How Do Employees Qualify for the PSLF Program?
There are several requirements to meet to qualify for the program:
1. Qualifying Employer:
First and foremost, employees must be employed by one of the following types of organizations:
- Government organization (federal, state, local, or tribal)
- Not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
- Serving as a full-time AmeriCorps or Peace Corps volunteer
2. Qualifying Hours:
To qualify for PSLF, employees must work full-time for qualifying employers. Employers have different definitions for the number of hours that must be worked to be considered full-time. Employees must work for the number of hours required by their employer to be regarded as full time or at least 30 hours per week, whichever is greater. It is also possible for forgiveness applicants to work part-time for two qualifying employers, as long as they work more than 30 hours per week in total.
3. Qualifying Student Loans:
Only non-defaulted federal student loans received under the William D. Ford Federal Direct Loan Program qualify for possible forgiveness. Direct loans include direct subsidized and unsubsidized loans, direct PLUS loans, and direct consolidation loans. Borrowers with other loan types besides Direct Loans may still become eligible for PSLF if they consolidate them into a Direct Consolidation Loan; however, private student loans cannot be consolidated into this plan. Borrowers should be aware that qualifying payments made before consolidation may not be counted towards their new eligibility, but it is possible to leave certain loans outside of the consolidation process.
4. Qualifying Monthly Payments:
PSLF eligibility requires that qualifying payments be completed within the following criteria:
- Made after October 1, 2007
- Made under a qualifying, income-based repayment plan
- Made for the full amount due as shown on the borrower’s bill
- Paid no later than 15 days after the due date
- Paid while the borrower is employed full-time by a qualifying employer
The 120 qualifying monthly payments do not need to be consecutive. A period of employment with a non-qualifying employer, for example, will not cause the employee to lose credit for prior qualifying payments, but loan payments still need to be made during the time of non-qualifying employment. The qualifying monthly payments, however, can only be made during periods when the loans are not in deferral due to an in-school status or other reason, the grace period after graduation, or a forbearance.
5. Qualifying Repayment Plans:
Eligibility for PSLF requires that employees enter into an income-driven repayment plan for their federal student loans. These are plans where the monthly payment is based on the employee’s monthly income. Employees that are using a non-income driven repayment plan are advised to analyze whether it makes sense to switch to an income-driven repayment plan to be considered for PSLF eligibility.