How To Improve Your Odds Of Getting Student Loan Forgiveness

Forgiveness programs for federal student loans always seem to be well-intentioned, but the way they’re rolled out can leave a lot to be desired. When you take a closer look at Public Service Loan Forgiveness (PSLF), for example, you’ll find a program with rules so complicated many applicants don’t really understand them.

This has led to a situation where hardly anyone who applies is approved, and where many people spend years thinking they’re working toward loan forgiveness only to find they had the wrong loans or the wrong job all along. 

So, how does PSLF work? As a refresher, this program was created to help people escape student loan debt when they agree to work in an eligible job for 10 years and make 120 on-time payments. Other requirements apply, but the end result is having loan balances forgiven after 120 payments are made and 10 years are up. 

Sounds good, right? It definitely does, but the reality is a lot more complicated. To understand how bad PSLF has gotten, one only has to look at Public Service Loan Forgiveness data released by the U.S. Department of Education. Here are some of the most egregious stats from the April 2020 report:

• As of the end of April 2020, 196,046 applications for PSLF have been submitted by 150,545 borrowers
• Of the 180,798 applications that have been process out of those, 177,422 have been rejected and 3,376 have been approved
• 2,215 unique borrowers have had their PSLF discharge processed
• In total, $146,322,876 in balances have been discharged

Even when you take typos or confusion over the program into account, it’s hard to understand how only 3,376 applicants out of 150,545 individuals have been approved. If you took these stats at face value, you would have to believe that less than 3 percent of people filled out their application the right way or met the requirements for the program.

But let’s dig down another layer deeper into this mess. Remember when the federal government rolled out the Temporary Expanded Public Service Loan Forgiveness program (TEPSLF)? This program was created in order to help more people qualify for loan forgiveness, yet it’s hardly moved the needle. So far, 1,826 requests for TEPSLF have been approved, and 28,888 applications have been deemed ineligible.

How To Improve Your Chances of Approval

When it comes to PSLF, the U.S. Dept. of Education shares a laundry list of problems that have made too many people ineligible for the programs. These include:

• Not enough qualifying payments (58%)
• Missing information (23%)
• No eligible loans (14%)

With this in mind, improving your odds of approval should be rather simple. I say “should be” because it should be extremely apparent that qualifying for PSLF is a lot more complicated than it seems.

If you want to boost your chances of approval and avoid a situation where you’re stuck in forgiveness limbo, you have to pay close attention to the qualification details for this program. Here are the main steps you can take to work toward loan forgiveness and make sure you don’t waste any time.

Have The Correct Loan Type

To qualify for PSLF, you need to have certain types of student loans called Direct Loans. Any loan that falls under the William D. Ford Federal Direct Loan (Direct Loan) Program qualify, whereas other federal loans like FFEL loans and Perkins loans do not.

If you don’t have the right type of federal student loans, you can get your loans into compliance for PSLF by consolidating them with a Direct Consolidation Loan. But remember, you have to do this first because payments made on other types of student loans will not account toward the 120 payments you need to qualify for PSLF.

Make Sure You’re On The Correct Repayment Plan

In addition to having the right type of student loans, you also have to be repaying your loans on an income-driven repayment plan. This includes plans like Pay As You Earn (PAYE), Income Based Repayment (IBR), Revised Pay As You Earn (REPAYE), and Income Contingent Repayment (ICR), all of which let you pay a percentage of your discretionary income for 20-25 years before leading to forgiveness of your remaining loan balances.

If you’re not repaying your loans on an income-driven repayment plan, you’ll need to move to one before your payments start counting toward PSLF.

Certify Your Employment Every Year (Or More If Needed)

Finally, you need to have the right type of public service position in order to qualify for PSLF. Specifically, the United States Department of Education says you need to be employed full-time by a “U.S. federal, state, local, or tribal government or not-for-profit organization.”

In order to make sure you’re on track with qualified employment, you also need to fill out an Employer Certification Form, and update with a new one every single year. 

You also need to fill out a new one if you switch jobs mid-year. You don’t want to have to track down past employers to fill this out.

This form ensures that, without a doubt, your employment makes you eligible for PSLF in the year you fill it out. Not only should you fill this form out as soon as you apply for your first job that would make you eligible for PSLF, but you should fill one out if you switch employers and once every year otherwise.

May The Odds Be Ever In Your Favor

Qualifying for PSLF may seem nearly impossible, but some applicants seem to be getting through. My guess is that problems were rampant among submitted applications, and that many people just don’t understand all the requirements for the program — requirements like having to repay on an income-driven plan, having Direct Loans, or avoiding pay ahead status.

If you want to ensure you’ll get the forgiveness you’re dreaming of — and that you don’t waste years making payments that won’t count toward PSLF — the time to get serious about the details is now. Make sure you have the right loans, that you’re repaying your loans on an income-driven plan, and that you fill out the Employer Certification Form every year. Once you do that, everything should fall into place.