By Nate Matherson, Co-founder of LendEDU, a blogger who is obsessed with everything student loan debt. Nate is working to repay his own mountain of student loan debt. Nate graduated from the University of Delaware in ’16 with a B.S. in Finance and over $55k in student loan debt. He is happy to share his knowledge of student loan forgiveness for federal employees through the PSLF program.
Note from GovWorker: Nate reached out to me about a month ago. He explained LendEDU’s mission and offered to write a guest post for the site specifically targeting student loan forgiveness for federal employees. As I’ve mentioned earlier on the blog, I was lucky enough to graduate debt free. I admit student loans is an area I know little about and was very happy with the post that Nate put together. Enjoy!
Student Loan Forgiveness for Public Employees (including federal employees)
Student loan debt is undoubtedly a crisis in the United States, with an estimated $1.52 trillion in debt outstanding among 45 million student loan borrowers.
Unfortunately, high student loan balances can make it more challenging for graduates to go into public service – including working for the federal or state government – because many new grads need a private sector salary to repay all they’ve borrowed.
In fact, as the Office of Personnel Management explains, the government has actually had to put a federal student loan repayment program into place to allow federal agencies to provide loan repayment assistance in order to attract qualified professionals into government work. The federal student loan repayment program allows individual government agencies, such as the Department of Justice, to repay up to $60,000 in loans for employees who meet certain requirements.
Read More: Is FIRE even possible for federal employees?
While some federal workers can take advantage of benefit of working for the federal government, there is also another option for those looking for help managing loans while going into government work: Public Service Loan Forgiveness (PSLF). Public Service Loan Forgiveness is an option for all government workers at the federal, state, or local level who comply with certain requirements for getting federal loans forgiven.
How Does Public Service Loan Forgiveness Work?
Public Service Loan Forgiveness allows eligible federal employees to have some of their federal student loans forgiven. If you qualify for PSLF, you could get your loans forgiven if you received loans under the William D. Ford Federal Direct Loan Program.
If you have taken out a Direct Consolidation Loan to consolidate other types of federal student debt, including Federal Perkins Loans or loans administered under the Federal Family Education Loan Program (FFEL), you can also have this debt forgiven.
Eligible loans are forgiven only after you have made 120 qualifying payments on an income-driven repayment plan. Only payments made on an income-driven plan count towards earning loan forgiveness, and you must have been required to make the payment. If you paid on your loan while it was deferred or in forbearance, the payment won’t count.
And, payments must be made while working full-time for a qualifying employer. They must have been made no later than 15 days after your due date, and you must have made the full payment shown on your bill.
Are You Eligible for PSLF student loan forgiveness for federal employees?
If you work for a federal, state, or local government and you work full-time, you should be eligible for PSLF – provided you have the right type of loans and are paying on them back on an income-driven repayment plan.
You are considered to be working full-time if you either meet your employer’s definition of working full time or if you work at least 30 hours weekly – whichever is greater. If you have more than one qualifying job, the combined aggregate time you work for each employer can count towards determining if you are full-time. This means you’ll qualify as long as you work a combined average of 30 hours per week.
It’s Important to Avoid PSLF Scams
While Public Service Loan Forgiveness is an important program that ensures people with expensive degrees can do government work, there are unfortunately some scammers out there who take advantage of people eager to get student debts forgiven.
Some scammers will charge you to help you sign up for income-based plans that you can sign up for on your own or will charge you a fee to help you enroll in PSLF even though you can also apply for forgiveness on your own without any special help.
It’s important to be on the lookout for red flags that suggest a student loan forgiveness scam, including:
- Companies that offer help with student debt in exchange for paying an up-front or monthly fee.
- Companies trying to collect fees over the phone before they’ve actually taken any steps to help you deal with your debt problem.
- Companies that promise immediate forgiveness of your student debt.
- Companies that pressure you into signing up for assistance programs.
- Companies that request you provide sensitive personal details right away or provide personal details over the phone or email.
You do not need to pay any third-party company to help you sign up for loan forgiveness. You can sign into your account with the Department of Education, select an income-based payment plan, and make your payments over time.
When you are ready to apply for PSLF, you’ll simply need to complete the PSLF application and mail or fax the application and your employment certification to the U.S. Department of Education, FedLoan Servicing at P.O. Box 69184, Harrisburg, PA 17106.
Additional Programs to Know About
While Public Service Loan Forgiveness is one way to reduce the total you owe on student loans, it’s not the right approach for everyone.
PSLF won’t help you to deal with your private student loan debt, as private loans can’t be forgiven. And, if your income is so high that you’d have your loans paid down before making 120 on-time payments, no debt would actually be forgiven.
Fortunately, there are other ways to reduce your student loan debt including refinancing your student loans. Student loan refinancing means taking out a new loan – ideally at a lower rate – to pay off existing debt. By reducing your rate, you can lower your monthly payments and ideally reduce the total repaid over time. As of this writing, student loan refinancing rates range from 3.39% to 9.99%.
While refinancing federal loans would mean giving up access to borrower protections, including PSLF, refinancing private loans doesn’t involve giving up any benefits and could save you a significant amount of money if you can lower the interest you pay.
Explore all your options for dealing with student debt
If government work is your passion, it’s important to find a way to do this work while still getting your debts paid down. Public Service Loan Forgiveness is just one potential avenue for federal employees with student loans. You may also want to explore loan refinancing, or federal employer loan repayment programs could make doing the work you love possible while still paying off the educational debt you owe.
Note this post was updated for search engine optimization on September 5, 2020. This is a personal blog and this post does not constitute legal, investment, or debt-consolidation advice.
The Truth About Federal Employee Health Insurance After Retirement- What You Need to Know Now
Health care is one of most American's biggest expenses. Find out how as a federal employee you can have health insurance after retirement
When Can Federal Employees Retire? Proven Advice You Need Today.
I want you to stop thinking of "When can federal employees retire" as a specific age and number of years of service.
FERS Deferred Retirement- What You Need To Know Before You Quit A Government Job
Wondering what happens to your pension if you quit your government job? This article is a playbook for FERS deferred retirement benefits.
The million dollar day of work— Understanding your full FERS retirement compensation
FERS is more than a pension. The non pension parts of the FERS retirement compensation package are worth more than a million dollars! Find out more here!
Should You Max Out TSP Contributions? The Truth About The Government 401(k)
Thinking about contributing the max to your TSP? This post describes the maximum allowable TSP contributions and pros/cons of the TSP.
Federal Employees and Social Security Myths Versus Reality
Do federal employees get social security and a pension? Read this article to understand everything you need to know about feds and SSI.