal Perkins Loans

If your balance on undergraduate loans is just a few thousand dollars, you may not want to consolidate them to avoid prolonging repayment or an increased interest rate (undergraduate loan interest rates are lower than graduate loan interest rates). If you have a larger amount of loans from previous education, it may be advisable for you to take advantage of this Special Direct Consolidation program. Contact Special Direct Consolidation for advising about what would be best for you and your student loans.

Keep in Mind:

If you have private loans or Bank loans, they are not eligible for Special Direct Consolidation.
Parents with PLUS Loans for Parents may consolidate their Federal PLUS Loans and/or Direct PLUS Loans and pay under Income Contingent Repayment. Parents must qualify based on their own public service, not the student for whom they borrowed
If you and your spouse both have student loans you cannot consolidate them into one lump sum. You consolidate them separately and you would have to qualify for PSLF independently.
Even if you do not end up working in the public service sector, it may still be beneficial for you to take advantage of Special Direct Consolidation. All of your loans would be federally held under Direct Loans, which means you only have to make one monthly payment to one lender.
Consolidating your loans will increase your overall loan balance, which would make your IBR or ICR payment lower and your potential balance for forgiveness higher. Additionally, there may be some interest rate reduction incentives available to you.
Most graduate school loans were automatically transferred to the Direct Loan program. You can find a complete list of your loans and lender data online through the National Loan System (NSLDS).
Special Direct Consolidation ends June 30, 2012. Check to see if you are eligible and apply today!

Eligible Repayment Plans

Income-Based Repayment Plan (IBR)

IBR is a repayment plan for all major types of federal students loans that caps your required monthly payment at an amount intended to be affordable based on your income and family size.

Your monthly payment may be adjusted annually. The maximum repayment period may exceed 10 years. If you qualify for IBR over a specified period of time (typically 20 years), you may qualify for cancellation (forgiveness) of any outstanding balance on your loans - even if you are not a part of the PSLF program.

Income Contingent Repayment Plan (ICR)

ICR gives you the flexibility to meet your loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Loans.

Under the ICR plan you will pay each month the lesser of the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income or 20% of your monthly discretionary income.

Standard Repayment Plan with a 10-year Repayment Period

With the standard plan, you'll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you'll have up to 10 years to repay your loans.

Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For the same reason—the 10-year limit on repayment—you may pay the least interest.

Borrowers interested in the PSLF are advised to enroll in IBR or ICR repayment plans because these plans are most likely to leave an outstanding balance to forgive after 120 payments. If you are enrolled in a standard repayment plan your entire balance (including interest) will be paid off in 10 years and there will be nothing left to forgive. If you IBR or ICR schedule monthly payment amount is $0, those months still count toward the 120 payments.

Qualifying Payments

Must have been made after October 1, 2007
Must be on time (no later than 15 days after the scheduled due date)*Enrolling in auto-pay is recommended as it ensure that payment are made on time. Incentives for enrolling in auto-pay, such as interest rate reductions, often apply.
Must be made each month (e.g. paying for two months worth of payment in one lump sum will only count as one payment)
Must satisfy the monthly installment that is due (e.g. schedule payment must be paid in full)
120 PSLF payments must be made, but they do not have to be consecutive (e.g. you may have a gap in employment or work at a for-profit organization for a period of time).
Payments made on a loan that is in default status do not qualify

Forgiveness

To have any remaining balance on your Direct Loans forgiven under the PSFL program you must:

Make 120 on-time, full, scheduled, monthly payments on your Direct Loans. Only payments made after October 1, 2007 qualify.
You must make those payments under a qualifying repayment plan.
When you make each of those payments and at the time forgiveness is requested and granted, you must be working full-time at a qualifying public service organization.
The loan cannot be in default

FedLoan Servicing

In November 2011, FedLoan Servicing was awarded contract to service eligible borrowers for Public Service Loan Forgiveness (PSLF). They provide customer support, process applications and forms related to PSLF eligibility, and track qualifying payments.

Steps to Forgiveness:

Review PSLF Program Requirements.
Upon employment in a public service organization, complete and submit a Employment Certification Verification Form.
When your employer is approved you will receive notification and all eligible loans will automatically be transferred to FedLoan Servicing. If applicable, the borrower will receive notification of qualified payments made with to all prior lenders.
Log into your FedLoan Servicing account to see a running tally of qualified payments.
You will be reminded annually, via email, to submit a new Employment Verification Form verifying employment

Resources

Examples

These examples are designed to show the benefit of working at a public service organization and taking advantage of the Public Service Loan Forgiveness Program.

Eligible Loan Debt: $23,000 (Unsubsidized at 6.8%) Adjusted Gross Income: $25,000 (Increasing at 4% annually) Family Size = 1	Standard Repayment Plan	Income-Based Repayment Plan
First Monthly Payment	$265	$103
Maximum Monthly Payment	$265	$172
Total Interest Paid	$8,762	$14,604
Total Principal Paid	$23,000	$1,607
Total Amount Paid	$31,762	$16,211
Remaining Principal Balance & Unpaid Interest	$0	$22,245
Total Loan Forgiveness	$0	$22,245

Eligible Loan Debt: $45,000 (Unsubsidized at 6.8%) Adjusted Gross Income: $35,000 (Increasing at 4% annually) Family Size = 1	Standard Repayment Plan	Income-Based Repayment Plan
First Monthly Payment	$518	$228
Maximum Monthly Payment	$518	$349
Total Interest Paid	$17,143	$29,300
Total Principal Paid	$45,000	$4,920
Total Amount Paid	$62,143	$34,220
Remaining Principal Balance & Unpaid Interest	$0	$40,640
Total Loan Forgiveness	$0	$40,640

Eligible Loan Debt: $75,000 (Unsubsidized at 6.8%) Adjusted Gross Income: $45,000 (Increasing at 4% annually) Family Size = 1	Standard Repayment Plan	Income-Based Repayment Plan
First Monthly Payment	$863	$353
Maximum Monthly Payment	$863	$527
Total Interest Paid	$28,572	$48,266
Total Principal Paid	$75,000	$3,963
Total Amount Paid	$103,572	$52,230
Remaining Principal Balance & Unpaid Interest	$0	$73,320
Total Loan Forgiveness	$0	$73,320

Questions and Concerns

Please direct all questions to the Financial Aid department.