Monday, June 17, 2013

Public Service Loan Forgiveness

Did you know that there is a student-loan forgiveness program specific to those who work at a qualifying non-profit organization? Whenever people ask me about student loan repayment, I am quick to inform them of Public Service Loan Forgiveness (PLSF) because many people do not know that the program exists.

"In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers."

In legal terms, what this means is that: 
  • You must make 120 on-time, full, scheduled, monthly payments on your Direct Loans. Only payments made after October 1, 2007 qualify.
  • You must make those payments under a qualifying repayment plan.
  • When you make each of those payments, you must be working full-time at a qualifying public service organization.
I am taking advantage of PSLF as an employee of a non-profit law school. "Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC)." To check to see if your employer is a 501(c)(3), you can use this database: http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.

My first step was to consolidate all of my loans under the Direct Loan Consolidation program to make sure that the loans qualified for PSLF. I then signed up for Income Based Repayment (IBR), which counts as a qualifying repayment plan. Now all that is left is the 120 on-time, full, scheduled monthly payments.  This equates to 10 years.

The wonderful thing about this program is that the amount that is discharged after the 120 payments is not taxed. Thank goodness for PSLF!

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