Maybe you’ve thought about reducing your hours at work, but you’re afraid of losing the Public Service Loan Forgiveness (PSLF) program. After all, you need to be full time for PSLF in order to get qualifying payments. After 10 years, the government wipes away your loan balance tax free.
However, what counts as full-time employment when you’re trying to qualify for PSLF? I had to do a lot of thinking when I got this question from a reader trying to help his wife:
Hi Travis, I’m in a kind of head-scratcher of a situation regarding what counts as full-time for PSLF, and I’m wondering if you might know of any resources about it.
(The (short) background is: She’s been working 30 hours/week for four years, and her hospital employer has signed her PSLF ECF forms for the first three of those four years. This past year, however, they refused to sign because 30 hours is only 0.75 full-time equivalent (FTE), and therefore, according to one possible reading of the situation, not full time at 1.0 FTE. (The other reading of the situation, which we’d been going by, is that “full-time for benefits purposes,” which begins at 30 hours, is full-time for PSLF.))
I’m just wondering if you know of anyone who’s successfully pleaded with their employer to consider .75 or .8 FTE as full-time for the purposes of PSLF. I’m guessing my wife’s employer decided that doing so was putting them at some kind of legal risk.
What is the definition of full-time for PSLF?
I love hard questions like this because it forces me to go back to the definitions and regulations of the program.
Here’s what the PSLF certification form says is full time for PSLF:
- Full-time means working for one or more qualifying employers for the greater of:
- (1) An annual average of at least 30 hours per week or, for a contractual or employment period of at least 8 months, an average of 30 hours per week; or
- (2) Unless the qualifying employment is with two or more employers, the number of hours the employer considers full time.
If your employer somehow tried to count you as full time if you’re working less than 30 hours a week, that clearly doesn’t qualify. 30 hours per week is the lower bound. You must work at least 30 hours per week or more.
However, there’s an additional requirement. You must meet your employer’s definition of full time if that number is greater than 30 hours per week.
That second point gives employers a big latitude over whether they have to sign the form or not. It’s up to their discretion as to what the definition of full time is.
What is FTE and why does it matter for PSLF?
University hospitals, government organizations, and other large bureaucratic institutions often use Full-Time Equivalent (FTE) as an accounting statistic.
If you’re at 1.0 FTE, you are at a worker’s full workload, generally 40 hours per week for exempt positions. If you’re at 0.75 FTE, it means you would be at 30 hours per week.
However, many workers who put in less than 1.0 FTE receive full-time benefits, such as health insurance and retirement contributions.
FTE differences between exempt and non-exempt jobs
You might not have known this since I didn’t before researching this article, but there are often different definitions of FTE for exempt and non-exempt positions.
An exempt position under the Fair Labor Standards Act earns a salary of at least $23,660. This means the employer does not have to pay you overtime when you work more than 40 hours per week. Employers I found online generally view 40 hours per week as 1.0 FTE. Think “white collar” workers or professionals.
A non-exempt position has an hourly wage. Workers in these roles must be given overtime if they work more than 40 hours per week. 1.0 FTE for most non-exempt roles I looked at was 37.5 hours per week instead of 40.
Hence, 0.75 FTE for an exempt job would be 30 hours per week and 0.75 for a non-exempt job would be 28 hours per week.
Hence, if your employer was willing to sign the forms, if they consider 0.75 full time then you would qualify for PSLF since you’re working at least 30 hours per week. However, if you were in an hourly job, say front desk security for a hospital at 0.75 FTE, you would not be working at least 30 hours a week since you’d be at 28.
Even if your employer was willing to sign off on you being full time, you wouldn’t qualify for PSLF based on rule (1) above that says you have to work the greater of 30 hours or the employer’s definition of full time.
Is 0.75 FTE considered full time?
The answer is that it depends on where you work.
For example, the University of Kentucky hospital system made a change in 2005 so that employees working 0.75 FTE could be considered full time for benefits purposes.
The administration decided it was worth it to extend benefits to folks working a shorter schedule so they could retain talent.
Many hospital systems will give you full-time benefits at 0.75 FTE.
However, if their full-time workload is 1.0 FTE, which definition wins?
My own opinion is that the rules allow an employer to sign or not sign at their discretion.
Are there legal risks for employers who sign PSLF forms?
Put yourself in the shoes of the HR Director in the example at the beginning of this article who refused to sign off on the PSLF form. She probably had legal concerns that the hospital would be on the hook for civil or maybe even criminal penalties if she said that an employee was full time at 0.75 FTE.
It’s one thing when your hospital considers you full-time for benefits, but what about when the government asks is the employee is full-time?
Most people I’ve met in decision making roles at big non-profit institutions are very risk-averse. They don’t want to do anything that could come back on them.
Risk aversion is complicating PSLF sign-offs in HR departments
One reason for that is negative events get punished far more than positive events get rewarded.
Most HR departments have no clue about PSLF. They don’t know what they’re signing, and they know if they commit the hospital to something they shouldn’t have, they think they could get in trouble.
I think they’re vastly overthinking the issue. If you consider an employee full time for benefits purposes at 0.75 FTE, that’s your functional definition of full time.
If the government ever had a question about why you signed off as a hospital, you could defend yourself with the fact that I’ve never seen any guidance on this issue from the Department of Education ever.
The IRS releases rules all the time on how to interpret complex tax regulations. The Dept of Education should probably be doing that with the insane complexity of student loans these days. However, it’s not set up to do so and probably won’t be for several years. That means right now, you want to try to follow the rules as best you can without being overly aggressive.
Worst case scenario, if an employer signs off on someone being full time incorrectly, then the employee would just not get PSLF. Nobody would get massive fines or go to jail over an honest misunderstanding of the rules without guidelines from the government.
Major risks for employers who do not sign off on PSLF
Most hospitals and other PSLF eligible employers do not have a clue about how valuable this benefit is. You’d be able to pay significantly less for many positions and fill them simply because of your institution being PSLF eligible.
Right now, the PSLF program is messed up because of how it was created in 2007. By 2024, folks will start qualifying en masse.
Employers that take an unnecessarily rigid view on signing off on PSLF certification forms will absolutely lose employees to institutions that do.
Employers that consider less than 1.0 FTE to be full time for PSLF
Risk-averse HR departments want to see that they’ll be in good company when they sign off on something they don’t know about.
Here are some employers that consider 0.75 FTE at 30 hours per week to be full time for PSLF purposes
- Children’s Hospital of Omaha – Employed >= 0.75 FTE
- Virginia Garcia Memorial Health Center – Detailed description of benefits you get starting at 0.4 FTE. PSLF sign-offs start at 0.75 FTE.
- Allina Health – Letter from Minnesota Nurse’s Association to Allina Health established 0.8 FTE or 30 hours per week as qualifying for PSLF
If you’re holding back signing off on PSLF, as more employers decide to sign the form at 0.75 FTE, you’ll lose employees to these other organizations. That’s true even at lower salaries since PSLF can be worth tens of thousands per year in salary value in many cases.
Strategies for PSLF with unhelpful employers
Regardless of what the reason is, the rules above state that if you work at least 30 hours per week at two separate employers, you can qualify for PSLF. Workers at two or more qualifying part-time jobs meeting this threshold qualify regardless of the employer definition.
That means the reader who was at 30 hours per week could’ve picked up 1 hour a week doing literally anything, and she would qualify for PSLF under these rules.
That in my view shows the silliness of not signing the form if your employees are at 30 hours and getting benefits.
That said, if you don’t get full-time benefits and work 35 hours a week, then I would support the employer not signing the PSLF form based on the rules of the program.
If you’re not receiving full-time benefits, you’re not full time according to the definition of your employer. Signing off on the form, in that case, could create legitimate concerns from an employer that might worry you could sue for unpaid benefits or something like that. Keep in mind I’m not an attorney, but that would concern me.
What the employer should sign off on is that you work there if you’re trying to certify with multiple part-time jobs.
I’ve found that if you ask for meetings with decision makers, bring in one or more colleagues with the same issue, and explain the risk to your employer that they can lose dozens of employees when they don’t have to, they might change their mind.
Getting help figuring out if PSLF is worth the headache
If you’re working 30 hours a week, maybe you’d prefer to work even less. We have a lot of strategies around helping someone work part time long term without worrying about their student loan debt.
We also like comparing forgiveness to refinancing to see if you’re making the right decision sticking with an employer for presumably lower pay.
Reach out if you think you want professional help.
Let us know in the comments if you’ve ever had to deal with employers giving you a hard time about the PSLF form. Feel free to use an anonymous or made up name too if you need to.