Public Service Loan Forgiveness (PSLF) is a program that’s gotten a lot of slack in the media for years. Reasons include the alarmingly high rejection rate for forgiveness applicants.
Qualifying requirements can also be difficult to navigate, and loan servicers aren’t very helpful in giving clear and concise information about the program.
Note: There have been recent changes to prior PSLF payment eligibility which could positively impact millions of borrowers thanks to the Biden administration’s PSLF order. You need to submit your PSLF ECF form by October 31, 2022 to qualify for this time-limited PSLF Waiver if applicable. Unfortunately, you need to be proactive in submitting a new ECF document as it’s a requirement to gain additional relief from this executive action.
Qualifying for PSLF
PSLF is designed to provide loan forgiveness to those who dedicate their career to public service work. Qualifying for PSLF comes down to five basic requirements:
- Work for a qualifying employer
- Work full-time for that qualifying employer
- Only Direct loans qualify for PSLF
- Enroll in an income-driven repayment plan (REPAYE, PAYE, IBR or ICR)
- Make 120 PSLF qualifying payments
The name of the game while pursuing loan forgiveness is to pay as little as possible, to maximize how much debt you can get forgiven. There’s absolutely no incentive to pay more than you need to when you’re on the loan forgiveness track.
120 monthly PSLF payments is no longer literal
The requirement to make 120 monthly PSLF qualifying payments was updated as of August 2020. Historically, there wasn’t a benefit to making lump-sum payments toward PSLF, because it would only count as one PSLF qualifying payment — even if it was 5x the required payment amount.
There was also the danger of your loans getting into paid-ahead status where the payments to follow the over-payment would not count as a qualifying payment toward the 120 payment requirement.
The only exception to this rule was if your lump-sum payment came from The Segal Education Award, a Peace Corps transition payment, or payments made to the U.S. Armed Forces through a U.S. Department of Defense.
As of August 2020, however, there’s been a change to the monthly payment requirement to include lump sums of up to 12 PSLF qualifying payments. This isn’t retroactive, so if you missed out on qualifying payments while under paid-ahead status, previously, this change won’t help you.
Here’s an example of how this works, compliments of the Department of Education:
Are PSLF lump-sum payments a significant improvement to the program? Not really.
It might be helpful for those who prefer not to have monthly payments or prevent unintentional ineligible payments. Also important to note: This payment processing change doesn’t appear to apply to the 20- or 25-year forgiveness paths at the end of an income-driven repayment plan.
When we first learned that borrowers could now make PSLF lump-sum payments, we didn’t trust it. These updated payment processing terms aren’t even defined within the new PSLF/TEPSLF Employment Certification Form & Application (used to qualify payments, employment, and apply for forgiveness) which came out after this change was announced.
As it reads in Section 6, under Qualifying Payment Definitions:
Qualifying payments are on-time, full monthly payments made on 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 for the payment.
BUT under the Department of Education’s PSLF FAQ page:
“You may prepay, or make lump-sum payments, which would apply to future months, for up to 12 months, or when your next income-driven repayment (IDR) plan is due. For example, if you recertified your IDR and your monthly payment was $100, but you paid $1200 for the first month’s payment, that payment would count as 12 separate payments for that year. You would not need to make another payment until the next 12-month cycle. These payments would count as qualifying payments towards PSLF forgiveness once you certified your eligible employment for the 12-month period.
For the prepayment to qualify for subsequent months, you must
- pay an amount to fully satisfy future billed amounts for each month you wish to prepay within a 12-month period;
- make one or more prepayments that pay your loan ahead (if you are on an IDR plan, you may not prepay past your next annual recertification date— your annual recertification period is the 12-month time period when your payments are based on your income); and
- have qualifying employment that covers the due date for each month you prepay.
Note: Multiple prepayments made within the same year will not afford you more than 12 months of qualifying payments.”
So with that, PSLF lump-sum payments can count toward the forgiveness requirement.
PSLF payment tracking
In late-2020, Fedloan made some upgrades to its online user portal to include PSLF Payment Tracking. This can be found under the “Payments & Billing” tab. This is actually my favorite improvement to date by far.
This Tracker lists out each of your loans and reflects your eligible payments toward the 120 payment count. It separates payments that have already qualified via an Employment Certification Form (ECF) and those that need employment certification for both PSLF and TEPSLF.
This tool helps you see your progress toward loan forgiveness more transparently, including the payments you’ve made since your last ECF submission.
If you have any “ineligible payments,” the tracker will help you identify those and list the reason why. If you ever believe there’s a count error for your PSLF qualified payments, after a new ECF is submitted and after reviewing the denial reason provided, here are five steps to fix your PSLF payment count.
This online feature from Fedloan is a big improvement that could help people feel more confident about their timeline toward earning PSLF. Moreover, it will hopefully help borrowers catch discrepancies sooner rather than later.
Hopeful for ongoing PSLF improvements
With the Department of Education’s goal of improving customer service and holding servicers accountable for their performance in managing federal student loans, more improvements are expected.
If you need some additional guidance with your specific student loan situation, schedule a consultation with Student Loan Planner. Our team has helped thousands of people handle their student loan debt.