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 43 million people nationwide have education loans totaling more than $1.6 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) 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

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. The U.S. Department of Education (DOE) previously proposed eliminating PSLF in its budget in 2018. In September 2018, the U.S. Government Accountability Office (GAO) released a report finding that the vast majority of PSLF applicants had been denied. Only 55 of the more than 890,000 borrowers who had started the process received loan forgiveness. The report cited deficiencies in the guidance and instructions from the DOE and inadequate collaboration between DOE and the PSLF services as significant problems. One hundred fifty Members of Congress, all Democrats, responded to the report with a letter to Secretary DeVos requesting additional information. In September 2019, GAO released another 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. 

Senators Gillibrand (D-NY) and Kaine (D-VA) introduced legislation (S.1203) to expand eligibility for PSLF, shorten the timeframe for portions of forgiveness, include more types of loans and repayment plans, and assures repayment. Additionally, the What You Can Do for Your Country Act of 2019 would direct the Department of Education to provide clearer information and guidance and simplify the application and certification process for borrowers. 

In December 2016, the American Bar Association (ABA) filed a lawsuit against DOE 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." The DOE declined to appeal the decision. 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, 2018. The New York Attorney General sued the Pennsylvania Higher Education Assitance 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.

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 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
• 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.
• Letter to Secretary DeVos, Members of Congress, October 16, 2018.
• Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers, U.S. Government Accountability Office, September 2018.

Recent News

• Broken Promises and Debt Pile Up as Loan Forgiveness Goes Astray, The New York Times, November 28, 2019.
• Turf War Blocked CFPB From Helping Fix Student Loan Forgiveness Program, NPR, October 15, 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.
• It's Easy to Forget, but a Program to Forgive Student Loans Already Exists, The New York Times, July 24, 2019.
• Suit Filed to Hold Public Service Loan Forgiveness Program to Purpose, Nonprofit Quarterly, July 16, 2019.
• Federal Public Service Loan Forgiveness Program Still Forgives Almost No One, Nonprofit Quarterly, May 8, 2019.
• Program to Relieve Student Debt Proves Unforgiving, Wall Street Journal, May 7, 2019.
• Lawmakers debate future of loan relief for public workers, AP News, April 29, 2019.
• The sabotage of public service student loan forgiveness, CNN, April 23, 2019.
• Your Student Loan Servicer Will Call You Back in a Year. Sorry., The New York Times, April 12, 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.
• 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 public 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.