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, but must meet the stringent requirements.

Why It Matters

More than 44 million people nationwide have education loans totaling more than $1.6 trillion in student debt. Full time 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) borrowers work at 501(c)(3) nonprofit organizations, according to FedLoan Servicing. 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 nonprofit 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

Borrowers will automatically be placed into forbearance with 0% interest rates through Dec. 31, 2020, for federal student debt under a recently released statement from U.S. Department of Education Secretary DeVos.  An automatic suspension of payments will apply to any borrower more than 31 days delinquent. Forbearance will count as payments towards the minimum requirements for Public Service Loan Forgiveness, decreasing the required number of payments from 120 to 111. However, the borrower must continue to be employed full time at a qualifying employer during the forbearance period. See Coronavirus and Forbearance Info for Students, Borrowers, and Parents for more information.

Background

In 2017, 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 have eliminated PSLF for future borrowers. In September 2019, the Government Accountability Office released a report stating that only 1 percent of applicants for Temporary Expanded Public Service Loan Forgiveness (TEPSLF) had received forgiveness. Direct contact, recounts, correcting repayment plans, and follow up is key to approval after a denial under TEPSLF. In December 2019, Secretary DeVos proposed creating a separate federal agency to manage all federal student loan debt. 

In February 2019, a federal district court judge found 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" in regards to American Bar Association employees and other public interest attorneys. 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. The New York Attorney General sued the Pennsylvania Higher Education Assistance Agency and FedLoan Servicing on October 3, 2019 stating that "deceptive, unfair, and abusive practices in administering the federal program have contributed greatly to the large number of rejected PSLF applicants." Discussions to make potential changes to the program are ongoing.

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.

Additional Resources

• Coronavirus and Forbearance Infor for Students, Borrowers, and Parents, FedLoan Servicing
• 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 Tools, StudentDebtCrisis.org
• Public Service Loan Forgiveness, FedLoan Servicing
• Public Service Loan Forgiveness Data, FedLoan Servicing
• 8 Common Public Service Loan Forgiveness Mistakes, U.S. Department of Education
• Student Loan Debt Resources, National Conference of State Legislatures, June 26, 2020.
• Student Loan Oversight, National Conference of State Legislatures, April 27, 2020.
• Public Service Loan Forgiveness, The Institute for Student Loan Advisors 
• Comments to the Department of Education, BJC and National Council of Nonprofits, January 10, 2020.
• Public Service Loan Forgiveness: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion, U.S. Government Accountability Office, September 2019.

Recent News

• Trump: Federal student loan borrowers can suspend payments for 60 days, Politico, Mar. 20, 2020.
• Broken Promises and Debt Pile Up as Loan Forgiveness Goes Astray, The New York Times, November 28, 2019.
• How to Get Your Public Service Loan Forgiveness Qualifying Payments Recounted, Forbes, September 24, 2019.
• U.S. Dep't. of Education Backs Loan Servicers over Student Borrowers, Nonprofit Quarterly, September 16, 2019.
• Hard-Won Tips From Borrowers Who Got Student Loan Forgiveness, NerdWallet, August 27, 2019.
• Federal Public Service Loan Forgiveness Program Still Forgives Almost No One, Nonprofit Quarterly, May 8, 2019.
• Lawmakers debate future of loan relief for public workers, AP News, April 29, 2019.
• A Guide to Getting Your Student Loans Forgiven, Consumer Reports, March 13, 2019.
• Federal Judge Defines Scope of Public Service Loan Forgiveness Program, Nonprofit Quarterly, February 26, 2019.
• Watchdog group investigates federal loan forgiveness program for public servants, The Washington Post, December 19, 2018.
• Can You Get Your Student Loans Forgiven by Working for a Nonprofit?, Nonprofit Quarterly, August 3, 2018.
• What you need to know about the temporary expansion of loan forgiveness for public servants, Washington Post, May 23, 2018.
• To Help Strapped Borrowers, States Turn to Student Loan Ombudsmen, The Pew Charitable Trusts, April 10, 2018.