Ask Jeni: Is PSLF Right for Me?

November 27, 2018

I work at a non-profit and I’m getting payment from my employer totaling $10,000 over 5 years in the Tuitionio program. I’m currently repaying under the extended graduated repayment plan. My question is about student loan forgiveness given I work for a non-profit. I heard that if you do the required payment plan based on income it usually pays your loan off and there is nothing to forgive. How would I know what is best for me? How do I see if the loan forgiveness program could benefit me?

 

It sounds like you want to qualify for Public Service Loan Forgiveness (PSLF). PSLF is for folks employed full time by a non-profit employer. After 120 eligible payments are made (10 years) the remaining student loan balance is forgiven tax free.

Right now you’re not making eligible payments because you’re not in an eligible repayment plan. Because payments made under the Graduated Repayment Plan don’t count toward the 120 required for PSLF.

If you’re considering PSLF you’ll need to switch to one of the income-driven repayment plans. Eligible plans are Income-based repayment (IBR), Revised Pay As You Earn (REPAYE), or Pay As You Earn (PAYE).

Next, you need to know what type of student loans you have. If they’re all Federal Direct Loans or if you have some FFEL loans (an older type of federal loan). If you’re not sure, you can contact your student loan servicer and ask. It’s important to remember that  only Federal Direct Loans are eligible for forgiveness under PSLF. So, if you have older FFEL loans they will need to be consolidated to a Direct Consolidation Loan to qualify for PSLF.

After you determine what type of loans you have, the next step is to go to the Federal Student Aid Website and use their repayment estimator. It will show your monthly payment under the different repayment plans. It will also show you what your estimated loan forgiveness would be under PSLF.

If your income is too high relative to your debt you may not qualify for an income-driven repayment plan. If you don’t qualify for an income-driven repayment plan you won’t be able to get any loan forgiveness under PSLF. There will be nothing left to be forgiven after 10 years of payments if your loan balance isn’t high enough, so you also won’t benefit from PSLF.