Public Service Loan Forgiveness: How does it work?

The Public Service Loan Forgiveness (PSLF) program provides an opportunity for people who work for the government or a not-for-profit organization to have some of their educational debt eliminated. Only borrowers with eligible federal student loans are eligible, but those that qualify can reap substantial benefits.

This guide will help you determine if you’re eligible for Public Service Loan Forgiveness and explain some new changes that could make it easier for you to have your debt cleared.

What is Public Service Loan Forgiveness?

Earning a degree can be expensive, and many people who pay for school are left with student debt. Public Service Loan Forgiveness aims to ease the financial burden for borrowers who dedicate their careers to serving the public.

The PSLF program makes it possible for government employees and those who work for not-for-profit organizations to have a portion of their federal student loans forgiven. To take advantage of the program, you're required to make 120 qualifying payments under an eligible income-driven repayment plan while working full-time for an eligible employer.

Once you have met these requirements, the remainder of your federal Direct Loans will be forgiven.

Check out: How to get student loan forgiveness

Eligibility requirements

To be eligible for Public Service Loan Forgiveness, you must:

1. Have qualifying loans.
2. Work for an eligible employer.
3. Make 120 qualifying payments.

Learn more about each of these requirements below and use Federal Student Aid's PSLF help tool to determine the actions you must take to become eligible.

1. Qualifying loans

You must have federal student loans to be eligible for Public Service Loan Forgiveness. Eligible types of loans include:

• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans

If you have Federal Family Education Loans (FFEL) or Perkins Loans, you can make them eligible for forgiveness by consolidating them with a Direct Consolidation Loan.

Parent borrowers are also eligible for loan forgiveness on Direct PLUS Loans. However, parents must first consolidate using a Direct Consolidation Loan in order to become eligible to repay the loan on a qualifying payment plan.

2. Eligible employment

To qualify for PSLF, you must also work for an organization that serves the public. You’ll likely be eligible for the program if you work for the following types of employers:

• U.S. government at any level, including the federal government, a tribal government, or your state or local government
• A 501(c)(3) tax-exempt not-for-profit organization
• Another not-for-profit organization that devotes the efforts of most of its employees to offering qualifying public services

You must work full-time while you are making your 120 qualifying payments to be eligible for Public Service Loan Forgiveness. This means working for one or more eligible employers for at least 30 hours a week.

You should also submit a PSLF form annually to certify your employment, and whenever you change employers, to stay on track for forgiveness. You and your employer will both need to complete sections of this form. It can be submitted digitally or via mail.

3. Qualifying payments

To get the remainder of your debt forgiven, you must also make 120 qualifying loan payments while employed full-time by an eligible employer (after Oct. 1, 2007). All income-based repayment plans are considered qualifying payment plans:

• Paye As You Earn (PAYE)
• Saving on a Valuable Education (SAVE)
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)

If you make payments with a nonqualifying plan, it’s possible that you could count those payments and become eligible for forgiveness under a special program called Temporary Expanded Public Service Loan Forgiveness (TEPSLF).

There are also some circumstances when you may be given credit for a payment even if you didn’t make one. For example, if you worked full-time for a qualifying employer and your loans were not in default during the COVID-19 payment pause, you can still earn credit for payments you would have made during this time.

You can log in to your MOHELA account to look at your loan details and see the number of qualifying payments you’ve made. MOHELA will also send you a letter that documents the number of payments that count toward forgiveness every time you submit a PSLF form.

New PSLF rules and improvements

There have been many changes made to PSLF in recent years, with the aim of helping borrowers navigate the complicated program.

A Public Service Loan Forgiveness waiver opportunity was available through Oct. 31, 2022. This allowed borrowers to receive credit for payments that wouldn't otherwise qualify for forgiveness. These included late payments, partial payments, those made on the wrong payment plan, and those made toward FFEL or Perkins Loans.

Although the program ended, borrowers can still take advantage of Temporary Expanded Public Service Loan Forgiveness (TEPSLF) to count nonqualifying payments toward loan forgiveness, as long as the payments were made for Direct Loans. TEPSLF was introduced in 2018 and is limited in funding. Borrowers who believe they qualify should use the PSLF help tool to complete the necessary forms.

On July 1, 2023, other improvements went into effect as well. These improvements include:

• Allowing credits toward the 120 qualifying payments for past late or partial payments, as well as those made in a lump sum
• Counting certain periods when payments are deferred or in forbearance as part of the 120 eligible payments (this includes when loans are deferred due to military service, cancer treatment, or economic hardship; or mandatory administrative forbearances)
• Receiving credit for a weighted average of existing qualifying payments when consolidating Direct Loans, instead of losing all credit for payments upon consolidation
• Simplifying the employment rules so you qualify as long as you work 30 hours per week for a qualifying employer
• Requiring employers to provide adjunct professors and contingent faculty credit for a minimum of 3.35 hours of work for each credit hour they teach
• Allowing qualifying employers to certify employment for contractors if state laws prevent a direct employee of the organization from filling the contractor’s role
• Having other periods of deferment and forbearance counted toward loan forgiveness if you pay what you would have owed at the time (even if that was $0 payments)

Together, these rules should make securing loan forgiveness easier.

How to apply for PSLF

To apply for Public Service Loan Forgiveness, you will need to complete the PSLF form. You can use the PSLF help tool to obtain the form and submit it online or by mail.

You should submit this form annually to certify your employment, and when you have completed your 120th qualifying payment. Your employer will also need to certify your forms in order for you to be eligible. You’ll be able to send the form digitally so your employer can digitally sign it.

Related: 7 alternatives to private student loan forgiveness

What if I’m denied?

If you don’t qualify for Public Service Loan Forgiveness, you can submit a request for PSLF reconsideration. You can submit this request if:

• You received a notification that your employer isn't eligible, or the employer's status was returned as ineligible when you used the PSLF employer search tool, and you have information showing they should be an eligible employer.
• Your servicer sent you a letter indicating a qualifying payment count you believe is incorrect.

If you were deemed ineligible because your payments didn't count, you can submit a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application form using the PSLF help tool to apply for TEPSLF.

Public Service Loan Forgiveness FAQ

Will I pay taxes on PSLF loan forgiveness?

If you have student loans forgiven under Public Service Loan Forgiveness, the federal government will not tax you on the forgiven debt. However, your state may tax you.

Can you apply for PSLF if you’re retired?

Public Service Loan Forgiveness requires you to be working full-time for an eligible employer when you apply for PSLF and when you receive forgiveness. If you are not working full-time for an eligible not-for-profit organization or government agency, you can’t qualify for this program.

How long does it take to get PSLF approved?

The processing time for PSLF approval depends on many factors, including the number of employers you’ve had; whether there were gaps in employment or payment history; and whether you have submitted all of your employment certifications from past employers over time. 

MOHELA states that it can sometimes take at least 90 business days for forms to be processed after they are submitted. If you regularly submitted the PSLF form while making your payments, your form may be processed faster.

Will PSLF hurt my credit?

PSLF generally will not have a lasting impact on your credit score. Your loan will be moved to paid-off status once the remaining balance has been forgiven. Since lenders like to see a mix of different kinds of debt and your loans were a form of installment loan, losing this as an active account could potentially cause a slight dip in your score. That would also occur if you repaid a loan in full. The drop is likely to be temporary and not significant.