Loan forgiveness is a topic that almost every law student and public defender has thought about. That’s because the federal government established the Public Service Loan Forgiveness program, (PSLF).
PSLF gives students the opportunity to have the balance of their federal student loans cancelled. You have to have a qualifying job and make 120 on time payments under the program. Seems simple, right? Not so much.
PSLF Pitfall #1: Qualifying Loans for Public Service Loan Forgiveness
PSLF can be tricky. There a many pitfalls that await hardworking students with an eye towards financial freedom from their student loans. For starters, did you know that the only eligible loans are “Federal Direct Loans”?
What are “Federal Direct Loans” you ask? Quite simply, they are loans administered by the United States Department of Education under the William D. Ford Federal Direct Loan Program. Any other loans are not eligible for forgiveness on that particular loan or loans.
Don’t forget that not all federal loans are “Federal Direct Loans.” If you have federal loans that do not qualify for PSLF fear not, you can consolidate with a Direct Consolidation Loan. But, any payment you made on those non-qualifying loans will not count towards your 120 payments towards loan forgiveness.
Some students will look to private loans because their parents may have a relationship with a particular bank, or the terms may appear to be more favorable. This is fine for some people, but if you plan to enter a career in public interest law, including public defense, you want to rethink private loans.
On the other hand, if you cannot see yourself working in public service for at least ten years, then you may want to rethink this strategy. Either way, you don’t want to end up like me, with over $100,000 in loans that qualify for loan forgiveness, and another $20,000 that do not. Yay hindsight!
Pitfall #2: Qualifying Employment for Public Service Loan Forgiveness
Another pitfall students face is taking a job that does not qualify under PSLF. Nothing could be worse than working a job for 10 years and making 120 on time payments, only to be told that you’re not eligible!
So what is considered eligible employment? The official answer will only be known by submitting the Public Service Loan Forgiveness Employment Certification Form to the United States Department of Education. In general, your employer must meet one of the following requirements:
- Your employer is a federal, state, local, or tribal government organizations; or,
- Your employer is a 501(c)3 nonprofit; or,
- Your employer is a not-for-profit that’s not 501(c)3 designated but meets other requirements related to public service; or,
- You are employed by AmeriCorps, in a full-time capacity, or the Peace Corps.
You must also be a full-time employee and work a minimum of 30 hours per week. Any full-time public defender will qualify, but it is nonetheless critical to file the Employment Certification Form every year and every time you change your employer.
Failing to file every year or every time you change your employer is not going to be fatal to your application. However, you are asking for some stress if you do it this way. And I’m not just talking about the stress of chasing down people for signatures. What if one of your past employers does not qualify? Save yourself the time and stress by filing the form yearly and every time you switch employers.
This brings me to my last point on this; you don’t have to stay with the same employer for the 120 payments. You can bounce around all you like. Just make sure the employer qualifies! However, you must be employed with a qualifying employer at the time you apply and at the time your application is pending. (Unless you request otherwise, your payments will be put on hold during this period).
Pitfall #3: Qualifying Payments
This one definitely jammed me up when I was just starting out. First and foremost, I had trouble making even the minimum payment in the beginning. A few payments were a little late and therefore did not count.
In order for a payment to count towards public service loan forgiveness, it must be for the full amount due and it must be made within 15 days of the due date. If you miss the 15 day mark, the payment is still due, you just don’t credit for it under the public service loan forgiveness program.
But it gets even better, not only do your payments need to be on time, or not count, they must also be under the correct repayment plan! That’s right, your payment plan must be one of four income driven repayment plans or your payments do not count.
Fear not, if you were under the wrong repayment program, you may qualify for “Temporary Expanded Public Service Loan Forgiveness.”
On that note, be sure to check out my post “4 Tips To Surviving On A Public Defender’s Salary” for some helpful tips on how to lower your monthly payment!
Final Thoughts
The key is not just knowing the rules, but following them and documenting everything! Have a call with a rep? Record the date, time, and representative’s identification number or last name. Want to toss those letters approving your employer certification form? Keep it! Etc.
Here is what one student put together:
Now that you are aware of the three areas where people get caught, you are ready for success! My hope is that this will save you a lot of time, anguish, and hopefully money! As always, ask any questions and share your experiences below in the comments.
