The Department of Education earlier this month posted information for consumers about the Public Service Loan Forgiveness (PSLF) Program including a fact sheet (PDF) that gives general information and a list of questions and answers (PDF) that address specific aspects of the program.

The Q&A provides some important information for borrowers who plan to take advantage of the loan forgiveness program, including:

Documenting Eligibility

The Department states that it is the borrower's responsibility to have documentation that supports a request for loan forgiveness under the PSLF Program. This includes documentation from the borrower's employer or employers. Based on this employment documentation, the Department will be able to identify qualifying employment and payments. The Department is developing a PSLF application that borrowers may use to document their qualifying employment while they are making the required 120 payments. Until the form becomes available, borrowers should keep records that clearly identify their employer, show that their employer meets the definition of a public service organization, show their dates of employment, and demonstrate that they are a full-time employee.

Eligible Loans

PSLF is available only for Direct Loans, but borrowers with FFEL or Perkins loans may qualify for PSLF by consolidating those loans into the Direct Loan Program. Payments made on the FFEL or Perkins loans before they were consolidated into the Direct Loan Program are not counted toward the required 120 monthly payments. Non-federal student loans are not eligible for either consolidation into the Direct Loan Program or for PSLF.

Loans that are in default are not eligible for PSLF. However, a borrower with a defaulted loan may be eligible for PSLF by consolidating the defaulted loan or by rehabilitating the defaulted loan.

Grad PLUS borrowers can benefit from PSLF. Parent PLUS loans are not eligible to be repaid under the Income-Based Repayment (IBR) or Income-Contengent Repayment (ICR) programs. However, a parent PLUS borrower could consolidate the PLUS loans and then choose ICR for the new Direct Consolidation Loan. While a Direct Consolidation Loan that repaid a parent PLUS loan may not be repaid under IBR, it can be repaid under ICR. Parent PLUS borrower eligibility for PSLF is based on the parent's public service employment, not the employment of the student on who used the loans.

Eligible Payments

Only payments made after Oct. 1, 2007 may be counted towards the required 120 payments for PSLF. Payments on Direct Loans made before Oct. 2007 do not count toward PSLF.

While payments made under the Standard 10-Year Repayment Plan are eligible for PSLF, if a borrower makes all required payments under a 10-year plan, there will not be any remaining balance to be forgiven. However, some borrowers may have made payments under a Standard Plan for a portion of the 120 months and made the remaining payments under either IBR or ICR, leaving them with a remaining balance after 120 payments have been made. While payments under certain other repayment plans may be counted toward the required 120 payments, to receive any forgiveness under the PSLF Program it is likely that borrowers must make at least some loan payments under IBR or ICR.

The 120 required payments do not have to be consecutive. Borrowers must make 120 separate on-time, full monthly payments while employed by an eligible public service organization, but the payments do not have to be consecutive.

Borrowers do not have to make a payment if their monthly payment under IBR or ICR is zero. Any month when the calculated payment under IBR or ICR is zero will count toward the required 120 monthly payments.

Eligible Employment

The specific job that is performed does not matter, as long as the borrower is employed by a public service organization. For example, full-time employees of a public school system would meet the requirements for PSLF, regardless of their position (teacher, administrator, support staff, etc.).

Employees at certain private school will qualify for PSLF. Most private schools, colleges and universities are not-for-profit entities that are tax-exempt 501(c)(3) organizations. Therefore, they would qualify as public service organizations for PSLF purposes.

Employees at private companies doing work under a contract with a state government agency do not qualify for PSLF. A borrower must be directly employed by the public service organization.

Resources

Department of Education's PSLF Web Center

Department of Education's PSLF Fact Sheet

Department of Education PSLF Q&A (PDF)

The Project on Student Debt's IBR and PSLF Web Site

Posted 02/25/10 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.