Your Guide to New Public Service Loan Forgiveness Rules

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The Public Service Loan Forgiveness (PSLF) program was designed to help employees working in public service — including federal, state, and local governments, school districts, public hospitals, and some nonprofit organizations — get out from under their student loan debt.

That sounds simple, but in reality, the program is anything but. Although the Consumer Financial Protection Bureau (CFPB) estimated that one-in-four American workers could be eligible for student loan forgiveness under the program, only a fraction of applicants have qualified. As of May 2019, the Department of Education had only approved about 1% of applications, according to the Government Accountability Office.

Fortunately, recent changes to the PSLF program could make it easier for eligible borrowers to achieve student loan forgiveness. Here’s what you need to know.

While Public Service Loan Forgiveness doesn’t apply to private student loans, refinancing into a new loan with a lower interest rate may help cut student loan coasts. Credible makes it easy to compare student loan refinance rates from multiple lenders.

  • The Public Service Loan Forgiveness Program explained

  • What are the recent changes to student loan forgiveness?

  • How can I apply for Public Service Loan Forgiveness?

  • Are there other types of student loan forgiveness?

  • Other ways to reduce student loan debt

The Public Service Loan Forgiveness Program explained

The Public Service Loan Forgiveness program is designed to forgive the remaining balance of your federal Direct Loans after you’ve made 120 monthly payments while working full-time for a qualifying employer in a qualifying job.

Part of the problem with the program is its confusing rules about which loans and which borrowers qualify. As a 2021 CFPB report pointed out, “there is significant confusion about eligibility for PSLF, which is further complicated by the relative complexity of student loan types and terms.”

To help clear up some of that confusion, here’s an overview of PSLF program rules.

Eligible loans

Only federal Direct Loans that aren’t in default qualify for PSLF. But if you have a Federal Perkins Loan or Federal Family Education Loan (FFEL), it may become eligible for PSLF if you consolidate it into a Direct Consolidation Loan.

Eligible borrowers

To qualify for PSLF, you must:

  • Be employed by the U.S. military; a federal, state, local, or tribal government; or a not-for-profit organization that’s tax-exempt under section 501(c)(3) of the Internal Revenue Code.

  • Work full-time for a qualifying employer.

  • Make 120 qualifying payments.

Payment requirements

The definition of “qualifying payment” can be a source of confusion as well. Qualifying payments are those that you make:

  • After Oct. 1, 2007

  • Under a qualifying repayment plan

  • For the full amount shown on your bill (partial payments don’t count)

  • No later than 15 days after the due date

  • While you’re employed full-time by a qualifying employer

You can’t count any payments made while you’re still in school, during the grace period, or while your loans are in deferment or forbearance. But any payments made during the automatic emergency forbearance period, which extends from March 13, 2020, through Jan. 31, 2022, count toward your 120 payments.

The StudentAid.gov PSLF Help Tool can help you determine whether you work for a qualifying employer, suggest actions you can take to become eligible for PSLF, and guide you through the application process.

What are the recent changes to student loan forgiveness?

In October 2021, the Department of Education announced significant changes to the PSLF program to make it easier for eligible borrowers to get loan forgiveness.

These changes include:

Counting more payments toward PSLF

Historically, payments made on a FFEL or Perkins loan wouldn’t count toward the PSLF program’s 120-payment requirement. Neither would any payments made on a Direct Loan if you consolidated it into a Direct Consolidation Loan — the consolidation would restart the countdown to 120 payments.

Under the new rules, through Oct. 31, 2022, the Department of Education will count all prior payments made by student loan borrowers toward PSLF, regardless of the loan program. But you must submit your PSLF application by Oct. 31, 2022, to have those payments counted. And you must consolidate FFEL and Perkins loans into a Direct Consolidation Loan in order to qualify.

Another issue with the PSLF program stems from payments not counting toward the 120-payment requirement because they were short by a few cents or late by just a couple of days. The Department of Education announced it will automatically adjust PSLF payment counts for any payments made before Oct. 31, 2021, for borrowers who already certified some employment for PSLF and those that apply by Oct. 31, 2022.

Help for military service members

Months when your student loans are in deferment or forbearance normally don’t count toward your 120-payment requirement. This presented challenges for members of the U.S. military who have their loan placed on deferment or forbearance while they’re on active duty.

The Department of Education will now allow military service members to count months spent on active duty toward PSLF, even if their loans weren’t in active repayment during that time.

The ED will also make it easier for military service members and other federal employees to access PSLF. Starting next year, the department will begin automatically matching its data with information provided by other federal agencies to automatically give service members and other federal employees automatic credit for qualifying employment.

Reviewing denied PSLF applications

Another problem plaguing the PSLF program is borrowers reporting discrepancies in their PSLF payment counts and other review and processing errors by the student loan servicer responsible for processing PSLF payments, PHEAA.

The Department of Education will review all denied PSLF applications and create a process to reconsider previously declined applications from borrowers who believe their application was denied in error.

Other changes

Other actions promised by the Department of Education include:

  • Beginning an outreach campaign to make sure borrowers are better informed about the PSLF program

  • Improving the PSLF application process to make it easier to apply

  • Simplifying qualifying payment rules

How can I apply for Public Service Loan Forgiveness?

You don’t have to wait until you’ve made 120 qualifying payments to start the PSLF application process. In fact, you can begin the process as soon as you have a full-time job with a qualifying employer.

If you’re already employed full-time in public service, here’s the step-by-step process for applying.

  1. Enroll in a qualifying repayment plan. To qualify for PSLF, you must be enrolled in an income-driven repayment plan. If you’re not sure whether your current payment plan qualifies for PSLF, call your lender to find out as soon as possible.

  2. Start making qualifying payments. Make sure you pay the full amount due each month, no later than 15 days after your payment is due. Also, keep in mind that paying extra won’t help you qualify for loan forgiveness sooner — you still have to make 120 payments.

  3. Complete the employment certification for PSLF form. You need to complete the PSLF certification and application form, have it certified by your employer, and send it to the Department of Education once a year and whenever you change employers. This documents that you’re working for a qualified employer while making payments. If you don’t complete this form, you could apply for forgiveness in 10 years only to find out that some of your payments didn’t qualify.

  4. Submit your final application. Once you’ve made 120 qualifying payments, your student loans aren’t automatically forgiven; you need to apply using the same form you used to certify employment. You need to be working full-time for a qualifying employer when you submit the form and when your loan is forgiven.

What if I was previously rejected for the program?

If you previously had a PSLF application denied because some of your payments weren’t made under a qualifying PSLF repayment plan, now is a good time to try again.

The Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program gives you credit for some payments that previously didn’t qualify for PSLF.

You still have to work full-time for a qualifying employer and have Direct Loans or Direct Consolidation Loans. But more of your past payments may count. That’s because TEPSLF counts payments made under any plan, including:

  • Graduated Repayment Plans

  • Extended Repayment Plans

  • Consolidation Standard Repayment Plans

  • Consolidation Graduated Repayment Plans

According to a letter from Richard Cordray, Chief Operating Officer of Federal Student Aid, TEPSLF can add months’ or years’ worth of credit for previously ineligible payments.

“In some cases, borrowers will earn full forgiveness based on these changes,” Cordray wrote.

Are there other types of student loan forgiveness?

PSLF and TEPSLF aren’t the only options for having your student loan debt forgiven. Consider whether you might be eligible for one of the following:

  • Teacher Loan Forgiveness Program If you teach full-time for five complete and consecutive academic years in a low-income K-12 school or educational service agency, you may have up to $17,500 of your student loan debt forgiven.

  • Closed school discharge If your college, university, or vocational school closed while you were enrolled or soon after withdrawing, you may be able to have your federal loans discharged.

  • Perkins Loan cancellation and discharge Teachers, firefighters, law enforcement officers, military service members, nurses, and a variety of other professions and volunteer positions may be able to have their Perkins Loan canceled or discharged.

  • Death, disability, or bankruptcy — In some cases, you may be able to have your federal student debt discharged due to death, disability, or bankruptcy.

  • Borrower defense to repayment If you believe your school misled you or engaged in other misconduct to recruit you or encourage you to continue enrollment, you may be eligible to have your federal student loans discharged.

Other ways to reduce student loan debt

If you don’t qualify for forgiveness, consider these alternatives to reduce your student loan debt:

  • Sign up for autopay. Federal Direct Loans and many private student loan lenders will reduce your interest rate if you sign up to make automatic payments. While this won’t reduce the amount you owe, it will reduce your interest charges, which can help you pay off your loans faster.

  • Pay more than the minimum payment. Paying more than your monthly minimum payment will help you pay off your loan faster, meaning you pay less overall.

Refinance with a private student loan. Refinancing can be a way to get a lower interest rate and reduce your monthly payments. Credible makes it easy to compare private student loans from multiple lenders.

About the author: Janet Berry-Johnson is an authority on income taxes and small business accounting. She was a CPA for over 12 years and has been a personal finance writer for more than five years. Janet has written for several well-known media outlets, including The New York Times, Forbes, Business Insider and Credit Karma. In 2021, Canopy named her one of the Top 10 Influential Women in Accounting and Tax.

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