How does Public Service Loan Forgiveness work?

Earning a degree can be expensive — the average undergraduate debt after graduating is nearly $30,000 according to the latest College Board data. Public Service Loan Forgiveness (PSLF) aims to ease the financial burden for borrowers who carry a federal student loan and dedicate their careers to serving the public.

As of October 2021, more than $62.5 billion in student loan debt has been discharged through the PSLF program. Over 871,000 public service workers have benefited from this debt relief, including healthcare workers, teachers, firefighters, social workers, and more. Here’s what you need to know about this federal forgiveness program. 

PSLF key facts

• The PSLF program forgives your remaining federal student debt after 10 years of payments 
• You must work full-time for a government or nonprofit employer to qualify
• Enroll in an income-driven plan while pursuing PSLF to save the most money 
• It’s a good idea to recertify your employment annually to stay on track for forgiveness 
• Input your loan details and employer info into the PSLF Help Tool to confirm your eligibility

What is Public Service Loan Forgiveness?

The Public Service Loan Forgiveness (PSLF) program was established in 2007 and aims to support government employees and individuals who work for not-for-profit organizations by forgiving a portion of their federal student debt. To take advantage of PSLF, you're required to make 120 monthly student loan payments — or 10 years worth of payments — under an income-driven repayment plan while working full-time for an eligible employer. Once you’ve met these requirements, the remainder of your federal Direct Loans will be forgiven.

Check out: Student loan forgiveness: What are my options? 

How to get Public Service Loan Forgiveness 

Have Federal Direct Loans

You must have federal Direct Loans loans to be eligible for Public Service Loan Forgiveness. Eligible types of loans include: Direct Subsidized Loans, Direct Unsubsidized Loans, Grad PLUS Loans, and Direct Consolidation Loans.

If you have Federal Family Education Loans (FFEL) or Perkins Loans, you can make them eligible for forgiveness by consolidating them into a Direct Consolidation Loan. Parent borrowers are also eligible for loan forgiveness on Parent PLUS loans. However, parents must first consolidate using a Direct Consolidation Loan in order to become eligible to repay the loan on a qualifying payment plan.

Work full-time for an eligible employer

To qualify for PSLF, you must also work for an organization that serves the public. You’ll likely be eligible for the program if you work for the following types of employers:

• U.S. government at any level, including the federal government, a tribal government, or your state or local government
• A 501(c)(3) tax-exempt not-for-profit organization
• Another not-for-profit organization that devotes the efforts of most of its employees to offering qualifying public services

You must work full-time while you are making your 120 qualifying payments to be eligible for Public Service Loan Forgiveness. This means working for one or more eligible employers for at least 30 hours a week. 

Related: Teacher Loan Forgiveness Options

Make 120 payments on a qualifying repayment plan 

To get the remainder of your debt forgiven, you must also make 120 qualifying loan payments while employed full-time by a qualifying employer (after Oct. 1, 2007). The 10-year Standard Repayment plan and all income-based repayment plans are considered qualifying payment plans — but you’ll save the most money on an income-driven plan, since these set your payments based on a percentage of your income:

• Paye As You Earn (PAYE)
• Saving on a Valuable Education (SAVE)
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)

If you make payments with a non-qualifying plan (such as the Extended or Graduated repayment plans), it’s possible that you could count those payments and become eligible for forgiveness under a special program called Temporary Expanded Public Service Loan Forgiveness (TEPSLF). To apply for TEPSLF, submit the PSLF form via the PSLF Help Tool on StudentAid.gov. TEPSLF funding is limited so apply as early as possible. 

Certify your employment annually

You should submit a PSLF form annually (and whenever you change employers) to certify your employment and stay on track for forgiveness. You and your employer will both need to complete sections of this form. It can be submitted digitally or via mail via the PSLF Help Tool.

While you can technically apply for PSLF forgiveness after your 10 years of service, it’s highly encouraged to submit the PSLF form every year to certify your employment. That way, you can easily keep track of your payment count and catch any payment issues or mistakes early on. 

Related: Private student loan forgiveness: 7 options

Applying for PSLF

To apply for Public Service Loan Forgiveness, you will need to complete the PSLF form. You can use the PSLF Help Tool to obtain the PSLF application and submit it online or by mail. You should submit this form annually to certify your periods of employment, and when you have completed your 120th qualifying payment. Your employer will also need to certify your forms in order for you to be eligible. You'll be able to send the form digitally so your employer can digitally sign it.

If you don't qualify for Public Service Loan Forgiveness, you can submit a request for PSLF reconsideration. You can submit this request if:

• You received a notification that your employer isn't eligible, or the employer's status was returned as ineligible when you used the PSLF employer search tool, and you have information showing they should be an eligible employer.
• Your servicer sent you a letter indicating a qualifying payment count you believe is incorrect.

If you were deemed ineligible because your payments didn't count, you can submit a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application form using the PSLF help tool to apply for TEPSLF.

It's easier to reach forgiveness now

The U.S. Department of Education is revising the Public Service Loan Forgiveness (PSLF) payment criteria to include more of your past payments, making it easier for many borrowers to reach forgiveness. This means, any payments you made on federal Direct Loans since October 2007 while working in a qualifying public service job will contribute toward your PSLF.

Key aspects of the adjustments include:

• Allowing credits toward the 120 qualifying payments for past late or partial payments, as well as those made in a lump sum
• Counting certain periods when payments are deferred or in forbearance as part of the 120 eligible payments (this includes when loans are deferred due to military service, cancer treatment, or economic hardship; or mandatory administrative forbearances)
• Receiving credit for a weighted average of existing qualifying payments when consolidating Direct Loans, instead of losing all credit for payments upon consolidation
• Having other periods of deferment and forbearance counted toward loan forgiveness if you pay what you would have owed at the time (even if that was $0 payments)

This recount is expected to continue through July 2024. There's no need for you to apply; the adjustment should be applied to your account automatically. Continue certifying your public service employment as usual to ensure all qualifying payments are counted towards forgiveness.

Changes to PSLF

There have been many changes made to PSLF in recent years, with the aim of helping borrowers navigate the complicated program. A Public Service Loan Forgiveness waiver opportunity was available through Oct. 31, 2022. This allowed borrowers to receive credit for payments that wouldn't otherwise qualify for forgiveness. These included late payments, partial payments, those made on the wrong payment plan, and those made toward FFEL or Perkins Loans.

Although this program ended, borrowers can still take advantage of Temporary Expanded Public Service Loan Forgiveness (TEPSLF) to count non-qualifying payments toward loan forgiveness, as long as the payments were made for Direct Loans. TEPSLF was introduced in 2018 and is limited in funding. Borrowers who believe they qualify should use the PSLF help tool to complete the necessary forms.

PSLF FAQ

Will I pay taxes on PSLF loan forgiveness?

If you have student loans forgiven under Public Service Loan Forgiveness, the federal government will not tax you on the forgiven debt. However, your state may tax you.

Can you apply for PSLF if you're retired?

Public Service Loan Forgiveness requires you to be working full-time for an eligible employer when you apply for PSLF and when you receive forgiveness. If you are not working full-time for an eligible not-for-profit organization or government agency, you can't qualify for this program.

How long does it take to get PSLF approved?

The processing time for PSLF approval depends on many factors, including the number of employers you've had; whether there were gaps in employment or payment history; and whether you have submitted all of your employment certifications from past employers over time. MOHELA states that it can sometimes take at least 90 business days for forms to be processed after they are submitted. If you regularly submitted the PSLF form while making your payments, your form may be processed faster.

Will PSLF hurt my credit?

PSLF generally will not have a lasting impact on your credit score. Your loan will be moved to paid-off status once the remaining balance has been forgiven. Since lenders like to see a mix of different kinds of debt and your loans were a form of installment loan, losing this as an active account could potentially cause a slight dip in your score. That would also occur if you repaid a loan in full. The drop is likely to be temporary and not significant.