If you want to make sure you get Public Service Loan Forgiveness (PSLF), you’re going to love this guide.
I’ve advised over half a billion dollars in student loans, personally, and these are the 107 best tips that I’ve discovered over the past five years.
Borrowers ask me all the time, “Have you actually met anyone who’s received forgiveness?”
Not only is the answer yes, but I’ve interviewed the first couple ever to BOTH receive Public Service Loan Forgiveness.
If you apply my tips to your individual situation, you could save five- or six-figures more than if you hadn’t read this blog post.
Congress created the Public Service Loan Forgiveness program in 2007. And as of 2020, 99% of borrowers who’ve applied for PSLF have been rejected.
Ignoring the fact that this is an extremely misleading statistic, read these tips so you’ll be in the 1% that gets approved.
Identify qualifying loans
The first step is making sure your student loans qualify for the PSLF program. To qualify, you must make 120 cumulative monthly payments under an income-driven repayment plan while working in a full-time government or not-for-profit job.
Additionally, only Direct Student Loans issued under the William D. Ford loan program can be forgiven. The good news is that many other kinds of student loans can qualify for PSLF, but they must first be consolidated into a Direct Loan.
Examples of loans that qualify for Public Service Loan Forgiveness
To know if you owe Direct Loans, login to nslds.ed.gov. You’ll see a table of all the loans you owe through the Department of Education.
Any of the loans listed that match one of the following types below qualify for PSLF.
1. Direct Stafford Subsidized Loans. This kind of loan is usually taken out for undergraduate programs.
2. 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.
3. 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.
4. 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.
Loan types that could qualify for PSLF
Before 2010, the Direct Loan program was a small part of the total federal student loan portfolio. Even after 2010, borrowers will take on loans that aren’t Direct Federal Student Loans.
Any of the following types of student loans can qualify for PSLF if you consolidate them into a Direct Consolidation Loan.
If you don’t see your loan listed when you apply to consolidate, you can use the “Add Loans Button” on studentaid.gov and manually include it.
5. Parent PLUS Loans. This type of loan is listed under your parent’s account. You can’t receive Public Service Loan Forgiveness for Parent PLUS Loans unless your parent qualifies on their own. That’s because Parent PLUS debt legally belongs to the parent, not the student.
To get PSLF on Parent PLUS Loans, your parent needs to consolidate the loan into a Direct Consolidation Loan and apply for the Income-Contingent Repayment (ICR) plan. There are other more complex strategies for receiving PSLF on Parent PLUS Loans, including Double Consolidation.
6. Federal Family Education Loans (FFEL). FFEL loans were the most common type of student loan prior to 2010. You could’ve borrowed them for undergraduate or graduate programs. They’re also the most common culprit when your student loans don’t qualify for Public Service Loan Forgiveness.
The bad news is that any payments you made on your FFELs don’t qualify for PSLF. The good news is you can start at month zero by consolidating any FFELs into a Direct Consolidation Loan. You don’t need to include any other kind of loans to consolidate FFELs. You generally want to avoid including any Direct Loans in a consolidation with a FFEL unless the Direct Loan has zero credit toward Public Service Loan Forgiveness.
7. Perkins Loans. The Perkins program is discontinued for new borrowers, but many borrowers still owe Perkins Loans from prior years. You can’t consolidate a Perkins Loan unless you include at least one other FFEL or Direct Loan.
Generally, consolidating Perkins for PSLF is only worth it if you take this action within the first year of the program.
8. Health Education Assistance Loan (HEAL). Created in 1978, this program has been discontinued for over 20 years. It’s exceedingly rare to see a HEAL loan, but if you have one you can consolidate it into a Direct Consolidation Loan, too.
9. Health Professions Student Loans (HPSL). Perhaps the most common type of student loan issued by the Department of Health and Human Services, this loan is typically issued at a 5% interest rate and often serviced by Heartland ECSI Servicing.
Many borrowers in dental and medical school programs mistakenly assume HPSLs are private student debt. That’s not the case, and you can consolidate an HPSL with at least one FFEL or Direct Loan to get Public Service Loan Forgiveness on any HPSL balance.
Forgetting to consolidate HPSLs is a common five-figure error among borrowers.
10. Loans for Disadvantaged Students (LDS). Loans for Disadvantaged Students are just another type of loan issued by the Department of Health. It must be consolidated to be eligible for PSLF.
11. Nursing Student or Nursing Faculty Loans. Issued to undergraduate and graduate students pursuing nursing, this type of loan is based on financial need and issued based on the results of the FAFSA form submitted by a borrower. It can be consolidated and made eligible for PSLF.
12. Other less-common loan types. These loans also don’t qualify for PSLF unless consolidated: Guaranteed Student Loans (issued before 1992), National Direct Student Loans, National Defense Student Loans, Auxiliary Loans to Assist Students, and Supplemental Loans for Students.
The Department of Education has a student loan program similar to a never-ending sandwich. Sometimes old programs get discontinued but it takes decades to end them. If you have any of these rare types of student loans from years ago, you can also combine them into a Federal Direct Consolidation Loan, which is eligible for PSLF.
Loans that can’t qualify for PSLF
If you have any of the following types of student loans, you unfortunately can’t get them forgiven using the PSLF program.
13. Private student loans. A private loan often has a high interest rate. If studentaid.gov won’t allow you to include a student loan in your consolidation, it’s most likely private.
Private student loans are never eligible for PSLF, which is why we strongly encourage borrowers to seek out federal student loans if there’s even a chance they might pursue student loan forgiveness.
14. Refinanced loans. When you refinance your student loan, you create a new private loan held by a private company. That new loan is ineligible for PSLF even if it paid off an eligible Federal Direct Loan. That’s why we never recommend refinancing unless you’re positive you won’t benefit from loan forgiveness programs.
15. Student loans from family. From having made thousands of student loan plans, we see students borrow from the “Bank of Mom and Dad” all the time. Unfortunately, this kind of loan isn’t an eligible loan for PSLF. That’s why we generally recommend against borrowing from family for higher education costs.
Choose a qualifying payment option
You’ve figured out if you have qualifying loans that can be forgiven. Now you need to figure out which payment plan to select so that you 1) qualify for PSLF, and 2) pay as little as possible.
Most of the plans that qualify for PSLF require paying 10% to 20% of your discretionary income (which is Adjusted Gross Income minus 100% to 150% of the federal poverty line).
16. Income-Based Repayment (IBR). There are two forms of Income-Based Repayment. One requires you to pay 15% of your discretionary income, and the other asks you to pay 10% of your discretionary income.
The “new IBR” is only an option if you had no loans before July 1, 2014. You can exclude your spouse’s income by filing taxes separately under this plan. IBR is usually not the best payment option for PSLF.
17. Pay As You Earn (PAYE). PAYE is generally the best payment plan to use for Public Service Loan Forgiveness. It only requires you to pay 10% of your discretionary income, has a cap on payments (no more than the Standard 10-year plan), and allows you to exclude your spouse’s income if you file taxes separately. You’re only eligible for PAYE if you had no student debt before October 1, 2007 and took out at least one loan after October 1, 2011.
18. Revised Pay As You Earn (REPAYE). REPAYE requires 10% of your discretionary income. There’s no cap on payments and you can’t exclude your spouse’s income, even if you file taxes separately. Sometimes REPAYE lets you pay less than IBR though (because 10% is less than 15% of income). That said, we recommend the PAYE plan as a first choice.
19. Income-Contingent Repayment (ICR). Generally, the only borrowers who should use ICR for the PSLF program are parents who owe Parent PLUS Loans. You have to consolidate this type of debt into a Direct Consolidation Loan.
ICR requires 20% of your income, with a deduction of 100% of the poverty line (instead of the usual 150%). ICR isn’t a very good income-driven repayment plan, although it does qualify for PSLF. You also might be able to avoid ICR by using the double consolidation loophole.
20. Standard 10-Year repayment. This plan is just what you’d have to pay to get rid of your original student loan balance in 10 years. A good rule of thumb is that this monthly payment is roughly equal to 1% of your loan balance.
A $30,000 student loan would have a Standard 10-year plan payment of about $300 a month. If you don’t qualify for any income-driven repayment plans, then the Standard 10-year plan could be a way to still receive significant forgiveness. Note the Standard 10-year plan doesn’t exist for Direct Consolidation Loans.
Repayment Plans that don’t qualify for PSLF
Some legislative bills like the What You Can Do For Your Country Act would make these payment plans eligible for the PSLF program. Currently though, you’d be out of luck if you used any of the following payment plans.
21. Graduated. Your payment starts out low and gradually increases. This payment option results in the full payoff of your loans, eventually. However, it doesn’t qualify for PSLF.
22. Extended. You pay the same monthly payments for 25 years, but the amount is well below the Standard 10-year plan. Perhaps for this reason, Congress excluded the Extended Plan from PSLF qualification.
23. Standard Repayment Plan for Direct Consolidation Loans. When you consolidate your student loans, your standard 10-year payment option goes away. The new “Standard Repayment Plan for consolidation loans” has a repayment period of 10 to 30 years and doesn’t qualify for PSLF.
Jobs that qualify for PSLF
You have qualifying loans and a qualifying payment plan selected. Now, you need to be working full-time for a qualifying employer at the same time to make progress toward the 120 monthly payments needed to get your student loans forgiven.
You must be working the greater of 30 hours a week or your employer’s definition of full-time and receive a W-2 pay stub from one of the types of employers listed below.
24. Government organization. A governmental organization is a federal, state, local, or tribal government, organization, agency, or entity, a public child or family service agency, a tribal college or university, or the Peace Corps or AmeriCorps. This category is quite broad.
25. 501(c)(3). If your employer can receive a tax deductible donation from the IRS (university, charity, nonprofit hospital, etc.) and you find it listed under the IRS list of 501(c)(3) organizations, then you have a qualifying job.
26. Other non-501(c)(3) nonprofit organizations. This is a tough category to define. The definition requires that the employer must provide one of following services:
- Emergency management
- Military service
- Public safety
- Law enforcement
- Public interest legal services
- Early childhood education
- Public service for individuals with disabilities and the elderly
- Public health
- Public education
- Public library services
- School library services
- Other school-based services.
Most borrowers in the PSLF program will qualify based on the prior two categories.
Jobs that don’t qualify for Public Service Loan Forgiveness
Although by one estimate about 25% of jobs in America qualify for PSLF, these types of employers don’t qualify for the program.
27. Partisan political organization. Working for the Democratic or Republican National Convention? That’s not eligible for PSLF. This type of employer is a bit more broadly defined than you might think. A recent court ruling found that workers for an organization that lobbies on behalf of Vietnam Veterans didn’t qualify because their work was technically related to lobbying, even if for a sympathetic group.
28. Labor union. Any type of labor union explicitly does not qualify for PSLF.
29. For-profit employers. Private sector employment is the largest category in America. Although many employees in private sector jobs undoubtedly provide services to the public, you can’t qualify for PSLF if your employer is for-profit.
30. Religious-based jobs. If the primary purpose of your job is proselytizing, then you don’t qualify for PSLF. However, if you work for a religious-based nonprofit and your primary job purpose isn’t religious, then you might qualify. Pastors don’t qualify but a VP of fundraising for a Catholic charity does qualify.
31. 1099 contractors. Many workers aren’t employees, legally. Uber and Lyft drivers are a common example of 1099 contractors. You might receive your pay from a particular organization, but you aren’t an employee. Any 1099 contractor isn’t eligible for PSLF regardless of your job task.
Jobs that might qualify one day
Presently, you probably will not receive PSLF by working in a job matching the categories below, but it might happen at some point.
32. Nonprofit physician groups. Some states like California and Texas have rules requiring hospitals to employ physicians, indirectly, instead of as employees. Kaiser Permanente is a common example.
The physicians at Kaiser generally work for a for-profit physicians’ group even though they work at a not-for-profit hospital in terms of their location of practice. Democrats in the House want to expand PSLF eligible jobs to include physicians in these kinds of employment situations.
33. Starting your own nonprofit. Theoretically, you could start your own nonprofit to qualify for PSLF. You would need to draw a full-time, W-2 salary and the nonprofit would have to be legitimate. This is extremely hard to do in practice, and there are some groups that claim they can help you do this to qualify for PSLF, which we don’t believe is legal. However, future rulings might make it easier to run your own non profit to qualify for PSLF.
Restructuring your loans
Most borrowers who started school later than 2010 won’t need to restructure their student loans to qualify for PSLF.
There could still be situations though where consolidating your student loans could save you money even if it’s not necessary to qualify.
34. Consolidate everything after graduation. If you have federal student loans, haven’t made any payments, and already have your degree in hand, then you’re eligible to consolidate your loans on studentaid.gov.
The usual grace period after graduation is six months, which falls to two months when you consolidate. This loophole can sometimes net you an additional four months of PSLF qualifying payments, and it makes your loans much easier to certify for PSLF.
35. Don’t consolidate if you’ve made payments. If you have already entered one of the IDR repayment plans, you shouldn’t consolidate unless you have loans that aren’t Direct Loans. That’s because any loan that you consolidate starts with zero months of payments toward any forgiveness program.
That’s not a big deal if you consolidate FFEL, Perkins, or Department of Health student loans that already didn’t qualify. However, if you consolidate Direct Loans that already have a payment history, you’re wasting your money and throwing away payment credit that could get you to forgiveness faster.
36. Consider targeted consolidation for loans that don’t qualify. Remember that only Federal Direct Loans qualify for PSLF. That means if you owe any of the types of loans mentioned earlier that aren’t Direct Loans, you’ll need to consolidate them into a Direct Consolidation Loan.
37. Add your smallest direct loan to consolidate weird loan types. For Perkins, Department of Health, and some other federal loan types mentioned earlier, you’ll need to add at least one Direct or FFEL loan to process a consolidation.
That’ll start your PSLF clock at zero for the new loan. Hence, we recommend adding the smallest loan possible to consolidate ineligible federal student loans to make them eligible for PSLF. For example, a $50,000 Health Professions loan can be consolidated by adding a $5,000 Stafford Subsidized Loan to the consolidation.
38. Don’t confuse consolidation with refinancing. You consolidate federal student loans on studentaid.gov. You refinance your student loans with a private lender because you plan on paying off the balance in full with no federal loan forgiveness.
Federal consolidation eliminates any payment credit you’ve built up toward forgiveness. Refinancing eliminates the possibility of forgiveness forever. Don’t confuse the two. The only appropriate restructuring of your student loans for the PSLF program is a Federal Direct Consolidation Loan. Even then, only use that if you’re in a grace period or you have ineligible loans you’d like to make eligible for forgiveness.
PSLF: How to pay less each month
Having a qualifying payment plan with the right type of loans at a qualifying job is just the start of saving as much money as possible through Public Service Loan Forgiveness.
A lot of strategy goes into how to minimize your monthly required payments. Here are a few of the best techniques we’ve discovered over time to limit your taxable income and thus reduce your required payments under income-driven repayment options.
39. Pay 10% of your income instead of more. It sounds simple, but there are likely hundreds of thousands of borrowers paying back their loans on the old IBR plan, incurring a monthly payment equal to 15% of their income. Instead, make sure you pay 10% of your income under a plan like PAYE or REPAYE. There are some exceptions where IBR is cheaper but not many.
40. Use your most recent tax return to certify. Did you know that if you use your pay stub to certify your payment that you don’t get credit for any pre-tax deductions like retirement? Use your tax return to certify your IDR plan payment because 1) it’ll likely show a lower number than your pay stub, and 2) it’s more compliant as it includes all sources of taxable income by definition.
41. Update your income whenever it drops. You don’t have to wait until your IDR plan is up for recertification to report a drop in income. Let your loan servicer know as soon as your income falls, such as when you change jobs, reduce your hours, or become unemployed. Doing so reduces your monthly payment, and it’s fine to use your pay stub to certify in this situation.
42. Max your Traditional 401(k). All IDR plans take a percentage of your taxable income. One of the best ways to pay less each month on your student loans is reducing that taxable income through legal means, such as saving in a pre-tax 401(k). You can contribute up to $19,500 in 2020, which would save you 10% of that amount under the PAYE plan ($1,950 per year). If you’re pursuing PSLF, this is like an additional marginal tax savings since the government forgives any remaining balance.
43. Max your Traditional 403(b). Most employers offer either a 401(k) or a 403(b). You can only contribute up to $19,500 to one of them as your employee contribution. Having a 403(b) removes any doubt that you work for a qualifying employer for PSLF, so contribute as much as you can up to $19,500 to reduce student loan payments on PSLF.
44. Max your SIMPLE IRA. Some smaller employers might not have the resources to offer employees a 401(k) or 403(b). In that case, you might be offered a SIMPLE IRA, which has a $13,500 max contribution in 2020. You can’t contribute to both a 401(k) or 403(b) and a SIMPLE IRA.
That said, if you have one, a SIMPLE IRA can reduce your student loan payment by reducing your Adjusted Gross Income when you contribute to it.
45. Max your Traditional IRA. If all else fails and you have no access to any retirement plan through your work, you can make a deductible $6,000 contribution to your Traditional IRA, which you can set up with almost any financial institution of your choice. Note that you do not get to reduce your taxable income with a Roth IRA. If your goal is to save money on your student loans, you need to use the Traditional version.
46. Max your Solo 401(k). What if you have a non profit or government job but you do some side contractor work? One example is a physician who takes on extra shifts at another hospital system under a 1099 contractor arrangement. In that case, you could set up a Solo 401(k) and contribute up to 25% of your wages as an “employer match.”
This is in addition to your $19,500 employee contribution to your retirement plan at work. You cannot contribute an additional employee contribution, so make sure your plan sponsor codes your contribution the right way. You can set up a Solo 401(k) at most large investment companies.
47. Max your SEP IRA. Easier to set up than a Solo 401(k), a SEP IRA can be set up at any large investment company (including options like Betterment and Vanguard). You can contribute up to 25% of your earnings from contractor work on the side in addition to your 401(k) or 403(b) contribution at work. The limit for 2020 is $57,000 or 25% of your compensation, whichever is less.
48. Max your HSA. Many employees of large non profit and government employers will have a high deductible insurance option with a Health Savings Account. You can contribute up to $3,550 as an individual or $7,100 as a family in 2020.
HSAs are the only triple tax exempt account, as you contribute the money tax-free, it grows tax-free, and you can pull the money out tax-free if spent on healthcare expenses. They also reduce your AGI and thus your student loan payment.
49. Max your 457 plan. Only offered to specific government and nonprofit employers, a 457 plan often limits participation to highly compensated employees. You’ll need to ask your HR if you qualify. If you do, you can contribute up to $19,500 as an additional retirement plan contribution on top of your 401(k) or 403(b).
If you pull your money out, you have to pay ordinary income taxes but you don’t have early withdrawal penalties. 457 plans might be harder to move to an IRA if you change employers, so use this type of account after you have made max contributions to all your other pre-tax accounts.
50. Harvest capital losses up to $3,000. You can write off up to $3,000 of losses from investing against your taxable income every year, even if you take the standard deduction. You can use tax loss harvesting whenever the market drops to generate paper losses and save 10% on your student loan payment next year if you take the full $3,000 write off. Any unused losses carry forward to the next year. We cover this concept in detail in our investing course.
51. Claim the student loan interest deduction. If you earn less than $85,000 if single or $170,000 if married, you might be able to claim the student loan interest deduction up to $2,500 of interest paid. At most, this could save you $2,500 off your taxable income. Under PAYE or REPAYE, this saves you $250 off next year’s student loan payment. Every little bit helps.
52. Consider professional real estate investor status if you’re married. This is a complex concept, but if you perform at least 750 hours of real estate activities and real estate is your primary profession, you might be able to write off real estate investing losses against your active income from other sources.
How we see this benefiting PSLF borrowers is when a PSLF-eligible lawyer or physician has a spouse who qualifies as a professional real estate investor. That spouse might be fixing and flipping houses, generating large paper losses. These losses can offset the income from the PSLF borrower’s day job, resulting in a payment that in some extreme cases can be as low as $0 a month.
Only the most aggressive real estate loving married couples should look into this. A PSLF-eligible borrower can’t accomplish this on their own since you’d have to make an argument to the IRS that you have two full-time jobs and real estate takes more time than your day job.
What to do if you get married or have kids
Most student loan borrowers get married at some point. This life event has a huge impact on how much you will have to pay on your student loans.
In some cases, getting married can actually reduce your student loan payment under PSLF. For the times that your payment doesn’t fall, you can at least prevent it from increasing. Having children even as a single parent can also affect your student loan payments.
53. Consider PAYE filing separately. If you file taxes married filing jointly, you must include your spouse’s income in your monthly payment. If you file married filing separately, you can exclude your spouse’s taxable income from your payment. If you both have loans and plan to pursue PSLF together, your services don’t count your income twice and you can just file jointly. Filing separately is usually for spouses where only one has loans.
54. If you can’t use PAYE, consider IBR filing separately. Sometimes 15% of just your income is less than 10% of your household income under the REPAYE plan. Recall that some borrowers cannot use PAYE because of having loans before October 2007. If that’s you, then you could use the Income-Based Repayment plan, file taxes separately, and only pay 15% of your income instead of using household income.
55. If your spouse has loans, too, then perhaps file jointly. Your servicer splits your combined payment proportionately based on the size of your loan balance. If your spouse has large loans and plans to pursue PSLF, you don’t need to worry about filing separately. If your spouse won’t use PSLF, but might consider the 20-year forgiveness option under the PAYE plan, you could also file taxes jointly.
56. Consider the PAYE/REPAYE filing separate loophole. This is a rare case, but sometimes both spouses want to pursue PSLF, but one has a large balance and the other has a small balance. You can file taxes separately, and pay on the large loans under the PAYE plan based on one spouse’s income.
Then the other payment is proportional based on what your REPAYE payment would have been. In other words, if one spouse owes 10% of the loan amount and your combined monthly payment is $2,000 a month, the spouse with the small debt would only pay $200 a month and the spouse with the larger debt might only have to pay 10% of their income. The combined payment could well be significantly lower than filing taxes jointly.
57. Use the breadwinner loophole. Only available in community property states, when you file taxes separately you can equally distribute income across both spouses, even if one spouse makes considerably less money. That allows a dentist with $200,000 of income and a stay at home spouse for example to file separately and pay 10% of half of $200,000 instead of 10% of their entire income. This powerful loophole can cut your monthly payment by as much as half.
58. Use the reverse breadwinner loophole. What if you live in a community property state but you’re the lower earner? In that case, if you filed taxes separately and excluded your spouse’s income from your IDR payment, you’d be paying more if you used your tax returns to certify your income. That’s because half your household income in this case would be higher than your income individually.
In this situation, you can use “alternative documentation of income” with most servicers, which usually means sending in your pay stub along with any other sources of income you need to document.
59. Use FMLA leave to get three-months credit for each child born. You can already take up to three months of leave from your employer if you have a child in a calendar year. You should know that this leave doesn’t need to be paid for you to receive PSLF credit as long as you keep your payments going. This is a common mistake for new parents pursuing PSLF who don’t get as much credit during parental leave as they should.
60. Amend your tax return from “separate” to “joint” when your child turns two years old to get refunds. This is a gray area under the rules, but there’s nothing explicitly prohibiting you from amending old tax returns from “separate” to “joint” up to three years in the past. You’d do this to get a refund on any extra tax penalty from filing your taxes married filing separately.
To avoid looking like you’re doing this explicitly because of your student loans, we suggest waiting until your return is at least two years old to file an amendment. In that case, you no longer are using that return for your IDR payment. You’d at least be able to truthfully state that you always used the most recent available tax return if the PSLF program ever develops audits. We wouldn’t recommend taking this action unless your tax penalty is at least $1,000 a year extra from filing separate vs. joint.
Certify your PSLF status
Now that you’re paying as little as possible on eligible loans using an IDR plan while working in the public sector, you need to build a paper trail.
That way, you can be assured that you won’t go through the nightmare of tracking down all your old bosses from 10 years ago when filing your application for forgiveness.
61. Send in the PSLF certification form. Amazingly, many borrowers who tell me they’re pursuing PSLF haven’t submitted the PSLF certification form yet. That’s a bit like saying you’ll wait around to obtain your child’s birth certificate until they go to elementary school. You don’t have to do it now, but it’s a bad idea to wait. Once you certify your status, you’ll identify problems with your payment count.
62. Use the online recertification process. You don’t need to submit the paper version of the PSLF ECF form any longer! You can recertify your PSLF status completely online now and reduce the energy spent any time you need to send snail mail.
63. Remember to sign all the right spots. Twenty-three percent of all PSLF applications get denied when borrowers or employers forget to sign the certification forms in the right box. That’s a very common error and something you’d be upset about if it prevents you from getting your loans forgiven for several months. Double check you and your employer have signed and dated all forms.
64. Make it an annual habit. Once you’ve certified your PSLF status before applying, you need to resubmit the form at least annually so that you build your paper trail toward 10 years of PSLF credit. If you fail to do this, then you’re taking a gamble with having to track down old employment information at the end of the 10-year period.
The first PSLF ECF form is by far the hardest to successfully submit. Every form submission thereafter should be a cakewalk but it’s something you still need to remember to do.
65. Prepare for your loans transferring to a new servicer. If you don’t already have your loans at FedLoan Servicing, once you submit your PSLF certification form your loans transfer over to FedLoan over the course of a couple months. You may need to reapply for your IDR plan or furnish them with additional information. Keep alert to any mail or emails from FedLoan as the transfer of your loans to the only servicer that manages PSLF is frequently a gut-wrenching process.
66. Keep a paper trail. You don’t have to do this, but the most organized borrowers keep paper copies of their confirmed status in the PSLF program. Some have even sent me PDFs of every interaction they have ever had with FedLoan Servicing with representative ID numbers as well.
That might be going overboard, but it’s a good idea to take a picture of all the correspondence you get about PSLF with your phone. You’ll want that to sync with a cloud-based photo storage app and then you can be happy with a “digital paper trail.”
You can pursue PSLF along with other federal and employer student loan forgiveness programs. However some have been known to cause problems when used together.
Can Be Used Along With PSLF
67. VA EDRP. You can actually use the VA student loan program along with PSLF. You just need to know that they will only reimburse you for your student loan payments. If you pay more than your IDR plan requires, then make sure your loans don’t get put into “paid ahead status”. This could actually lose you money by having months that don’t count toward the 120 payments needed.
68. NHSC. Double check with your NHSC coordinator about how you need to use your lump sum award. If you use it all on your loans at once, that could only count as one month of payment credit. You’re better off using NHSC loans to pay off any private debt. Also, check with the NHSC program if you can use the award to reimburse monthly payments you’ve made during the calendar year.
69. Employer repayment programs (that reimburse you). If the employer just wants proof that you’ve made student loan payments, then you’ll be in good shape accepting a benefit like this if the employer just gives you a check at the end of the year. There’s no reason for the employer not to do this, as employers receive no tax deductions for student loan payments they make in lieu of bonuses they pay you.
Programs that don’t combine:
70. Teacher Loan Forgiveness. Stupidly, the government named one of the primary student loan forgiveness programs after teachers, made it significantly worse than PSLF, and made it so that teachers participating in it cannot receive concurrent credit for the PSLF program. Teachers with less than $20,000 in student debt are the only ones who should consider using this poorly designed program.
71. Employer student loan repayment (that requires lump sum payments). Unfortunately, many nonprofit hospitals make lump sum contributions directly to your loan servicer, wasting thousands of dollars in many cases. Just make sure any employer repayment assistance program you accept helps you with PSLF and doesn’t just add to your taxable income for no reason.
Fixing your PSLF status
You have a very high chance of your PSLF payment count or status in the program being incorrect at some point. Here’s what you need to do if that happens to you.
72. Call your servicer. This is an easy way to waste dozens of hours, so be careful. When you call your loan servicer, expect that any information you receive might be inaccurate. Use this step only for verifying if you submitted forms with signatures in the right box and other clerical tasks easily verified by a phone representative.
73. Request a manual review. This process takes approximately one year to complete. There are huge data problems with loans transfer from another servicer to FedLoan that frequently result in accurate payment counts. Naturally, you’ll want to file a request for a review to make sure you have the correct number of payments credited to you. Just know that it’ll take a long time because of the backlog. You need it finished by the time you’re eligible to receive PSLF, so be patient.
74. Contact the Ombudsman. I’d imagine this resource gets easily swamped, but you could try to contact the Federal Student Aid Ombudsman office if you feel like you’ve exhausted all your other options. They’ll likely not be as effective as some other options on this list.
75. Contact the PHEAA case worker. FedLoan is owned by PHEAA. You can reach out to FedLoan’s “internal Ombudsman” with concerns over how the process has been managed with your PSLF status. I would spend no more than 10 minutes with a regular phone representative before escalating to a group with more specialized knowledge such as this one.
76. Contact your congressperson. We have had a lot of luck with readers contacting the constituent services department of their local Congressperson with concerns about their incorrect PSLF status. When the problem is just an inaccurate payment count, we have seen borrowers have a manual review expected to take one year, get expedited and take only two weeks.
77. Contact your Senator. Similar to contacting your Congressperson, getting one or both of your Senator’s offices involved might speed up getting your FedLoan issues resolved. Congress sets the rules that decide who gets lucrative federal student loan contracts, so naturally servicers respond much faster to grievances from Congressional offices than when you contact them as an individual.
78. Contact the CFPB.The option to submit a complaint to the CFPB does not help that much in getting your PSLF problem fixed. However, it does end up in a database that helps improve service for all student loan borrowers over time. We’d suggest other options on this list to get your issue corrected.
79. Check your NSLDS file (to see repayment period). You can go to nslds.ed.gov and click on the “my student data download” button above the table summarizing all your loans. The resulting download looks like the ugliest TEXT file of all time.
That said, each loan has a detailed repayment history listed line by line that shows when you made payments, entered forbearance, and entered repayment again. I frequently ask clients to look at their NSLDS files to know for certain what payment history they have versus what FedLoan might tell them. NSLDS forms can still be incorrect, but they’re significantly more accurate than loan servicer data.
Handling Servicer Problems
FedLoan has often created huge problems for borrowers with incorrect or misleading information. You need to know how to respond to common servicer errors that we see.
80. Don’t blindly believe what phone reps tell you. The loan servicers get a contract in part because they bid as low of a cost as possible. A primary component of that cost is paying phone reps to staff call centers. That means you likely speak with someone making low five-figures in compensation when you call your servicer.
Some loan servicer reps are fantastic. The unfortunate reality though is when you pay low wages you will attract an average level of talent that is lower. In other words, you cannot trust a phone rep making $15 an hour like you would your CPA. Take everything your servicer rep tells you with a grain of salt.
81. Ignore the dreaded “you no longer qualify” letter. Sometimes FedLoan will send a letter warning that you no longer can pay under an IDR plan. This happens when your income is high enough that your payment gets capped at the Standard 10-year plan.
Ignore this letter, and FedLoan will simply keep you at this capped payment level, allowing you to continue receiving PSLF credit. If you call, you’ll probably get moved to the REPAYE plan, and you’ll have to pay more each month. Even worse, you won’t be able to switch back.
82. Know what payment you should owe in case it’s too high. Servicers will calculate the wrong payment for borrowers all the time. Sometimes I have seen them even double count two spouses’ incomes. Use something like our free calculator to make sure your payment is as low as it should be.
83. Switch payment plans with $5 payments instead of the standard 10 year. When you change repayment plans, say from IBR to REPAYE, you might get asked to pay one month at the Standard 10-year plan to switch. In fact, you can pay a one-time $5 “manual forbearance” instead. You can now request this change in IDR plan on studentaid.gov, with a spot to enter that you request to pay $5 if you need to switch payment options.
84. Ask for refunds if you’ve made overpayments. Believe it or not, many loan servicers will allow you to request refunds for any payments you made in excess of what you owed as long as you do so within 90 days. I have seen some borrowers make five figure lump sum payments not knowing they needed to pursue complete forgiveness under PSLF. When they asked their servicer for a refund, the servicer complied. That’s how we found out about that option.
85. Avoid paid ahead status. FedLoan used to automatically delay your future payments with any excess payments at all. Now you can specifically request that any overpayments not put you into the dreaded “paid ahead status.”
That simply means you don’t have to make a payment for months in the future because the servicer considers your excess payments as a request to delay your next due date. They don’t give you PSLF credit if you get into paid ahead status, so avoid any extra payments except for the absolute minimum. If you must pay extra (because of a program like NHSC or an employer repayment benefit), make sure they continue your required monthly payments.
Biases that Reduce Your Chances of Getting PSLF
Most people on social media know absolutely nothing about the PSLF program. Many personal finance personalities also know little about this program, but discourage you from participating because “there’s no way the government will live up to its end of the bargain.”
Make sure these biases don’t prevent you from receiving PSLF.
86. Family. Your conservative father knows for sure that there’s no way you’ll ever have your student loans forgiven because “you just can’t trust the government.” Your liberal brother is positive that right-wing administrations “will never honor his word to public servants.” Family members tend to have a lot of opinions but few of them are well informed for a program as niche and specific as PSLF.
87. Politics. Your own politics can cause you not to get PSLF. This happens when you let your positive or negative views of who is in office influence your decision to pay off your loans or not. When I see borrowers post that they’ve given up on PSLF, some political statement usually follows.
88. Fear of the unknown. Why do so many of us love working at large stable employers? It’s because we like safety. Pursuing PSLF at this point is uncertain because we have not seen billions of dollars be forgiven yet. Anxiety about this lack of certainty prevents borrowers from feeling comfortable with the program.
89. Fear of high interest. Your interest isn’t as bad as you think it is. Some borrowers assume if they attempt to use PSLF, but then opt out later, the interest will be so high that it’ll ruin them. Some then decide it is better to refinance to mitigate that risk. That’s silly as student loan interest grows at a simple rate of interest instead of compound interest.
90. Fear of Your debt size. Some borrowers like to pay extra on their loan balance because of a fear that the debt would be unmanageable if they ever left the PSLF program. A better path would be to put any money you’d normally want to pay on your student loans into a brokerage account for easy access in case you needed the funds to pay down your balance at a later date.
Maintaining Your PSLF Status
The last step to ensuring PSLF for you and your family is to maintain your status in the program until you hit the 120 months of credit over at least 10 years.
91. Remember payments are cumulative. Some borrowers get worried about what happens if you forget to certify or miss a payment or need to reduce your hours for a couple months. You shouldn’t be worried. Your PSLF payment clock is cumulative, meaning that you can pick up where you left off if you ever have a gap in qualifying employment or cannot afford the payments for a couple months.
92. Strategic forbearance. Imagine that you take a couple year hiatus from public sector employment to work in the private sector. You have up to three years of forbearance on your federal Direct loans. If you think you will be returning to public sector employment, consider using a year or more of that forbearance to put your payments into paused mode. After all, why make any payments unless they qualify for the Public Service Loan Forgiveness program?
93. Continue making payments. At the risk of sounding obvious, if you change your bank account information, update it. You just need to make sure that you keep payments going on your loans regardless of what else goes on in your life.
94. If your payment gets capped, that’s OK. Recall on the IBR and PAYE plans, the payment can never be more than the Standard 10 -year monthly payment. When you earn too much to qualify for a lower payment than that, you just need to ignore your servicer. Continue sending in your PSLF certification form and the capped payments will count toward forgiveness.
95. Certify your income-driven payment annually. Unless you want to pay more than 10% of your income, you’ll need to resubmit your income information every year. That requirement will be increasingly automated in the future.
96. Continue sending in your PSLF forms. Remember you want to certify your PSLF status at least once a year. It’s all about building that paper trail and not forgetting to ask your boss to sign off each year so there’s no question when you apply.
Applying for PSLF
Finally, the time has come for you to submit your PSLF application. Here’s how to make the process as smooth as possible.
97. When to send in the form. We suggest sending in the application immediately following your 120th month of payments. If you have certified your PSLF status, you’ll know exactly when that is.
98. Receive refunds for overpayments. If you send in your PSLF application later than you should have, know that the government has been refunding excess payments made after the 120th payment. That’s fantastic news and should significantly lower your anxiety level.
99. Appealing a denial. Most likely, if you get denied at this point it will be because you didn’t submit regular employer certification forms. Your remedy would look much like those listed in the “Fix Your PSLF status” section of this post.
100. Apply for TEPSLF. Within a few years, I expect the TEPSLF fund will be gone. Also, the government is currently merging the TEPSLF and PSLF processes. Even so, if you didn’t qualify because you had the wrong kind of repayment plan and you owed Direct Loans for the entire 120 month payment period, apply for TEPSLF and see what happens.
101. Check to see if the debt is gone. Borrowers who I’ve interviewed who had their loans forgiven report that they logged into their FedLoan account one day and just saw a $0 balance. You’ll likely get a formal piece of mail describing your loan forgiveness in detail. Perhaps you’ll even want to get it framed!
102. Verify with a free annual credit report. Go to AnnualCreditReport.com and request a free report from one of the major bureaus. Look for the details of your federal student loan balance and confirm that they show $0 balances. You might wait a couple months after forgiveness to make sure you’re not looking at old data.
Getting help with PSLF
103. The easy DIY approach. Read this post, make sure you follow all the steps and be confident that you have a high probability of getting tax free loan forgiveness thanks to your service to the public.
104. Avoid companies with recurring charges. Some borrowers exclaim, “I just want to pay somebody to do all this for me.” Federal agencies have made it clear they don’t like it when companies gain access to borrowers’ accounts to submit things, like the PSLF ECF form and IDR recertification.
Any company that charges you a recurring fee to manage your PSLF progress at best is overcharging for the service. You can easily manage the annual PSLF process yourself. At worst, these companies could be fraudulent so be careful.
105. Avoid financial professionals using student loans as a gateway to selling more expensive products. Many “financial professionals” have ulterior motives besides you getting the best student loan advice. Some examples I’ve seen include commissioned sales people faking student loan expertise to sell high fee mutual funds, whole life insurance, disability insurance and more.
Ethical financial professionals will usually admit they don’t know enough to advise you when a subject area is complex enough to warrant writing 107 tips. The aggressive ones will use any opening to gain your trust to make more money.
106. Pay a one-time fee for a review of your repayment plan. If you want a strategic look at how to get the most out of PSLF, that’s what Student Loan Planner does, full time. We’ve advised thousands of borrowers and you should take a moment to check out our reviews. I think they speak for themselves.
107. Leave a comment on this post with questions you have. One of the best ways to get help! Just ask a question in the comments below.
Conclusion: PSLF is the best tax-free student loan forgiveness program
Clearly, Public Service Loan Forgiveness is the best forgiveness program available.
After only 10 years of payments, the government wipes your entire balance, tax-free. Although I don’t think the program in its current form will last forever, repeal proposals have never included current borrowers.
So pursue PSLF with everything you’ve got. I’ll look forward to you celebrating when your student loan debt is gone.
Did I miss anything?
Do you have any concerns about the tips above? Sound off!