Public Service Loan Forgiveness Offered by the Direct Loan Program
Established by the College Cost Reduction and Access Act of 2007, this loan forgiveness program is only available through Direct Loans. The public service loan forgiveness program is targeted at students who pursue public service careers and who have high student loan debt and low income. Borrowers with low debt or high income will not benefit as much.
Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation. A FFELP borrower may consolidate their loans with Direct to qualify for the forgiveness program. Perkins Loans and FFELP PLUS loans may be included in a Federal Direct Consolidation Loan; the entire consolidation loan, including the Perkins or PLUS Loans, is eligible for public service loan forgiveness.
NOTE: Parent PLUS loans included in a Federal Direct Consolidation Loan are eligible for income-contingent repayment (but not income-based repayment), making it possible to obtain forgiveness. However, the income contingent repayment is not available for Federal Direct Consolidation Loans that include PLUS loans for borrowers who entered repayment before July 1, 2006, per 34 CFR 685.208(a)(1)(ii).
Eligible Repayment Plans include income-based repayment, income contingent repayment, standard repayment or a combination of these repayment plans. Payments made under other repayment plans do not count (e.g., extended repayment, including consolidated loans, and graduated repayment). To maximize the amount of forgiveness, borrowers should use income-based repayment.
PAYMENTS: The forgiveness occurs after ten years of repayment (120 monthly payments made on or after October 1, 2007 on an eligible Federal Direct Loan). Periods of deferment and forbearance are not counted toward the 120 payments. Payments made before October 1, 2007 do not count. This represents a huge savings compared to the 25 years of repayment required for forgiveness under the income-contingent and income-based repayment plans for borrowers who are not employed full time in public service jobs.
NOTE: If a borrower were to use only standard repayment for repaying their loans there would be no balance remaining after 10 years and so no debt to cancel. Standard repayment is only provided as an option to address situations where a borrower is unable to continue under income-based repayment because they no longer have a partial financial hardship or the payments under income-contingent repayment exceed standard repayment. In such a situation the borrower would use standard repayment for the remaining payments within the 10 year period and obtain some loan forgiveness at the end of the ten years of payments.
EMPLOYMENT: The borrower must be employed full-time in a public service job for the entire ten year repayment period. Public service jobs include, among other positions, emergency management, government (federal, state or local), military service, public safety and law enforcement (police and fire), public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten), social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization), public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations
WHAT IS FORGIVEN: ALL remaining interest and principal are forgiven. The borrower must understand that this is an all-or-nothing benefit. If a borrower stops working full-time in a public service job, even with just a few of the 120 payments left, they get no forgiveness.