Student Loan Forgiveness For Nonprofit Employees
Teachers, police and hospital workers are often hailed as heroes. As nice as the praise is, it doesn’t put food on the table or lower their bills.
For millions of them, one of the biggest monthly bills is their student loan repayment. Semi-fortunately for them, the government has a student loan forgiveness program for nonprofit workers and others in the public service industry.
We say “semi-fortunate” because the Public Service Loan Forgiveness (PSLF) program has been a case study in government dysfunction since it began in 2007. At one point, 99% of applicants were rejected.
It wasn’t that they didn’t qualify. There was mass miscommunication over the proper repayment plans, which loans were eligible and whether applicants worked for a qualified employer.
Reforms have been put in place, so it truly is possible to have student loan forgiveness if you work for a nonprofit. The PSLF is likely the best option for government workers, people who work for eligible 501c3 nonprofit organizations or in public service, like firefighters or police officers.
The goal is to make such jobs more attractive to people by having their loans forgiven after 10 years of qualified payments. Here’s a look at the basics of the system.
Public Service Loan Forgiveness: How it Works
- Eliminates all remaining federal student loan debt after 10 years or 120 qualifying payments.
- Combines with an income-based repayment option to significantly reduce your payments.
- Combines with a student loan consolidation for one easy monthly payment.
Public Service Loan Forgiveness Eligibility
- Must be a local, state, tribal or federal government employee or work for a 501(c)3 nonprofit organization.
- Must work full-time (a minimum of 30 hours/week).
You should submit a PSLF & Temporary Expanded PSLF form annually or when you change employers. That will ensure you are on the right track and make sure you are making qualifying payments.
Student loan payments have to be made under an income-based repayment plan, which is part of the limited PSLF waiver. AmeriCorps and Peace Corps volunteers are also eligible.
What Is the Criteria for a Qualifying Payment?
A qualifying payment for the PSLF program is one that has been made:
- Under a qualifying repayment plan.
- No later than 15 days after the due date.
- Payments made after Oct. 1, 2007.
- While you are employed full-time by a qualifying employer.
Qualifying payments can’t be made while you are enrolled in school, during the grace period or while a loan is in deferment or forbearance.
Payments don’t have to be consecutive, so if you work for a non-qualifying employer and return to a qualifying employer, you will retain credit for the prior payments.
How Can I Check If I Work for a Qualifying Employer?
It’s paramount to make sure your employer is qualified for the loan forgiveness program. The PSLF Help Tool keeps a database of about 2.7 million qualified employers that is updated on a regular basis.
Fortunately, you don’t have to scroll through all 2.7 million looking for your employer’s name. The PSLF Help Tool generates a form that you submit. If your employer qualifies, you receive a count of the number of payments you have made toward both the PSLF and TEPSLF from FedLoan Servicing.
The specific job you perform does not matter as long as you’re employed by a qualified employer. For instance, if you work for a school system, it won’t matter if you are a principal, a teacher or a janitor.
Federal Perkins Loan Cancellation
Certain nonprofit employment categories qualify for Federal Perkins Loan Cancellation, including those listed below:
- Peace Corps or Vista employees.
- Librarian with a master’s degree working in a Title I-eligible elementary or secondary school in a public library serving Title I-eligible schools.
- Full-time employee of a public or non-profit child- or family-services agency providing services to high-risk children and their families from low-income communities.
- Full-time staff member in the education component of a Head Start program.
- Full-time staff member in a pre-kindergarten or child care program that is licensed or regulated by a state (for service that began Aug. 14, 2008 or after).
How to Qualify for Perkins Loan Cancellation
- Must be a full-time attorney employed by a federal public or community defender organization.
- Forgiveness is only available for Perkins Loans.
You are eligible for 100% loan forgiveness under the Federal Perkins Loan Cancellation program for service that began Aug. 14, 2008 or after. Cancellation happens after five years, as follows:
- Year One: 15% cancellation
- Year Two: 15% cancellation
- Year Three: 20% cancellation
- Year Four: 20% cancellation
- Year Five: 30% cancellation
If you have a Federal Perkins Loan, you must apply to the school that made the loan or to the loan servicer the school designated. If you have any questions on Perkins Loan cancellation, contact your college or loan servicer.
Make Your Loans Eligible through Consolidation
In almost all cases, if you consolidate your loans, only the qualifying payment you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF.
However, if you consolidate those loans in a Direct Loan before Oct. 31, 2022, you may be eligible for qualifying credit payments made on those loans through the limited PSLF waiver.
To get help with a direct consolidation loan, student loan consolidation and refinancing, call today.
What If My PSLF Application is Denied?
If your PSLF application is turned down, it’s not the end of the world. You might still be eligible for a Temporary Expanded PSLF. If you are denied there, you will have to continue making payments according to the original terms of your Master Promissory Note.
At that point, you might want to consider student loan refinancing if it means you’ll get a better interest rate or monthly payment that works better for you.
Get Help with Student Loan Debt
The scrutiny and criticism of the PSLF program has made it somewhat easier to qualify, but applicants still face major headaches and hurdles. Given the rejection percentage, it would be wise to develop a Plan B.
Among the alternatives are an income-based repayment plan or a debt consolidation loan from a nonprofit. Such a program includes credit counseling and financial experts who work with all your lenders to find lower interest rates. All your loans are then rolled into one monthly payment that is lower than the total of all the separate bills you were previously on the hook for.
Contact a nonprofit credit counseling agency like InCharge Debt Solutions for help with student loan debt.
About The Author
In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.
- N.A. (ND) Public Service Loan Forgiveness. Retrieved from https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service
- Turner, C. (2018, October 17) Why Public Service Loan Forgiveness Is So Unforgiving. Retrieved from https://www.npr.org/2018/10/17/653853227/the-student-loan-whistleblower
- Lieber, R. (October 8, 2021) A Guide to Big Changes for Public Service Loan Forgiveness. Retrieved from https://www.nytimes.com/article/public-service-loan-forgiveness-changes.html