Millions of Americans are struggling with debt. That debt comes in many forms, including mortgages, car loans, credit card balances, and more. But debt resulting from student loans is a special kind. It can’t be discharged in bankruptcy. No one can repossess your degree or remove the knowledge from your head. For that reason, getting rid of loan debt — or hoping for the prospect of student loan forgiveness — is typically a fruitless pursuit.
But that doesn’t mean there aren’t people working on solutions. The federal government, for example, has a program in place that would allow some people to dump their debt after 10 years. The Public Service Loan Forgiveness Program, as it’s called, isn’t well known. But it’s out there, and depending on your individual situation, it can be an option for dealing with your debt load.
What is it, and how do you qualify? We’ll cover the basics. But there are a few things you need to know about the Public Service Loan Forgiveness Program.
First, it might not last much longer. Word has it the Trump administration, spurred by Education Secretary Betsy DeVos, is looking to scrap the program. We don’t know whether that will actually happen yet, but it’s an idea that will ultimately help the Trump team tighten up the federal budget. Second, some people who think they’ve qualified for the program might have been given the green light erroneously. Reports are surfacing saying some borrowers who have received confirmation letters from the government might not be eligible after all.
Again, how does one become eligible? Let’s take a closer look at the scope of the problem and dig into the particulars.
The scope of the issue
You know there’s a student loan crisis in America. Everyone knows it. The total amount of outstanding student debt is more than $1.4 trillion, according to Student Loan Hero. That’s spread out among more than 44 million individual borrowers, all of whom needed to take out loans to finance their education. Overall, this means the typical college graduate in 2017 is leaving school with an average debt load of more than $37,000.
Being in the hole $37,000 isn’t the way most people want to start off in the world — especially if you’re hoping to get married, start a family, or even buy a house in the near future. But how does that $1.4 trillion figure compare to other types of debt? According to Student Loan Hero, it towers in comparison. Total credit card debt in the U.S. is $779 billion. There’s $1.16 trillion in auto loan debt (a bubble that might be about to burst). Mortgage debt, on the other hand, unsurprisingly tops student loan debt at $8.84 trillion.
Mortgage and auto loan debt, though, is able to be discharged. Someone can repossess your house or car if you go broke. But they can’t repossess your education, which is why you can’t get rid of student debt through traditional channels.
Next: So if you’re among the 44 million student borrowers making an average monthly payment of $351 on your student loans, will the Public Service Loan Forgiveness Program help you?
What is the student loan forgiveness program?
The Public Service Loan Forgiveness Program was devised as a way to incentivize students to go into certain career fields, with the promise of forgiving loan balances after 10 years of service. According to the Department of Education, the government’s ultimate goal was to get qualified professionals into service jobs, rather than seeing talent flee to higher-paying career paths.
“The PSLF Program is intended to encourage individuals to enter and continue to work full time in public service jobs,” a document from USAid.gov said. “Under this program, you may qualify for forgiveness of the remaining balance due on your William D. Ford Federal Direct Loan (Direct Loan) Program loans after you have made 120 qualifying payments on those loans while employed full-time by certain public service employers.”
The program’s mechanics were set into motion in 2007, and the first students who could potentially see their loans forgiven are up to bat in 2017.
“Since you must make 120 qualifying payments on your eligible federal student loans after Oct.1, 2007, before you can qualify for the loan forgiveness, the first forgiveness of loan balances will not be granted until October 2017,” the site said.
Next: How does this program help the government deal with the growing student debt problem?
How does it tackle the problem?
Taking a step back, we know the student debt problem in America takes the form of a $1.4 trillion hole with 44 million borrowers inside. A typical student loan repayment plan sets you on a course to pay off your balance over a 10-year period. This varies, of course, depending on your situation (if you deferred your payments, for example) and your lender. So the idea with the government’s forgiveness program is to help students discharge remaining debts after that initial 10-year period.
There are other plans that can extend your payment schedule out to 25 years. This is an option under the government’s Extended Repayment Plan, for example. But even under the Standard Repayment Plan and Graduated Repayment Plan, you can get 30 years to repay your total balance.
Given that the average American lives to be around 80 years old, if you graduate at 22 you could be looking at the possibility of making loan payments until you’re in your mid-50s.
The forgiveness program, again, is meant to help those who qualify to dump those remaining debts after the typical 10-year time frame. But qualifying isn’t as easy as you’d probably hope, and there are a lot of variables at play that can derail your candidacy.
Next: How do you qualify for the program?
How do you qualify?
In order to qualify for the Public Service Loan Forgiveness Program, you’ll need to check several boxes off of a narrowly focused checklist. And, as mentioned, that might not even be enough. If the Trump administration gets its way, the program might be scrapped. And even if you’ve received a confirmation letter acknowledging you’ve been accepted by the program, it might have been sent in error.
Because of that, you probably shouldn’t count on this program coming through for you in the end. Yes, there’s a chance you could end up seeing your loan balance forgiven. But with the way things are going in Washington, there’s no such thing as a safe bet. Keep that in mind.
As far as the qualifications for the program, though, it comes down to five primary factors. We’ll go through each factor, one by one, on the following pages. But know going in this program was intended for those in service careers and those who have specific types of loans. It’s not for everybody.
1. Job eligibility
The Department of Education has this to say about your job: “Qualifying employment for the PSLF Program is not about the specific job that you do for your employer. Rather, it is about who your employer is.” You’ll qualify for the program if you work for any government organizations (federal, state, local, or tribal); a tax-exempt non-profit, such as a 501(c)(3); or other types of nonprofits that provide certain services. You can also qualify if you’ve been in AmeriCorps or the Peace Corps full time.
2. Loan eligibility
The type of loans you took out also matter. When it comes to this specific forgiveness program, only one loan actually qualifies: direct loans, or those from the William D. Ford Federal Direct Loan Program. If you have a loan of any other type, you’re drawing dead, according to the Department of Education.
“You may have received loans under other federal student loan programs, such as the Federal Family Education Loan Program or the Federal Perkins Loan Program. Loans from these programs do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan.”
3. Work with your employer and loan servicer
The next thing you’ll need to do is to ensure your employer is checking in with whoever is servicing your loan. Although it’s not technically required, it’s a pretty good idea to make sure your employer remains eligible, in the eyes of the Department of Education, for the program. (See our first eligibility bullet.) If your employer at some point over that 10-year period becomes ineligible, you’ll want to know about it.
4. Repayment: Income-driven plans
Next, you’ll need to be enrolled in a specific type of repayment plan. The income-driven plan, which determines your monthly payments as a percentage of your income, is what the government is looking for. This is different from the standard 10-year plan we’ve discussed before, as you’ll have finished paying your loans off after the 10 years if you stuck with that plan.
“Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan,” the Department of Education said.
5. Have a payment history going back 10 years
Finally, you’ll need to make sure you’ve made your payments — all of them — for 120 straight months or 10 straight years. The Department of Education calls these “qualifying monthly payments,” and they must have been made after Oct. 1, 2007, under a qualifying plan, for the full amount due on your bill, on time, and while you were employed full time by an eligible employer.
If you can clear all of these hurdles, you might qualify for the program — assuming it will continue under the Trump administration.