11 Common PSLF Mistakes to Avoid

The Public Service Loan Forgiveness program (PSLF) isn’t arbitrary or given at random. It’s earned by checking all of the eligibility requirements for the program, including working full-time in a public service job and making 120 on-time and full PSLF payments.

Editor's note: Recent changes to prior PSLF payment eligibility could positively impact millions of borrowers. Even though the Biden administration’s PSLF order has expired, almost all of the benefits are still available through the IDR Waiver until April 30, 2024, for those currently working in qualifying not-for-profit or government jobs.

If you’re considering this program, here are 11 of the PSLF mistakes to avoid.

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1. Not having perfect information about PSLF

Don’t let your colleagues or the media scare you away from PSLF. It can be a great option to pursue if you’ve done your due diligence to make sure you qualify.

When pursuing PSLF, there are five requirements you need to meet at the same time to successfully receive forgiveness on your student loans:

• Work for and be paid by a public sector employer. A public service entity can include the government, a nonprofit organization that’s tax-exempt under Section 501(c)(3) of the Internal Revenue Code, a private not-for-profit organization that provides certain public services or serving in an AmeriCorps or Peace Corps position.
• Work full-time for this entity. Full-time employment means working for one or more qualifying employers for the greater of an annual average of at least 30 hours per week or the number of hours the employer considers full time.
• Have Direct Loans. Only Federal Direct Loans can receive forgiveness via PSLF. If you have other types of federal student loans like FFEL, Perkins, HEAL, HPSL, LDS or other federal loans, you can combine them into a Direct Consolidation Loan to convert them into a qualifying loan. Review these considerations before consolidating.
• Repay your loans on an income-driven repayment (IDR) plan. Qualifying repayment plans include Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), Income Contingent Repayment (ICR). Technically, the 10-Year Standard Repayment Plan also qualifies, but would result in repaying your entire student debt over a 10-year period without benefiting from forgiveness.
• Make 120 qualifying student loan payments. A qualifying payment is a monthly payment made on time, in full, while all four of the above requirements are also met. Neither the 120 qualifying payments nor your employment has to be consecutive.

The first two requirements are certified via the Employment Certification Form (ECF). This form is retroactive, so it only looks back to certify past qualifying payments up to when the form was dated. You should submit this form at least once a year, which leads us to the next oversight on our list of common mistakes.

2. Not certifying employment regularly

The ECF is your best friend when pursuing PSLF. This form confirms that your past and/or current employment is eligible for the PSLF program, and will aggregate how many qualifying payments you’ve made toward the 120 payment threshold.

Although certifying once a year isn’t required, it’s a great way to keep a pulse on your progress toward forgiveness. It also helps you catch problems sooner rather than later, so there are no surprises when you formally apply for forgiveness.

Related: How to Get an Electronic Signature for Public Service Loan Forgiveness

3. Not using the PSLF Help Tool

PSLF data reports show that “missing information” continues to be a consistent reason for rejected ECFs. In 2019, the Department of Education introduced the PSLF Help Tool to help PSLF participants catch missing information or formatting issues on forgiveness paperwork.

The series of questions helps generate a prefilled ECF for the borrower’s and the employer’s signatures to return to FedLoan Servicing for approval.

FedLoan Servicing is the loan servicer currently responsible for PSLF. If your loans aren’t already serviced by this company, your loan will move to it within seven to 10 days of an accepted ECF.

If your ECF is accepted, it means FedLoan has verified your loan eligibility and employer. It will then review your payment history (including any payments you made to another federal loan servicer before your loans were transferred) to determine how many qualifying monthly payments you have for PSLF.

FedLoan will let you know the total qualifying payments you’ve made, and how many remaining payments are left before you qualify for loan forgiveness. This communication is usually by letter or email.

4. Not consolidating ineligible loans to qualify for PSLF

Only Direct Loans issued under the William D. Ford loan program can be forgiven. The good news is that many other kinds of student loans — like FFEL, HPSL, HEAL, Perkins Loans, LDS, and Parent PLUS Loans — can qualify for PSLF, but they must first be combined into a Direct Consolidation Loan.

If you currently have ineligible loans for PSLF that are eligible for a Direct Consolidation, you can convert them into qualifying loans after reviewing these considerations.

If you’re not sure that you owe Direct Loans, login to studentaid.gov. You’ll see a table of all the loans you owe through the Department of Education.

5. Consolidating loans when you shouldn’t

Any of the loans listed that match one of the following types below already qualify for PSLF:

• Direct Stafford Subsidized Loans. This kind of loan could be borrowed for undergraduate programs.
• Direct Stafford Unsubsidized Loans. If you exhausted your eligibility for Direct Stafford Subsidized Loans, you might’ve borrowed Direct Stafford Unsubsidized Loans. You can borrow this kind of loan for undergraduate and graduate programs.
• Direct Grad PLUS Loans. If you went to grad school after 2010 and needed more than $20,500 per year (or $40,500 in certain medical professions), you likely borrowed Direct Grad PLUS Loans.
• Direct Consolidation Loans. You can consolidate 17 different types of loans into a Direct consolidation Loan on studentaid.gov. This type of loan qualifies for PSLF even if the loans you consolidated didn’t.

If you have one of these kinds of loans, you don’t have to change their structure for them to qualify for PSLF. You merely need to submit the Public Service Loan Forgiveness Employer Certification Form.

The big downside to consolidating when you shouldn’t is that consolidation erases your payment history. If you already had payments counting toward your 120-payment timeline and you consolidate, you start from zero payments toward PSLF. Don’t consolidate if it’s not required.

You also don’t have to consolidate all your loans together. If you have some loans that don’t qualify for PSLF, but others that do, you can consolidate the ineligible loans so you don’t affect your payment count on your eligible loans.

6. Not being on the most efficient IDR plan for you 

When pursuing PSLF, you want to pay as little as possible to maximize forgiveness on the remaining balance. The two cheapest income-driven repayment plans are REPAYE and PAYE.

Unlike any other debt out there, federal student debt payment calculations are impacted by your tax filing status and your spouse’s income, if applicable.

Since tax filing status and marital status impact your payment when you’re on an IDR plan, tax planning with student loans in mind is just as important as a repayment plan itself. With the right planning, you can achieve a higher level of financial efficiency, putting more money back in your pocket.

Not sure what the best strategy is for you and your spouse? Schedule a consultation with me for your customized student loan repayment plan.

7. Not updating income on time

When a borrower is on an IDR plan, they must update their monthly payment based on income every 12 months by their plan anniversary date. This is called annual recertification of income, or simply recertification.

Your recertification due date — or anniversary — is found through your aid data download on StudentAid.gov, your servicer’s website or past recertification correspondence.

Always keep your contact information up to date with your servicer to make sure you receive timely notice of your annual recertification deadline so you can update on time each year.

If you don’t recertify, your repayment plan will switch to the 10-Year Standard Repayment Plan causing your payment to go up. Your unpaid interest may be capitalized, meaning it will be added to the principal balance of your loans.

If you try to re-enter your IDR plan and are no longer eligible — you no longer have a partial financial hardship — you’ll have to stay on the 10-year repayment period plan, switch to one of the longer-term Standard or Graduated plans which don’t qualify for PSLF, or switch to REPAYE where spousal income is always considered as part of the payment equation.

8. Paying extra on the loans

If you’re pursuing PSLF, there’s zero benefit to paying more than your required payment toward the loans. There’s no extra credit for making extra payments, and it doesn’t speed up your forgiveness timeline in any way. Only one qualifying payment can count toward your 120-payment threshold per month.

You can make payments in advance up to a certain point if desired.

9. Missing payments or going into forbearance

The months you’re in deferment or forbearance (outside of the CARES Act administrative forbearance) don’t count toward PSLF.

If your income has lowered, re-calculate your income-driven repayment plan to lower your payments and keep payments going, before putting the loans into forbearance. Your payment could be calculated as low as $0/month depending on your income.

You can’t make qualifying payments on the loans corresponding to your degree in-progress while you’re still in school. The six-month grace-period automatically offered post-graduation doesn’t count toward PSLF either.

You can strategically consolidate right after graduation and forgo a grace period if you start working in public service full-time, immediately. That way you can get your payments to count sooner rather than waiting six months.

10. Not layering programs or benefits correctly (if applicable)

There are many student loan forgiveness programs available to public health workers that also tend to have work situations which qualify for PSLF, too. Take the National Health Service Corps (NHSC) Loan Repayment Programs for example.

NHSC is typically a commitment of two to three years of employment in a high-need area, typically a 501(c)(3) or government entity which can also qualify for PSLF.

The award limits vary. If you’re eligible for both PSLF and NHSC, but NHSC’s award doesn’t pay off your loans in full, don’t use that award as a lump sum on the loans. Instead, use the grant money to fund your monthly payments.

Have the grant sit in a separate PSLF savings account, and use this account to make payments toward your 120 qualified payments so you’re not paying out of pocket. Also, take advantage of both loan repayment and forgiveness options, optimally.

11. Not following up on ineligible payments

Qualifying payments are on-time, full monthly payments. They must be made toward an eligible loan after October 1, 2007 under a qualifying repayment plan while employed full-time by a qualifying employer.

An on-time payment is a payment made no more than 15 days after the due date. If you feel like your payment history isn’t reflected correctly, here are five steps to fix your PSLF payment count. You can also contact the PSLF helpline to talk through why a certain payment(s) or payment periods aren’t counting and if there’s anything you can do to correct the issue.

Need help?

If you want a strategic look at how to get the most out of PSLF, that’s what Student Loan Planner consultants do, full time. We’ve advised thousands of borrowers so take a moment to check out our reviews.