Public Service Loan Forgiveness Program

This information comes from a great web page created by the National Council of Nonprofits. It has to do with the Public Service Loan Forgiveness Program which was created by the College Cost Reduction and Access Act of 2007. There might be hope for those with tremendous student loan debt yet!

1. What is the Public Service Loan Forgiveness Program?
The Public Service Loan Forgiveness Program is intended to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their eligible federal loans after they satisfy the Program’s public service and loan repayment requirements. Those individuals with certain federal student loans for college (Federal Eligible Direct Loans) may qualify to have the outstanding principal balance and accrued interest cancelled under the following conditions: (a) the borrower makes 120 monthly payments on the loan after October 1, 2007; (b) the borrower is employed by a “public service organization” at the time that loan forgiveness is requested and granted, as well as during the period the borrower makes the required 120 monthly payments; and (c) the loan is not in default at the time of the request.

“Federal Eligible Direct Loans” is defined to mean a Direct Subsidized Loan, a Direct Unsubsidized Loan, Direct PLUS loan, or a Direct Consolidation Loan. Your loan documentation should identify the type of federal loan you have.

2. What is a “public service organization?”
Public service organizations include full-time jobs at a nonprofit that is a Section 501(c)(3) organization under the Internal Revenue Code. Other public service organizations include federal, state, local or tribal governments, agencies or entities; public child or family service agencies; Tribal colleges or universities; and private organizations that provide public services like emergency management, public safety, public interest law service, public care for children, elders or disabled, or public health, education or library services.*

3. When and how can I start counting my ten years?
The Program applies to payments made after October 1, 2007. Every month you work at a public service organization and make your loan payment on time counts towards the necessary 120 payments. Your service does not have to be consecutive however (e.g., if you worked for a nonprofit for a year, then a business for a year, and then again at a nonprofit, you just starting counting payments where you left off).

4. Do I have to keep working in the same public service job?
No. For a payment to count towards the forgiveness period, the borrower has to have been employed full-time by a public service organization when the payment was made. As noted, there are many types of public service organizations.

5. What does it mean to work full time?
“Full-time” means working in one or more public service jobs for the greater of: (a) 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 (b) the number of hours the employer considers full-time.

6. What if I am a teacher?
For borrowers with a contractual or employment period of less than 12 months, qualifying payments have to be made each month for all 12 months. Teachers who work on an academic year basis, often for only nine months in a year, would still be required to make payments on their loans during the summer vacation period.

7. What if I was/am an AmeriCorps or Peace Corps volunteer?
Full-time service in an AmeriCorps or Peace Corps position counts as employment in a public service job. AmeriCorps Segal Education Awards or Peace Corps transition payments used for loan repayment may qualify to meet the 120-payment requirement.

8. How do I keep track of this?
It is the borrower’s responsibility to collect and retain the documents that support eligibility for this benefit.

9. Does this just apply to loans taken by the student, or does it also apply to the loans a student’s parent(s) have taken?
For the most part, this just applies to eligible loans the student has taken directly. Parents with outstanding loans would need to contact the Department of Education to learn the conditions under which part of their loans could be forgiven.

10. What if I have further questions?
For further information on the Public Service Loan Forgiveness Program, contact Nikki Harris at the Department of Education. Telephone: (202)219-7050. Internet: Nikki.Harris@ed.gov

*This last category of private organizations providing public services do not include the following: for profit organizations, labor unions, partisan political organizations, or religious organizations (unless the activities of the religious organization are unrelated to religious instruction, workshop or any form of proselytizing).

Disclaimer: The information in this courtesy fact sheet is provided for informational purposes only and is not a substitute for expert legal, tax, or other professional advice specific to an individual’s circumstances.

Again, this information comes from the National Council of Nonprofits and I trust in their review of this program. For those of us with tremendous student loan debt – be on the lookout for more information about this program. It could be big!