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Student Loan Forgiveness

11 March 2013 3 Comments

canstockphoto10451265Student loans allow millions of students in the United States to pursue an education they otherwise would have missed out on. However, a lot of students find that once they have finished with their education, servicing student education debt is harder than they thought. In such a situation, student loan forgiveness of any kind sounds like a very attractive proposition. In this article we talk about one type of federal student loan forgiveness – the Public Service Loan Forgiveness program from the federal government.

An Introduction to Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) program was established under the College Cost Reduction Act of 2007. It tries to reduce student debt by partially forgiving it, while also encouraging people to work in public service agencies and organizations. Basically, the program allows student loan forgiveness once the borrower has made 120 monthly payments under the program. To be eligible for this program, you should be working full-time in a qualified public service organization. A qualifying public service organization is any state, federal or local agency or organization, or any non-profit organization that is tax-except under the section 501(c)(3) of the IRS tax code.
PSLF is only available for direct loans, and if you are servicing indirect loans from the federal government, then you are not eligible for this program. At the same time, you can consolidate your direct and indirect loans under a single Direct Consolidated Loan and then pay back on that loan to avail of this program. The payments you made for indirect loans till that time would not count under this program, and only the new payments you make will count under it.
It should be noted that once you apply for this program, you have to still make 120 monthly donations to actually get your loan forgiven. Therefore, it is not a total loan forgiveness plan, but only helps to partially reduce the burden of student loans. At a time when millions of people are still saddled with hundreds of billions of dollars worth of student loans, even partial loan forgiveness is a welcome respite.
More about the 120 Qualifying Monthly Payments
You need to pay back at least 120 monthly payments for your student loan under the PSLF to become eligible for student loan forgiveness. If you miss out the payment of a month, or get delayed in it, then that month will not be counted as one of the required 120 months. You are given almost unlimited time, or as allowed under the repayment plan you are using, to make the 120 payments under this program.
It should be noted that it takes 10 years to make 120 monthly payments without missing out a single month. Therefore, if you apply today for this program, it will take at least 10 years for your student loans to be forgiven.
If you are working for a government agency, or a non-profit organization that is a qualified employer under this program, you should definitely apply for this program and start making your payments under it. Paying back student loans can take decades even at the best of times, and one never knows whether you will be able to pay your student loans in 10 years or not without the use of this program.


Yakezie Carnival at Making The Life You Want
Carnival of Retirement at Midlife Finance
Carnival of MoneyPros at The Savvy Scot


  • Taylor Brione said:

    Yes! I'm minoring in non-Profit Manaement at my school, and they always tell us about this program. It's really helpful if you get on the income based plan and then pay your minimum payment for the ten years, then you will have it forgiven after the 120 payments. Thanks for sharing!

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  • Joseph said:

    Very interesting read, Helped me out a lot with my son just about to graduate with a student loan. going to talk to him about this idea