The Public Service Loan Forgiveness Program forgives the balance remaining on a Federal Direct Student
Loan, or Federal Family Education Loan (FFEL) or Perkins Loan if either have been consolidated into a
01 Public Service Loan Forgiveness Eligibility
To be eligible for Public Service Loan Forgiveness, a borrower must have worked full time for a
government agency or for certain types of non-profit organizations, be on an Income Driven Repayment
Plan, and have made 120 qualifying payments on the qualifying Direct Loan. If a Federal Family
Education Loan or Perkins Loan were consolidated into a Direct Loan, any payments made prior to the
consolidation do not count toward the 120 qualifying payments.
If a Federal Family Education Loan or Perkins Loan was not consolidated into a Direct Loan,
it is not eligible for Public Service Loan Forgiveness.
If a borrower has both a Direct Federal Student Loan and a Federal Family Education Loan or Perkins
Loan and wishes to consolidate into a single qualifying Direct Loan, payments made on the already
existing Direct Federal Student Loan will not be given credit toward the 120 qualifying payments. The
full 120 qualifying payment would have to be made after the loan consolidation. A borrower in such a
situation may wish to consider consolidating their Federal Family Education Loan(s) or Perkins Loan(s)
into a separate Direct Loan so as not to lose credit for payment already made on the preexisting Direct
Federal Student Loan.
02 False Information to Borrowers Regarding Public Service Loan Forgiveness
It is very important to ensure loans a borrower plans to have forgiven are eligible for Public Service Loan
Forgiveness. Servicers have at times given false information to borrowers, stating a loan is eligible when
it is not unless the loan is first consolidated. This has led to startling surprises as such false information
has caused borrowers to take care in doing everything to comply with the requirements for discharge
under Public Service Loan Forgiveness, only to find out that cannot get their loan forgiven or only some
of their loans forgiven with others still remaining. Borrowers who have been given false information on
their loan eligibility and relied on this information provided by their servicer can sue for damages caused
by the misrepresentation of eligibility. Due to servicers giving such false information to borrowers, the
number of lawsuits that have been filed against services for misrepresenting their loan eligibility has
been increasing. While this does raise the possibility of a borrower suing the servicer that falsely stated
loans would be eligible for forgiveness that are not without first being consolidated, it causes the time of
service under the Public Service Loan Forgiveness Program to start over, beginning after the
consolidation is completed. Depending on when the false nature of the loan being eligible is discovered
during the 120 qualifying payments period, which works out to be 10 years, it could potentially double
the time before loans can be forgiven.
In another lawsuit brought by the American Federation of Teachers which sought loan forgiveness under
Public Service Loan Forgiveness rather than Teacher Loan Forgiveness in order to have a full balance
forgiven rather than the limitation under Teacher Loan Forgiveness. Under the suit the American
Federation of Teachers claims the U.S. Department of Education has mismanaged the Public Service
Loan Forgiveness program, denied claims after the borrower had made the required 120 qualifying
payments, and for intentionally preventing public service workers from receiving forgiveness. While this
primarily is brought by teachers, the implications can be applicable to anyone who qualifies for Public
Service Loan Forgiveness.
03 Qualifying Payments
For a payment to be qualifying, they have to have been made after October 1, 2007, been made under a
qualifying repayment plan, were made for the full amount of the payment due, been made no later than
15 days after the date due, and while employed full time by a qualifying employer. Any payments made
do not qualify if they are made while the borrower’s loan is in in-school status, during the grace period
after completing the educational program, in deferment, or in forbearance. If a borrower wishes to
begin making qualifying payments while their loan is in the deferment period or in forbearance, the
borrower can waive the deferment or forbearance in order to make payment due that would not
otherwise be required so the number of qualifying payments can begin. The qualifying payments do not
have to be consecutive, so if the borrower’s employment changes to a non-qualifying employer
payments made while working for a qualifying employer will not be lost toward the 120 qualifying
04 Non-Profit Organization Qualifications for Public Service Loan Forgiveness
To qualify as a non-profit organization for Public Service Loan Forgiveness, the organization must be
either tax-exempt under Section 501(c)(3) of the Internal Revenue Code, or have a primary purpose to
provide a qualifying public service such as emergency management, military service, public safety, law
enforcement, public interest law services, early childhood education, public service for individuals with
disabilities, public service for the elderly, public health, public education, public library services, or
school based services. Full time service as a volunteer in AmeriCorps or the Peace Corp also applies as
qualifying employment. Labor unions, partisan political organizations, for profit organizations including
government contractors, do not qualify. Volunteer employment with AmeriCorp or the Peace Corp also
provides special rules to allow for up to 12 qualifying payments to be counted in a single payment by
using their Segal Education Award or Peace Port transition payment.
05 Full Time Employment
Full time employment for purpose of Public Service Loan Forgiveness requires working at least 30 hours
per week. This requirement can be met through part time employment if the cumulative average work
hours with multiple qualifying employers meets or exceeds the 30 hour per week requirement.
However, time spent on religious instruction, workshop services, or any form of conversion to religion,
belief, or other opinion does not count toward the full time employment requirement.
06 Income Driven Repayments Plan Requirement
Only those on an Income Driven Repayment Plan qualifies to receive Public Service Loan Forgiveness. As
120 qualifying payments are required, to be able to qualify to have the Federal Direct Loan forgiven
there must be 10 years of payments that qualify. Under a Standard Repayment Plan, a loan will be
repaid in the 10 year period regardless of if the employment was with a qualified employer. Due to this,
if one wishes to seek Public Service Loan Forgiveness they should have their loan servicing changed to an Income Driven Repayment Plan as soon as possible.
07 Taking Into Consideration On Taxes
The amount of the loan forgiven under Public Service Loan Forgiveness may be subject to taxes as
income up to 25% of the balance forgiven amount. This would be included in the tax year that
forgiveness is received. This is something a borrower should consider and plan for in either saving for
the future tax liability or making additional payments or payment amounts to reduce the later forgiven
Additional resources provided by the author
The Law Offices of Mitchell Reed Sussman & Associates has over 40 years experience and can assist you with cancellation student loans for borrowers all over the United States. More information about student loan cancellation and release can be obtained by visiting the website www.studentdebtcancellation.com or call 800 - 233 - 8521.
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