Most all of the stories I’ve seen about Public Service Loan Forgiveness (PSLF) statistics have focused on the supposed 99% rejection rate. NPR, Forbes, The Wall Street Journal, and The New York Times have all written articles about it. In fact, I’ve seen a similar version of the story written by almost every major national media news outlet.
While these statements are factually true, it’s not the full story by a long shot. Pretend a program like Medicare or Social Security had a lot of problems paying out benefits in the first few years of existence. Now pretend the national media focused on the application problems those first few thousand applicants had instead of the millions who would likely benefit down the road.
That’s what’s going on right now with PSLF statistics. In fact, I can’t think of any comparable government program that has been designed so poorly yet stands to provide such a large benefit to those who pay attention and take a proactive approach to managing their debt (e.g., reading personal finance blogs like these).
Here’s some of the latest PSLF statistics from the March 2019 report, along with what they mean.
PSLF stats do show a lousy success rate — for now
Here’s where the PSLF program stands currently after receiving 86,006 applications:
Total Debt Forgiven
Average Balance Forgiven
This PSLF success rate is less than 1%! Clearly you can’t count on PSLF, right? Wrong.
One of the most frequent emails and blog comments I get from readers and clients goes something like this:
“I saw in the news that PSLF has a 99% rejection rate. I don’t think I can trust this program with my financial future. What do you think, Travis?”
I think that back in 2007 when PSLF got passed, the vast majority of borrowers had non-qualifying loans issued under the Family Federal Education Loan Program (FFEL), not Direct Loans.
Income-Based Repayment (IBR) didn’t exist until 2009. Pay As You Earn (PAYE) came about around 2013. The Employer Certification Form (ECF) didn’t exist until around 2012.
Before IBR, you had to be a Ph.D.-level genius in the Department of Education bureaucracy to get on a qualifying plan. The only option was Income-Contingent Repayment (ICR). I can barely figure out ICR, and I’ve done over 1,000 individual student loan plans and think about student loans all day.
Needless to say, it was almost impossible to get on a qualifying repayment plan with qualifying loans prior to 2010. Add 10 years to 2010, and we get 2020 as being the very first date whereupon a fair number of people who did one-year master’s degrees might qualify.
Latest PSLF statistics show loads to be hopeful about
The data in this post mostly comes from the Department of Education’s PSLF report.
Here’s a collection of the stats that stood out to me the most:
- Average balance of approved PSLF borrowers: $89,841
- Total debt outstanding for borrowers with an approved PSLF Employer Certification Form: $97,912,935,516
- Cumulative number of approved borrowers: 1,089,846
Citing a sample of over 80,000 applicants with a less than 1% acceptance rate is an amazing headline. The problem is the other side of the story isn’t getting told. Over 1,000,000 borrowers have now been certified for PSLF, meaning that if they continue their service and their payments like they’ve been doing, they’ll qualify for PSLF.
That’s an astonishing number. Imagine one million borrowers with high debt and high levels of education all angry as hell if Congress tries to mess with that program for current borrowers. There’s probably at least another million out there right now that haven’t gotten around to submitting the form.
In fact, check out the annualized growth in the number of PSLF borrowers with at least one certification form approved:
Fourth Quarter of the Year
Percentage Growth in PSLF Borrowers
Source: Federal Student Aid
It’s slowing down, but that’s because the ECF form was brand new. Also, many borrowers will likely apply when they believe they’re eligible for forgiveness instead of applying along the way.
This double-digit growth percentage also means the number of certified PSLF borrowers will likely hit 2,000,000 within three years from now.
Difficult to get PSLF without working for the government or a 501(c)(3)
Many people know about the PSLF lawsuit that found you could get PSLF while working at a nonprofit that wasn’t a 501(c)(3). The problem is that very few people are getting approved who don’t work for a government or 501(c)(3) entity.
(for approved ECFs)
I assume 0% meant it rounded down to 0. In any case, if you want PSLF, don’t plan on it if you’re working at anything besides a 501(c)(3) or government employer as a W-2 employee full time.
Standard 10-year and standard consolidation repayment plans count for PSLF
A huge number of approved borrowers were using Standard Repayment Plans for their PSLF-qualifying payment. This is in stark contrast to the scary letters FedLoan sends out when you can’t pay based on your income anymore.
Repayment Plan Used by Approved PSLF Borrowers
If you want proof that borrowers can use Standard plans to get PSLF credit, there it is above.
PSLF statistics reveal most borrowers don’t fill out the form correctly
By far the biggest reason borrowers get rejected is that they didn’t finish the paperwork.
The second reason is they have no eligible loans. That probably means they have FFEL debt from before 2010 and got denied for that reason.
After 2010, only Direct Loans were issued by the Department of Education. All of those qualify for PSLF. That means we’ll see the “missing information” reason become even more dominant as the main culprit for borrowers being denied PSLF.
Usually borrowers are just missing a signature in the right place.
Most Common PSLF Rejection Reason
No Eligible Loans
Incorrect Form Type
Employer Not Eligible
PSLF statistics should make you want to use this program more, not less
When you see the terrible results of the PSLF program application process, just remember it will stay that way for several years.
The first year you’ll see lawyers get PSLF en masse is 2023 (2010 + 3 years of law school + 10 years = 2023). The first year physicians will get mass forgiveness is 2024 (2010 + 4 years of med school + 10 years).
Most of the borrowers getting approved right now have undergrad balances or earned one- or two-year master’s degrees. You can see this in the lower average approved student loan balances compared to the borrowers with approved PSLF forms.
With an interest group over 1,000,000 strong, PSLF is highly likely to stick around for a long time, for better or worse.
If you make financial decisions based on the incomplete headlines out there, you could be costing yourself massive amounts of money.
If you need help figuring out what to do for your own situation, give us a shout.