Maximizing PSLF Benefits and Strategies for Success.

MUW Team

// July 12, 2023

Financial education, Loans

Introduction

When planning your career, one of the most important factors is how much student loan debt you’ll have after graduation. If you’re attending a public school, your program will be more affordable than a private college or university. However, even if you take out fewer student loans than someone who attended an expensive school, paying back those loans can still be challenging—especially if you don’t know about Public Service Loan Forgiveness (PSLF). If this might apply to you (or someone else), read on for ways to maximize PSLF benefits and strategies for success and common mistakes people make along the way.

PSLF benefits

PSLF program allows you to pay off your student loans while working full-time in a qualifying job. You may receive forgiveness of the remaining balance after ten years, but only if you make 120 monthly payments on time while employed in an eligible public service position.

If you qualify and choose to participate in PSLF, your payments will be calculated based on either an income-driven plan or a standard repayment plan (depending on when your loans were taken out). If you have more than one type of federal loan–such as Direct Loans and Perkins Loans–you’ll need to consolidate them into one kind before applying for PSLF so that all of them can be consolidated into one monthly payment due date each month instead of two separate ones from different servicers with different interest rates attached.

PSLF eligibility criteria

To be eligible for PSLF, you must meet the following criteria:

You must have full-time employment with one or more eligible federal or non-federal employers.
You are required to make 120 qualifying monthly payments on your loans to qualify for PSLF. These payments may include principal and interest, applicable fees, and/or capitalized interest (the amount added when an unpaid balance is added to your loan).
Your loans must be in repayment (forbearance does not count) at the time of application or re-certification. They also cannot be in default or delinquent at any point after being accepted into the program until it expires in 2026.*

Qualifying employment for PSLF

Qualifying employment for PSLF is any job at a 501(c)(3) nonprofit, government, or other tax-exempt organization. It would help if you were employed full-time and consist of at least 30 hours per week. You can work for one employer or multiple employers during this period.

Income-driven repayment plans

If you’re interested in Income-Driven Repayment Plans, here’s what you need to know:

Payments are based on income. That means they can be lower than the standard payment amount.
They don’t affect PSLF benefits. However, if your monthly payment is still higher than what it would be under an IDR plan and this causes strain on your finances or prevents timely payments, it might make sense for you to switch over before applying for PSLF (since this will not reset the clock).
They can help consolidate loans if multiple ones have different interest rates; however, this may reduce some of their tax benefits since they’re all combined into one loan with one interest rate! If possible, try not to consolidate unless necessary, as doing so could also impact future income-driven plans; check out [this article](https://www.nclihelpdeskblog/2016/11/15/what-is-an-income-driven-repayment/) by NCLI Help Desk Blogger Rachelle Gardner for more info on how consolidation works with IDR plans!

Employment Certification Forms (ECFs)

While working toward PSLF, Employment Certification Forms (ECFs) must be submitted to the Department of Education to verify that your employment qualifies for the program. ECFs must be submitted within 120 days of the end of each year in which qualifying employment occurred; this means that if you worked during 2017 but did not submit an ECF until 2018, your form would still be considered timely as long as it was received within 120 days after December 31st, 2017.

Record-keeping for PSLF

As you complete your PSLF employment, keep track of the following:

Copies of your Employment Certification Forms (ECFs). You will submit these forms to the Department of Education to show that you worked full-time for an eligible employer and made 120 qualifying monthly payments. You must also provide copies of any documents related to the loans on which you are requesting forgiveness under PSLF if requested by a lender or guarantor.
Copies of W-2s and 1099s from each year in which you had worked during your period of full-time government or nonprofit employment while making monthly loan payments under IBR or REPAYE plans, including any periods when no funds were being withheld from paychecks due to non-filing with IRS; this includes years where there was no income tax liability because someone was unemployed but still making payments towards their loans under one these programs.* Copies of any notices received from lenders indicating their decision regarding whether or not they would accept certification as sufficient proof that borrowers had satisfied all eligibility requirements necessary for obtaining loan forgiveness through PSLF.* Loan statements showing payment history since beginning participation in IBR/REPAYE plans through June 30th following graduation year (this should include both principal & interest amounts).

PSLF program updates and changes

As a borrower, you must be aware of the potential changes in your PSLF program. The Department of Education has stated they will change their student loan programs shortly. These changes will likely affect borrowers participating in PSLF or considering doing so.

It’s also essential for financial advisors and employers who may be helping their clients decide whether or not they should pursue this option, as well as how best to do so based on what we know now (and what might change).

Common PSLF mistakes

Mistake 1: Not keeping good records

When you file your taxes, you’ll be asked to report the amount of your loan payments. If they don’t match what you expected, it could mean that something went wrong with the process. You should also keep a record of all correspondence related to loans and repayment plans so that if there are any questions later on (like why your income-driven plan isn’t working), all the information is readily available in one place. Mistake 2: Not understanding all the rules and regulations

Two main programs are eligible for PSLF: Public Service Loan Forgiveness (PSLF) and Income-Based Repayment (IBR). These programs have different eligibility requirements and unique features worth understanding before deciding which one best suits your needs and those of other federal student loan borrowers who may want access to these benefits too!

Budgeting for PSLF success

You should set aside a budget to track your spending and ensure you have enough money left over for PSLF payments. Here are some tips:

Make sure you’re saving for retirement. If you still need to start saving, start now! The earlier people begin contributing to their retirement accounts, the better off they’ll be when it’s time to retire (and enjoy all those free hours). You can use this calculator from TIAA-CREF to see how much money is needed per month at various ages to reach specific goals (e.g., $1 million).
Pay down high-interest debt first–especially student loans with the highest interest rate! This will save money on interest payments over time by paying off higher-interest debts sooner rather than later; plus, once these debts are paid off completely, any extra funds can go toward paying off lower-rate student loans or saving even more money towards retirement goals like buying a home someday soon after graduation when prices are low again.”

Alternative repayment and forgiveness options

Pay as you earn (PAYE)
Revised Pay as you earn (REPAYE)
Income-contingent repayment (ICR)
Income-based repayment (IBR)
Public service loan forgiveness (PSLF)

Income-driven repayment plans are designed to help borrowers with federal student loans manage their debt by reducing their monthly payments. These repayment plans can lower your monthly payments by extending the length of your loan if you qualify and require no interest on subsidized loans while they’re in school or during periods of deferment.

Maximizing PSLF benefits and strategies for success

Maximize your PSLF benefits. The Public Service Loan Forgiveness program is one of the most attractive benefits of pursuing a career in public service, but it’s not without its caveats. To be eligible for forgiveness under this program, you must meet specific criteria and complete an Employment Certification Form (ECF) each year that you want to include in your application for PSLF.
Qualify for public service loan forgiveness. To qualify for PSLF, borrowers must:

Be employed full-time by an eligible employer (i.e., one whose primary mission is serving the public good);

Make 120 monthly payments on their federal student loans, and Work in public service for ten years before becoming eligible for forgiveness.

Conclusion

Thanks for reading our guide to maximizing PSLF benefits and strategies for success. We hope you understand better how the program works, what it can do for you and your student loans, and how to make sure it doesn’t fall through the cracks. If you have any questions or would like more information about PSLF as it relates specifically to your situation, don’t hesitate to get in touch with us at [email protected]