Public Service Loan Forgiveness Program

On September 27, 2007, President Bush signed the College Cost Reduction and Access Act (CCRAA) of 2007.  Part of the act included a new Public Service Loan Forgiveness Program.

What are the general requirements for the program?

To be eligible to participate in the Public Service Loan Forgiveness Program you must meet the following requirements:

1. Make 120 monthly payments on the eligible Federal Direct Loan on or after Oct. 1st, 2007(FFEL* loans can be moved to Direct Lending through loan consolidation);
2. Be employed in a public service job as defined in the CCRAA during the time you make the qualifying monthly payments;
3. Be employed in a public service job as defined in the CCRAA at the time the Secretary forgives the loan; and
4. Make qualifying payments under the Income-Based Repayment (IBR) plan.

*The Federal Family Education Loan (FFEL) program includes loans provided by for profit and non-profit student loan lenders. 

What is the definition of public service employment?

The borrower must be employed full-time in a public service job for each of the 120 monthly payments. Public service jobs include emergency management, government, military service, public safety, law enforcement, public health, public education (including early childhood education), social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization), public child care, public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code; or Teaching as a full-time faculty member at a Tribal College or University as defined in section 316(b) and other faculty teaching in high-needs areas, as determined by the Secretary.

What types of loans are eligible for forgiveness?

Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. Borrowers in the Direct Loan program do not need to consolidate in order to qualify for loan forgiveness. Borrowers in the FFEL program will need to consolidate into Direct Loans.  Perkins Loans can also be included if consolidated into a Federal Direct Loan.

Who do I contact to consolidate my student loans from the FFEL program into a Federal Direct Loan?

Can I choose any repayment plan available with Direct Loans?

To receive loan forgiveness, you will need to use the Income-Based Repayment (IBR) plan.  A standard payment plan also qualifies but results in your loan being fully repaid by the 120th payment.  You can calculate an estimate of your monthly payment online:

• To see your income-based repayment estimate go to www.finaid.org/calculators/ibr.phtml

NOTE:  Income-Based Repayment (IBR) is recommended for any borrower seeking Public Service Loan Forgiveness.  IBR is a new repayment plan and available as of July 1, 2009.  For more information about IBR visit http://www.ibrinfo.org/what.vp.html.  

What else is important to know?

Under current tax law Public Service Loan Forgiveness will not be taxed.

You will need to consider whether you are willing to work in a public service job for the 10 years required for the forgiveness program.  Borrowers who only work in a qualifying public service job for a few years will not qualify for any of the benefit.  Entering into alternate repayment plans that extend your repayment schedule may also increase the amount you pay in interest over the life of your loan. 

If you are married you must file a separate Federal income tax return for the income-based payment amount to be calculated on the basis of the borrower's adjust gross income, rather than on the combined income of the borrower and the spouse.  There are disadvantages to filing separately.  You will want to consider that you might incur a higher tax rate and be ineligible for some credits and deductions if you are married and file separately.

In order to qualify for this program, FFEL borrowers must consolidate their federal student loans through the Direct Loan Program. 

Where can I find more information on the Public Service Loan Forgiveness Program?

The Graduate Financial Aid Office will add information to this Web site as it becomes available.  You can also visit www.finaid.org/loans/publicservice.phtml for more information on the program. 

A simple checklist is available for borrowers who will qualify for the Public Service Loan Forgiveness Program from Equal Justice Works.