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Understanding the Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program is a program of the federal government started in 2007, in which federal student loans are forgiven for borrowers who are working full-time (over 30 hours weekly) in an eligible job (federal, state or local public service job or 501 (C)(3) non profit) and has made 120 eligible on-time in-full payments over a span of 10 years. Qualifying student loan repayment plans that the loan payments can be made under include Standard Repayment, Income-based Repayment (IBR), Pay As You Earn Repayment (PAYE), Revised Pay As You Earn (REPAYE), and Income-contingent Repayment (ICR).

For most borrowers, an income-based repayment plan is preferable because it allows them to minimize their monthly student loan repayment, and at the same time have a bigger part of their loan forgiven. On the other hand, it is assumed by the Standard Repaymetn plan that all student loans will be paid off over a span of 10 years. Thus, if you are enrolled in this plan, there would be no loans to forgive by the end of the repayment period.

Forgiveness-Eligible Student Loans

Only two types of student loans are eligible for Public Service Loan Forgiveness, and they are Direct Loans and Federal Direct Consolidation Loan.

There are four types of Eligible Directly Loans, namely, Federal Direct Consolidation Loans, Federal Direct Unsubsidized Stafford/Direct Loans, Federal Direct PLUS Loans, and Federal Direct Subsidized Stafford/Direct Loans.

Student Loans Not Eligible for Forgiveness

The Public Service Loan Forgiveness Program will not forgive three types of student loans, namely, the Federal Perkins Loans, Federal Family Education Loans (EFEL) and Private Student Loans. But this rule makes a few exceptions.

Direct Loans & Private Loans

>> If you have a Private Loan and a Direct Loan, the Direct part will be eligible.

Federal Perkins & FFEL

Consolidating these two loans make them eligible, but only payment made to your Consolidation Loan will be considered part of your 120 payments. Any previous payments made prior to consolidation do not count.

Applying for Public Service Loan Forgiveness

After you’ve completed 120 qualifying monthly payments, you can submit a Public Service Loan Forgiveness Application. Meanwhile (though not necessary), submit the Public Service Loan Forgiveness Employment Certification Form every year or every time you get a new job so you can keep track of your progress in terms of meeting eligibility requirements. This form proves completion of the yearly employment requirements for the program.

Next, submit the form and employer’s certification to FedLoan Servicing of the Department of Education. FedLoan Servicing will inform you whether or not you’re eligible, as well as tell you how many payments youv’e made based on their records, and how any more you have to make in order to be eligible for loan forgiveness.

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