In 2007, Congress created the Public Service Loan Forgiveness Program through the College Cost Reduction and Access Act of 2007. Under this program, student borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans if certain requirements are met. This post will address four things that you should know about the program.
1. Only non-defaulted loans made under the William D. Ford Federal Direct Loan Program (Direct Loan Program) are eligible for forgiveness.
The Direct Loan Program includes Federal Direct Stafford/Ford Loans (Direct Subsidized Loans), Federal Direct Unsubsidized Stafford/Ford Loans (Direct Unsubsidized). Federal Direct PLUS loans (Direct PLUS Loans), and Federal Direct Consolidation loans. Other federal loans many qualify for the program if they are consolidated into a Direct Consolidated Loan. In order for the payments to qualify, the payments must be made on the Direct Consolidated Loan.
2. The program requires the borrower to make 120 payments under a Direct Loan Program repayment plan.
Under the program the borrower must make 120 separate monthly payments beginning after October 1, 2007. Therefore, cancellation of the remaining balance of loans will not begin until October 1, 2017. The payments must be made for the full schedule amount within 15 days of the due date. Repayment plans include the Income Based Repayment Plan, Income Contingent Repayment Plan, Standard Repayment Plan with a 10-year repayment period, and any other Direct Loan Program repayment plan in which payments are at least equal to the monthly payments that would have been required under the Standard Repayment Plan.
3. The borrower must meet certain requirements.
In order to qualify for the program the borrower must not be in default on loans for which forgiveness is being requested and the borrower must be employed by a full time public service organization. The borrower must be employed when making the 120 required payments, at the time the borrower applies for loan forgiveness and at the time the remaining balance on the borrower’s loan is forgiven.
4. Only certain public service organizations qualify for the program.
The borrower must be employed full time by a public service organization or be serving full time in AmeriCorps or Peace Corps position. Under the program, a “public service organization” means:
- A federal, state, local, or Tribal government organization, agency, or entity (includes most public schools, colleges and universities);
- A public child or family service agency
- A non-profit organization under section 501(c)(3) of the Internal Revenue Code that is exempt from taxation under section 501(a) of the Internal Revenue Code (includes most not-for-profit private schools, colleges, and universities);
- A Tribal college or university
- A private organization that is a not-for profit business, a labor union, a partisan political organization, or an organization engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing) and that provides the public services including the following: emergency management; military service public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-bases services.