Yesterday, you learned about how student loan refinancing can lower the interest rate on your private student loans. Today, we'll discuss a program that helps you save on federal student loans under special circumstances. It's called Public Service Loan Forgiveness.
Here's What You'll Learn Through the CommonBond Student Loan Boot Camp
Day 1: Average Student Loan Debt and Student Loan Refinancing
Day 2: Principal Versus Interest
Day 3 What Is Capitalized Interest?
Day 4: What Are Grace Period, Deferment and Forbearance?
Day 5: Student Loan Refinancing Versus Student Loan Consolidation
Day 6: Why Should You Refinance Private Student Loans?
Day 7: What Is Public Service Loan Forgiveness?
Day 8: How to Reduce Student Loan Payments
Day 9: How to Use a Student Loan Payoff Calculator
Day 10: Should You Pay Off Your Student Loans Early?
Day 7: Public Service Loan Forgiveness
Public Service Loan Forgiveness means that after working 10 years in certain public service jobs, you can have the remaining balance of your federal student loans forgiven. We'll walk you through what jobs are eligible for this type of loan forgiveness, what federal loans can be forgiven under this program, when those loans can be forgiven, and how to apply for the program.
What jobs are eligible?
You're automatically eligible for Public Service Loan Forgiveness if you work at a federal, state or local government agency or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service under Section 501(c)(3) of the Internal Revenue Code. If you work for this kind of organization, the nature of your employment or the service you provide them doesn't matter.
You also may be eligible if you work for a private, not-for-profit employer that is not a tax-exempt organization if it provides certain specified public services. These services include:
- Emergency management
- Military service
- Public safety
- Law enforcement
- Public interest law services
- Early childhood education (including licensed or regulated health care, Head Start and state-funded pre-kindergarten)
- Public service for individuals with disabilities and the elderly
- Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
- Public education
- Public library services
- School library or other school-based services
- Employees of labor unions or partisan political organizations are not eligible for federal loan forgiveness under this program.
What kinds of loans are eligible?
Only federal Direct Loans are eligible. Federal Family Education Loans (FFEL), which have not been dispersed since June 2010, and Perkins Loans, for students with exceptional financial need, are not eligible for Public Service Loan Forgiveness. You can consolidate FFEL and Perkins loans into a Direct Loan to take advantage of Public Service Loan Forgiveness, but only payments made toward the Direct Loan after consolidation count toward loan forgiveness. Loans through private lenders are not eligible for Public Service Loan Forgiveness.
When can my federal student loans be forgiven?
You must have made 120 payments, or 12 payments for 10 years, on time and in full, on your Direct Loans. Only payments made after October 1, 2007, are eligible. At the end of the 10-year period, any remaining balance on your loans will be forgiven, or erased. To take full advantage of Public Service Loan Forgiveness, you should be on an income-driven repayment plan so that you pay as little as possible during this time. Why? If you had a standard 10-year repayment plan and made 10 years of standard repayments, you would have no remaining balance to forgive at the end of 10 years. (We will learn more about income-driven repayment plans on Day 8 of the CommonBond Student Loan Boot Camp.)
How do I apply for Public Service Loan Forgiveness?
The earliest any federal student loan borrower will be able to qualify for Public Service Loan Forgiveness is October 2017. Therefore, there is no application for forgiveness yet. The application will be released closer to the time when the first borrowers will qualify for forgiveness. However, you can complete the Public Service Loan Forgiveness: Employment Certification Form to have the Department of Education determine whether your employment qualifies for the program.