If you have a federal student loan and you work for a government agency or nonprofit organization, you might be under the impression your balance will be forgiven after 10 years of payments. And you might be right. But you might be wrong.

The Public Service Loan Forgiveness (PSLF) program was introduced in 2007. In short, it offered to wipe away the remaining balance for public servants — government and nonprofit employees — who made 120 payments on loans through the Direct Loan Program or the Direct Consolidation Loan Program. When the first group of borrowers started applying for forgiveness in 2018, fewer than 3% — that's not a typo — were approved. There were various reasons for denial, but the most common was they had taken out Family Federal Education Loans — a federal student loan program not eligible for PSLF — and had never converted it to an eligible loan. 

Even people who had a Direct Loan or a Direct Consolidation Loan were denied forgiveness because they weren't in the right payment plan. To get forgiveness as a public servant, you need to be in an income-driven repayment (IDR) plan. Tragically, there are examples of people who opted into monthly payments that are higher than they would have been in an IDR plan and then learned they were not eligible for public servant loan forgiveness.

Another common disqualifier was failing to get annual certification from an eligible employer, which is pretty much any government or nonprofit organization, including public and private schools, colleges, nonprofit hospitals and health care providers, law enforcement, charities, etc.

Because the program was not providing relief to the people it was designed to benefit, the Federal Student Aid office within the U.S. Department of Education threw out a lifeline. "For a limited time," FSA said, borrowers could receive PSLF credit for payments made on loans that didn't qualify for PSLF. This opportunity is called the Temporary Expanded Public Service Loan Forgiveness (TEPSLF). 

That limited time ends on Oct. 31, just six months from now. And while you may get credit for payments that didn't strictly qualify, you do have to jump through the necessary hoops to have your loan balance wiped out. Qualifying remains a complicated process, but making sure you are on track for loan forgiveness is worth the effort. And borrowers who have enjoyed interest-free forbearance in repayments during the COVID pandemic will soon be reminded because that payment holiday also has an expiration date: Aug. 31.

And just last week, FSA announced more assistance for a broad group of borrowers, including PSLF eligible borrowers. It is possible that time when borrowers had paused repayment through forbearance could count toward PSLF, but the practical effects of the new announcement are still unclear. 

The most important thing is to make sure you are in the right loan, the right repayment plan and documenting your employment by an eligible government agency or nonprofit. Being in line for public servant loan forgiveness will also position you to benefit from the latest announcement.

Bottom line: There is no time to waste, and this is no time to make assumptions. 

If you need help figuring out where you stand and what your next steps are, these resources can help:

 

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