Public Service Loan Forgiveness Program

On September 27, 2007, President Bush signed the College Cost Reduction and Access Act (CCRAA) of 2007. Part of the act included a new Public Service Loan Forgiveness Program.

General Requirements | Definition of Public Service Employees | Loans Eligible for Forgiveness | Contact Information for Direct Loan Consolidation | Direct Loan Repayment Plans | Tax Information | Public Service Loan Forgiveness Program Information

General Requirements

To be eligible to participate in the Public Service Loan Forgiveness Program, you must meet the following requirements:

  1. Make 120 monthly payments on the eligible Federal Direct Loan on or after Oct. 1st, 2007(FFEL* loans can be moved to Direct Lending through loan consolidation);
  2. Be employed in a public service job as defined in the CCRAA during the time you make the qualifying monthly payments. Eligible public service jobs include:
    • employment by any nonprofit, tax-exempt 501(c)(3) organization;
    • employment by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
    • serving in a full-time AmeriCorps position.
  3. Be employed in a public service job as defined in the CCRAA at the time the Secretary forgives the loan; and
  4. Make qualifying payments under one of (or some combination of) the following:
    • Income contingent repayment plan;
    • Income-based repayment plan.

*The Federal Family Education Loan (FFEL) program includes loans provided by for profit and non-profit student loan lenders.

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Definition of Public Service Employment

The borrower must be employed full-time in a public service job for each of the 120 monthly payments.

Public service jobs include:

  • emergency management
  • government
  • military service
  • public safety
  • law enforcement
  • public health
  • public education (including early childhood education)
  • social work in a public child or family service agency
  • public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization)
  • public child care
  • public service for individuals with disabilities
  • public service for the elderly
  • public library sciences
  • school-based library sciences

Other public school-based services include any organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code; or Teaching as a full-time faculty member at a Tribal College or University as defined in section 316(b) and other faculty teaching in high-needs areas, as determined by the Secretary.

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Loans Eligible for Forgiveness

Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. Borrowers in the Direct Loan program do not need to consolidate in order to qualify for loan forgiveness. Borrowers in the FFEL program will need to consolidate into Direct Loans. Perkins Loans can also be included if consolidated into a Federal Direct Loan.

Contact Information for Direct Loan Consolidation

To find out more about Direct Loan Consolidation, please visit Direct Loan Servicing Online or call 1.800.848.0979.

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Direct Loan Repayment Plans

To receive loan forgiveness, you will need to use either the Income-Contingent or the Income-Based Repayment plans. A standard payment plan also qualifies but results in your loan being fully repaid by the 120th payment. You can calculate an estimate of your monthly payment online:

NOTE: Income-Based Repayment (IBR) is recommended for any borrower seeking Public Service Loan Forgiveness. For more information about IBR, visit IBRinfo.

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Tax Information

Under section 108(f) of the Internal Revenue Code, Public Service Loan Forgiveness will not be taxable.

You will need to consider whether you are willing to work in a public service job for the 10 years required for the forgiveness program. Borrowers who only work in a qualifying public service job for a few years will not qualify for any of the benefit. Entering into alternate repayment plans that extend your repayment schedule may also increase the amount you pay in interest over the life of your loan.

If you are married, you must file a separate Federal income tax return for the income-based payment amount to be calculated on the basis of the borrower's adjust gross income, rather than on the combined income of the borrower and the spouse. There are disadvantages to filing separately; you will want to consider that you might incur a higher tax rate and be ineligible for some credits and deductions if you are married and file separately.

In order to qualify for this program, FFEL borrowers must consolidate their federal student loans through the Direct Loan Program.

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Public Service Loan Forgiveness Program Information

For more information on the program, visit IBRinfo or FinAid's Guide to Public Service Loan Forgiveness.

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