Public Service Loan Forgiveness

If you are employed by a nonprofit or government and have student loan debt, you may be eligible for loan forgiveness, cancellation, and/or consolidation of Federal student loans under the Public Service Loan Forgiveness program (PSLF). Created under the College Cost Reduction and Access Act of 2007, PSLF allows borrowers who work full-time for nonprofits and government agencies to have their outstanding debt forgiven tax-free on Federal Direct Loans, after making 120 qualifying monthly payments under a qualifying repayment plan. Borrowers could apply for forgiveness under PSLF starting in October 2017.

Why It Matters

More than 42 million people nationwide have education loans totaling more than $1.3 trillion in student debt. Fulltime employees of nonprofit 501(c)(3) organizations, government employees, AmeriCorps and Peace Corp workers, and some other public service organization employees with certain types of student loans can receive forgiveness of outstanding debt after working full time and making payments for ten years. The program helps attract talent to the sector, encourages and incentivizes employees to remain in the sector, and provides relief for public service professionals who are often paid less than other employment opportunities.

Borrowers must certify that the public service employment qualifies under the program, but do not need to do so before applying for forgiveness at the end of the 10-year period. Of the borrowers who have submitted and had employment certification forms approved so far, nearly two out of five (38 percent) work at 501(c)(3) nonprofit organizations. The remaining 62 percent work in government. Less than 1 percent work at other qualifying organizations. 

Who is eligible?

Eligibility Requirements:

• Loan must be through the Federal Direct Student loan program, specifically the “William D. Ford Federal Direct Loan (Direct Loan) Program".
• After 120 payments (this usually takes 10 years) employees in certain public service jobs may be eligible for loan forgiveness as long as their loans are not in default, and their loans are under a qualifying repayment plan. 
• Qualifying employment includes:
  • Employment with a government agency (federal, state, local or tribal)
  • Employment with a charitable non-profit tax-exempt under 501(c)(3)
  • Full-time Americorps or Peace Corps members
  • Teachers (full-time) in low-income elementary/secondary school for 5 consecutive years may be eligible for loan cancellation up to $17,500.

Where We Stand

As proven job creators, nonprofits can and should participate in the development of job growth policies at the federal, state, and local levels. The National Council of Nonprofits strongly endorses policies that promote job creation in all sectors of the economy, especially policies that promote and incentivize employment at charitable nonprofits.

Public Policy Agenda

Status

Federal legislation to reauthorize the Higher Education Act, titled the Promoting Real Opportunity Success and Prosperity through Education Reform (PROSPER) Act (H.R. 4508) would eliminate PSLF for future borrowers. If passed, the legislation would not impact nonprofit workers already enrolled in the program. The U.S. Department of Education (DOE) previously proposed eliminating PSLF in its budget in 2018. Despite these attempts, the Consolidated Appropriations Act of 2018 section 315, commonly referred to as the omnibus spending bill, provided $350 million for the PSLF to temporarily expand loan forgiveness for certain borrowers under different repayment plans.

In September 2018, the U.S. Government Accountability Office (GAO) released a report finding that the vast majority of applicants for the Public Service Loan Forgiveness (PSLF) program have been denied.  According to the GAO report, only 55 of the more than 890,000 borrowers who have started the process of applying for PSLF have actually received loan forgiveness thus far. The report cites deficiencies in the guidance and instructions from the U.S. Department of Education (DOE), and inadequate collaboration between DOE and the PSLF services as significant problems with the program. One hundred fifty Members of Congress, all Democrats, responded to the report with a letter to Secretary DeVos requesting additional information.

Senator Heitkamp (D-ND) introduced the Help Encourage a Lifetime of Public Service Act (HELPS Act) on June 25 to expand the Public Service Loan Forgiveness program and “encourage more students to enter public service professions.” The legislation waives interest accrual under PSLF and directs the U.S. Department of Education to streamline the employment certification process and align deadlines for borrowers

In December 2016, the American Bar Association filed a lawsuit against the Education Department after ABA employees and other public interest attorneys, who had previously received approval for participation under PSLF, were disqualified from the program. A federal district court judge found for three of the four plaintiffs in February 2019, finding that the US Education Department had changed two of its policies retroactively "without properly informing borrowers or considering the impact on the borrowers who were relying on its original guidance." Nine members of the American Federation of Teachers filed a class-action lawsuit in federal court claiming student loan servicer Navient misled borrowers from accessing the loan forgiveness program on October 3.

Take Action

Nonprofit Employees With Student Loan Debt:

Make sure you have the correct loan type and then are on track for eligibility by submitting the Employment Certification for Public Service Loan Forgiveness form (Employment Certification form). Submit this form periodically during employment; once you do this, the student loan program will contact you to let you know if your loan repayments are on track to qualify as PSLF payments. Learn more:

• Loan Consolidation
• Employment Certification Form
• Application for Forgiveness
• Program Questions and Answers

Nonprofit Employers:

Spread the word! Many nonprofit employees aren’t aware that they may qualify for student loan forgiveness. Email a link to this webpage to nonprofit employees who need to know.

Everyone:

Help preserve the PSLF that supports nonprofit and public sector employees by contacting your Representatives and Senators to tell them how public service loan forgiveness translates into impact in your community. Let Congress know it can still preserve PSLF by removing the language from the PROSPER Act and funding PSLF for borrowers.

How to Make the Call: Simply call the Capitol switchboard (202-225-3121) and follow the automated instructions to reach the offices of your Representative and Senators. NOTE: Studies show that phone calls to congressional offices are the most effective means of constituent advocacy – so make the calls first before taking other actions.

Share your stories of how PSLF allows you to work or attract and maintain employees in the nonprofit sector.

Additional Resources

• Public Service Loan Forgiveness and Nonprofits | Conversations with Christina Dragonetti and Isaac Bowers, National Council of Nonprofits
• Public Service Student Loan Forgiveness Program, Federal Student Aid
• Nonprofit Student Debt Project, CalNonprofits 
• Preserve PSLF, The Coalition to Preserve PSLF
• Student Loan Forgiveness and Repayment, Equal Justice Works
• Student Loan Tools, StudentDebtCrisis.org
• Public Service Loan Forgiveness, FedLoan Servicing
• 8 Common Public Service Loan Forgiveness Mistakes, U.S. Department of Education
• Take Control of Your Future: A Guide to Managing Your Student Debt, Equal Justice Works
• Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers, U.S. Government Accountability Office
• Fact Sheet: GAO Report on Public Service Loan Forgiveness, U.S. Government Accountability Office
• Letter to Secretary DeVos, Members of Congress, October 16, 2018.

Recent News

• Federal Judge Defines Scope of Public Service Loan Forgiveness Program, Nonprofit Quarterly, February 26, 2019.
• Are you a furloughed federal worker? Got a student loan? Members of Congress want to help. Washington Post, Jan. 18, 2019.
• More than 41,000 public service workers sought federal loan forgiveness. The government approved just 206., USA Today, December 27, 2018.
• Watchdog group investigates federal loan forgiveness program for public servants, The Washington Post, December 19, 2018.
• The Public Student Loan Forgiveness Rescue Hasn't Gone Well So Far, The New York Times, October 17, 2018.
• 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It., The New York Times, September 27, 2018.
• Can You Get Your Student Loans Forgiven by Working for a Nonprofits?, Nonprofit Quarterly, August 3, 2018.
• The government expands access to student loan forgiveness - just read the fine print, MarketWatch, May 26, 2018.
• What you need to know about the temporary expansion of loan forgiveness for pbulic servants, Washington Post, May 23, 2018.
• Who Is a Public Servant? Borrowers Have a Lot Riding on the Answer, The New York Times, April 13, 2018.
• To Help Strapped Borrowers, States Turn to Student Loan Ombudsmen, The Pew Charitable Trusts, April 10, 2018.
• A $350 Million Fund Helps Many Public Servants. Meet the Ones Left Out., The New York Times, April 6, 2018.
• A Student Loan Fix for a Teacher and Many Other Public Servants, The New York Times, March 30, 2018.
• Unforgiving Student Loans, Nonprofit Advocacy Matters, February 20, 2018.
• Future of Public Service Loan Forgiveness Program at Risk, Nonprofit Advocacy Matters, December 11, 2017.
• Student Loan Confrontation, Nonprofit Advocacy Matters, October 2, 2017.
• Uncertainty in Student Debt Forgiveness Program, Nonprofit Advocacy Matters, April 17, 2017
• Student Loan Forgiveness for Nonprofit Workers, Massachusetts Nonprofit Network, April 14, 2017.
• Loan Forgiveness Program in Turmoil, Nonprofit Advocacy Matters, January 9, 2017.