There is a loan repayment program if one is employed full-time by a federal, state, local, or tribal government. The program is also applicable to non-profit organizations as well as Americorps and Peace Corps volunteers. Labor unions, for-profit organizations, and political organizations are excluded from the program. It is called the Public Service Loan Forgiveness program.
Under the program, a person’s student loans remaining balance are paid after a person has made 120 qualifying monthly payments under a qualifying repayment plan while they have worked for a qualifying employer.
Qualifying Federal Loans
Federal loans under the William D. Ford (Direct Loan) loan program qualify under the program. However, the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan (Perkins Loan) Program are not considered loans subject to the Public Service Loan Forgiveness program unless they are consolidated into the Direct Loan program. Other loans that do not qualify are private student loans. Therefore, a person must make 120 payments towards their Direct Loans.
Full Time Employment
Because one must work full-time, a person must work the greater of either 30 hours or work full-time under the employer’s standard. It should be noted that if one works for a non-profit organization that any time spent on religious activities does not count toward meeting the definition of full-time work.
Qualified Payments
Qualified payments occur when the person makes payments towards their loans. Periods of forbearance, deferment, grace period, or when one is in school does not count towards the time accounted towards qualified monthly payments. The 120 qualifying monthly payments do not have to be made on a consecutive basis. If a person wants to pay higher amounts, it will not help a person qualify for the 120 payments any sooner than their projected date, but one can prepay on their loan in advance for up to a period of 12 months.
A qualifying repayment plan includes all the income driven repayment plans. A 10-year Standard Repayment Plan would not qualify for the program because a person will pay off all their loans by the end of the 120 months. Likewise, the Graduated Repayment Plan, Extended Repayment Plan, and Alternative Repayment Plan does not qualify as a qualifying repayment plan.
One of the benefits of this program is that loans forgiven under the Public Service Loan Forgiveness program are not subject to federal income tax because the IRS does not consider the loan forgiveness to be income.
I highly recommend this program to anyone who qualifies under the Public Service Repayment Program. It is worth the pursuit and the additional benefit of not having to pay federal income tax on the loan forgiveness. In order to find out more information about the program, it is best to contact the following:
U.S. Department of Education
FedLoan Servicing
P.O. Box 69184
Harrisburg, PA 17106-9184
1-855-265-4038
Best of luck to you!