Your Guide to Federal Loan Repayment Plans That Qualify for PSLF

If you’ve committed your life to public service and have federal student loans, you might be eligible for the Public Service Loan Forgiveness program (PSLF). This loan forgiveness program lets you wipe out your debt after 10 years of payments while working for a qualifying employer. 

You also must meet other eligibility requirements while being on a qualifying student loan repayment plan. However, each PSLF repayment plan has different features. Figuring out which one offers the lowest monthly payment isn’t always straightforward. Here’s what you need to know. 

How to qualify for Public Service Loan Forgiveness

The Public Service Loan Forgiveness program incentivizes working professionals to pursue a career in public service. In exchange, the program forgives your remaining federal student loan balance after making 120 monthly payments during your service. 

To qualify for this benefit, you must meet certain eligibility requirements:

• You have loans in the federal Direct Loan program (you might be able to use a Direct Consolidation Loan to qualify).
• You work at an eligible nonprofit or other government organization.
• You’re employed full-time, at least 30 hours. 
• You’re enrolled in a qualifying repayment plan. 
• You make 120 monthly payments while employed in public service. 

Aside from being a PSLF requirement, it’s crucial that you’re on the right repayment plan so you get the most out of the program. Choosing a plan that offers the lowest monthly payment means that you’ll have a higher loan balance that’s forgiven after 10 years. 

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Qualifying repayment plans under PSLF

The 10-year Standard Repayment Plan and the four income-driven repayment (IDR) options qualify for the Public Service Loan Forgiveness program. 

10-year Standard Repayment Plan

Technically the 10-year Standard Repayment Plan is an option under PSLF guidelines. However, this isn’t a true option if you’re working toward forgiveness. Why? 

A Standard Repayment Plan is designed to pay off your loans in 10 years. If you pay off your loans in 10 years, you won’t have a remaining balance left to forgive once you’re eligible for PSLF. 

Also, it’s important to note that the Standard Repayment Plan for Direct Consolidation Loans doesn’t qualify for PSLF. 

Saving on a Valuable Education (SAVE)

The Saving on a Valuable Education (SAVE) Plan is the old Revised Pay As You Earn (REPAYE) Plan with new clothes. SAVE has some of the most remarkable benefits for student loan borrowers out of all the repayment options. Here are its main features:

• Your unpaid interest is covered by the government if you’re making payments. 
• You can qualify for lower payments thanks to increases in income exemption, going from 150% to 225% of the poverty guidelines. 
• You can now exclude your spouse’s income when you file separately, which changes REPAYE’s old rule of always using joint income data. 
• You’ll pay 10% of your discretionary income, which is based on whether you have undergraduate loans, graduate loans, or both. 
• You can get forgiveness after 20 years (undergraduate loans) or 25 years (graduate loans) if you’re not pursuing PSLF.

Furthermore, effective July 2024, if you only have undergraduate loans your monthly payment will be reduced to 5% of your discretionary income.

Overall, the SAVE Plan can reduce your monthly payment amount and might be the most affordable option. Although it’s not conventional advice to pay the least amount of your student debt, it’s what you should aim for with PSLF. 

Rob Bertman, senior student loan advisor at Student Loan Planner said that SAVE works best for those who “have high debt compared to their income, aren’t eligible for PAYE, or are a lock to finish out PSLF.” 

Bertman also added that borrowers who got federal student loans after 7/2014 would benefit from SAVE, too, “because if PSLF doesn’t work out, they’d be eligible for the new IBR which is similar to PAYE.”

Pay As You Earn (PAYE)

The Pay As You Earn Plan also qualifies for PSLF and has some important eligibility requirements. 

• You must have a partial financial hardship.
• Only new borrowers qualify and eligibility is two-pronged. 

To qualify, you can’t have an outstanding Direct Loan or FFEL balance before receiving a loan on or after October 1, 2007. Additionally, you have received a disbursement of unsubsidized Direct Loans, subsidized Direct loans, or Grad PLUS Loans on or after October 1, 2011.   

If you’re approved:

• You’ll pay 10% of your discretionary income, which has a cap on what you might pay on a Standard Repayment Plan. 
• The repayment term is 20 years for IDR forgiveness. 
• Individual income is used if you’re married, but filing separately. Joint income is used if you’re married and filing a joint tax return.
• Joint income might affect your eligibility. 

Though the SAVE Plan might look the best on the surface, certain borrowers might benefit from PAYE. 

“PAYE is best for those who aren’t 100% sure they’re going to finish out PSLF, or whose income will be higher than their student debt at some point before going for PSLF,” said Bertman.

There are also some important changes to be aware of, so you can make the best choice for you. 

“PAYE is not going to be available to switch into after 7/2024,” adds Bertman. “Even if payments are higher than on SAVE, PAYE is a great backup plan since it would take 20 years for forgiveness on IDR versus 25 years on SAVE.”

Income-Based Repayment (IBR)

The Income-Based Repayment Plan is eligible for PSLF and has a financial hardship component to it. If you qualify for IBR:

• Payments are between 10% to 15% of your income and won’t exceed what you’d pay on the Standard Repayment Plan. 
• New borrowers from July 1, 2014, or later pay 10% of their discretionary income. 
• If you borrowed before July 1, 2014, you’ll pay 15% of your income. 
• New borrowers from July 1, 2014, or later will reach IDR forgiveness after 20 years. 
• If you borrowed before July 1, 2014, IDR forgiveness is after 25 years. 

What you pay under IBR varies based on whether you’re considered a new borrower. For example, if you’re not a new borrower you’ll pay 15% of your discretionary income, which is more than on SAVE and PAYE.  

It also affects the IDR forgiveness timeline. However, this is a moot point if you’re going after PSLF since your loans will be forgiven after 10 years. 

Income Contingent Repayment (ICR)

The Income-Contingent Repayment Plan falls under the umbrella of income-driven repayment plans but is generally the least-favored option. That’s because, under this plan, borrowers pay the highest percentage of their discretionary income at 20%. For those not pursuing PSLF, qualifying for IDR forgiveness under this plan takes 25 years. 

Though you get forgiveness in 10 years under PSLF, paying 20% of your discretionary income toward loan payments can be hard to manage. Also, it doesn't make sense if you’re pursuing forgiveness. 

Generally, this repayment option isn’t the best fit for pursuing PSLF. For Parent PLUS Loan borrowers who consolidate their loans, however, ICR is the only qualifying income-driven plan that qualifies for PSLF.

Get extra PSLF credit with the IDR waiver

The IDR waiver also called the IDR account adjustment, might provide additional PSLF payment credit. In an unprecedented move, the U.S. Department of Education is offering a one-time adjustment and re-evaluating which payments qualify for forgiveness. This cleans up some of the mess and confusion of years past.

For example, if you didn’t know which repayment plans qualified for PSLF, you might have signed up for a Graduated Repayment Plan or an Extended Repayment Plan. But traditionally those plans don’t qualify for PSLF. 

In this IDR adjustment, previous payments including “any months in a repayment status, regardless of the payments made, loan type, or repayment plan,” will count toward IDR forgiveness, according to StudentAid.gov. Plus, some deferment and forbearance periods might count, too. 

If you’ve filled out a PSLF form, your payment count will be adjusted, shortening your timeline to debt freedom. You don’t have to take any action to qualify for this benefit. Read more PSLF changes that are on the way. 

Choosing the best PSLF repayment plan

If you’re an eligible candidate for PSLF, explore which option lets you pay the least toward your student debt to stay in good standing as you work toward loan forgiveness. Since forgiven debt under PSLF doesn’t have tax consequences, you don’t have to worry about having an inflated balance forgiven. 

Compare each IDR plan using our Student Loan Forgiveness Calculator. Consider the following details:

• Monthly budget.
• Spouse’s income.
• Tax filing status (filing jointly will include spouse’s income in the calculation, separately won’t).
• Repayment plan availability (as some are getting phased out later).
• IDR forgiveness options if you no longer want to go after PSLF. 

You can also use StudentAid.gov’s PSLF Help Tool or its Loan Simulator to get insight into which plan might work for you. 

Next steps for PSLF

The Public Service Loan Forgiveness program provides additional benefits to public service workers in the form of forgiveness. But there are some specific rules to follow to ensure you’re eligible. 

Stick to IDR plans, and consider the SAVE Plan for the lowest payment. It still makes sense to run calculations and review your goals, so you’re on the right plan for your situation. If you need support navigating the complexities of PSLF, get a custom student loan plan from one of our experts.

FAQs: Qualifying PSLF repayment plans

If you’re looking for information on PSLF, here are some answers to the most frequently asked questions.