Can I get public service loan forgiveness for a nearly paid-off federal student loan?

Dear Credible Money Coach,

I have been in the military for almost 20 years and I believe this is a qualifying employer for the Public Service Loan Forgiveness (PSLF) program. All my federal Direct Loans are either paid off or will be paid off within the next year.

If my employer qualifies and I made the required 10 years of qualifying payments, am I still eligible for PSLF even if those loans are paid off? Will I be eligible for a refund for the loan balance that was left after the 10 years of qualifying payments? — Mike

Hi Mike. Thank you for your question and your service. The Public Service Loan Forgiveness program is a valuable incentive for graduates to enter public service. Getting federal student loans forgiven under the program can save people in public service thousands of dollars in principal and interest, provided they meet qualifying criteria. Plus, loan amounts forgiven under the PSLF program don’t get included in your federally taxable income.

Who can qualify for forgiveness?

Military employment is considered qualifying employment for the Public Service Loan Forgiveness program.

Graduates may also qualify if they work for:

• Any government organization (federal, state, local or tribal), including the U.S. military
• Tax-exempt not-for-profit organizations
• AmeriCorps or Peace Corps as a full-time volunteer

To obtain forgiveness under the PSLF program, you must make 120 qualifying payments on a qualifying federal student loan.

Loans and payments that qualify

Public Service Loan Forgiveness is only available for federal Direct Loans. Note that if you consolidate multiple federal Direct Loans into one Direct Consolidation Loan, you lose credit for the payments you made on the old loans. You would need to make 120 qualifying payments on the new loan to be eligible for forgiveness.

The PSLF program took effect in 2007. So although you’ve been paying on your federal Direct Loans for nearly 20 years, only payments you made after Oct. 1, 2007, could qualify. Your payments would also need to meet other criteria to qualify, including:

• Be made under a qualifying repayment plan
• Be made for the full amount due for each payment
• Be no more than 15 days late
• Be made while you were employed full-time by the military

And any payments you made while you were in school, during the grace period or while you were in deferment or forbearance wouldn’t count toward the 120 required payments. The exception is payments that would’ve been due during pandemic forbearance; those still count toward your 120 payments.

Requesting forgiveness

Ideally, you’re supposed to submit a PSLF form annually, which the Department of Education uses to confirm that you’re making qualifying payments. If you don’t do this annually, you’ll have to submit employer certification for each qualifying employer you worked for while making your 120 payments.

The Department of Education offers a PSLF Help Tool that can help you understand more about how the program works and get loans forgiven.

Your specific situation

Mike, the best advice I can give you is to contact your loan servicer to see if any refund options are available. If your loan servicer doesn’t respond to your questions, you can file a complaint through the Department of Education’s Federal Student Aid Feedback Center and the Consumer Financial Protection Bureau.

Need Credible® advice for a money-related question? Email our Credible Money Coaches at [email protected]. A Money Coach could answer your question in an upcoming column.

This article is intended for general informational and entertainment purposes. Use of this website does not create a professional-client relationship. Any information found on or derived from this website should not be a substitute for and cannot be relied upon as legal, tax, real estate, financial, risk management, or other professional advice. If you require any such advice, please consult with a licensed or knowledgeable professional before taking any action.

About the author: Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.