Among the many great reasons to work for the State of California is student loan forgiveness. Although the Public Service Loan Forgiveness Program (PSLF) isn’t a program unique to or administered by the State of California, its employees are entitled to the benefits.
Who is eligible?
The PSLF is a program offered through the United States Department of Education and has been around since 2007. Through the program, employees of Federal, State and Local governments can have the remainder of their qualifying student loan debt forgiven after they’ve made a minimum number of monthly payments.
This benefit can be worth thousands of dollars but is often overlooked by job-seekers and current California state employees. People deciding whether to enter public service should also factor student loan forgiveness in when comparing the benefits offered by potential employers.
In addition to those working in public service, certain employees of not-for-profit organizations are eligible for the benefit.
What types of loans does it cover?
Only loans made through the US Department of Education’s Direct Loan program are eligible for forgiveness. This includes: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Private student loans are not eligible.
Loans through the Federal Family Education Loan Program (FFEL) are loans from a private provider but subsidized and guaranteed by the US government. FFEL loans are only eligible for forgiveness if they are merged into a Direct Consolidation Loan through the US Department of Education.
How do I qualify? To qualify for loan forgiveness, a public service employee must have made at least 120 monthly payments. That means it will be a minimum of 10 years of public service before your loans can be eligible to be forgiven. It’s not possible to make extra payments to speed things up and reach the 120-payment threshold more quickly.
You’ll have to have had at least 120 months, while working in public service, in which you’ve made a student loan payment. You won’t qualify if you make 2 payments a month for 60 months, for example.
Paying more than the minimum required payment will not help get your loans forgiven any faster, either. Even if you pay an amount above your monthly minimum, you will not get more than a month’s payment credit.
Only student loan payments made after October 1, 2017 qualify. That is when the program came into effect, and payments made before then do not qualify towards the 120 monthly payments.
Payments do not need to be consecutive. If you made payments while working in the public sector, then moved into the private sector, you would not lose the progress you made towards your 120 monthly payments if you returned to a government or non-profit job.
When you are in repayment of your student loans, there are multiple payment plans you have available to you. Not all of them qualify you for student loan forgiveness, though. You must select one of the 4 income-driven repayment plans available through the Department of Education. With these plans, your monthly payment amount is based on your income. Your payment will be low when you first get out of school and aren't making a lot of money but will steadily increase as you advance in your career.
Making smaller payments will also benefit you if you are considering working in public service and capitalizing on student loan forgiveness. The less you pay of your loan balance, the more that will eventually be forgiven. Make sure you’ve selected a qualifying repayment plan as soon as possible.
For each year you work in the public sector, you’ll need to complete an Employment Certification for Public Service Loan Forgiveness form. You’ll also need to do this anytime you change jobs. This will help your loan servicer keep track of all your payments and hopefully make it easier when you’re ready to apply to have the remainder of your student loan balance forgiven.
How do I apply?
If you’ve made your 120 qualifying monthly payments, you’ll need to apply to have your student loans forgiven. It will not happen automatically. The US Department of Education has the application form on its website as well as instructions for where it should be submitted.
Your application will be reviewed when it is received. If all your payments qualify, your remaining balance will be wiped out. You must be employed in the public sector at the time your student loan is forgiven.
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