public service loan forgiveness
Federal student loan forgiveness after 120 qualifying payments while working full-time for a qualifying public service employer.
Example
“After ten years of teaching she received public service loan forgiveness eliminating $85,000 in student loans.”
Memory Tip
PSLF — 10 years of public service and qualifying payments. The remainder is forgiven tax-free.
Why It Matters
Public service loan forgiveness can eliminate tens of thousands of dollars in student debt for those working in government, nonprofit, or other qualifying sectors. This program makes careers in public service more financially feasible by removing the burden of long-term loan repayment for eligible workers.
Common Misconception
Many people believe that any payment made on federal student loans counts toward the 120 qualifying payments, but only payments made under specific income-driven repayment plans while employed full-time at a qualifying employer are counted. Payments made under standard repayment plans or while unemployed do not qualify.
In Practice
A nurse working full-time at a public hospital with 80,000 dollars in federal student loans makes 10 years of qualifying monthly payments of about 200 dollars under an income-driven repayment plan. After 120 payments, the remaining balance of approximately 40,000 dollars is forgiven tax-free, saving the nurse from decades of additional payments.
Etymology
Created by the College Cost Reduction and Access Act of 2007.
Common Misspellings
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See Also
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