Do PLUS Loans Qualify for PSLF? Here’s How

Federal student loans are a common way to finance higher education. Public Service Loan Forgiveness (PSLF) aims to reduce the financial burden for individuals working in public service. PSLF can forgive the remaining balance on eligible federal student loans after a borrower meets specific requirements. Understanding the nuances of PSLF, particularly concerning different loan types like PLUS loans, is important for borrowers seeking this benefit.

PLUS Loan Eligibility for PSLF

PLUS loans are federal student loans for graduate or professional students (Grad PLUS loans) and parents of dependent undergraduate students (Parent PLUS loans). These loans cover educational expenses up to the full cost of attendance, minus other financial aid. Their eligibility for Public Service Loan Forgiveness (PSLF) depends on the specific type of PLUS loan and may require additional action.

Only Direct PLUS Loans (Grad PLUS or Parent PLUS) qualify for PSLF. Federal Family Education Loan (FFEL) Program PLUS Loans or Perkins Loans are not directly eligible. Many older federal loans fall under the FFEL Program. Borrowers with these non-Direct PLUS loans must convert them into a Direct Loan to pursue PSLF.

Non-Direct PLUS loans must be consolidated into a Direct Consolidation Loan to become eligible. This process combines multiple federal student loans into a single new loan under the Direct Loan Program. While consolidation makes these loans eligible for PSLF, payments made on the original FFEL or Perkins PLUS loans before consolidation do not count toward the 120 required payments for PSLF.

Parent PLUS loans, even Direct PLUS loans, have specific repayment plan requirements for PSLF eligibility. Direct Grad PLUS loans can be repaid under any income-driven repayment (IDR) plan for PSLF. However, Direct Parent PLUS loans are generally only eligible for the Income-Contingent Repayment (ICR) plan after consolidation. This requires careful planning for parents seeking PSLF.

Core Public Service Loan Forgiveness Requirements

Beyond the type of loan, Public Service Loan Forgiveness (PSLF) requires borrowers to meet three primary criteria: qualifying employment, qualifying payments, and enrollment in a qualifying repayment plan. All three conditions must be met for a payment to count towards the 120 required payments.

Qualifying employment means working full-time for a government organization (federal, state, local, or tribal), including the U.S. military, or for a not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code. Full-time employment generally means working at least 30 hours per week, or meeting the employer’s definition of full-time if it is greater than 30 hours.

Borrowers must make 120 qualifying monthly payments. These payments must be made on time, for the full amount due, and while employed full-time by a qualifying employer. Payments do not need to be consecutive, but only payments made after October 1, 2007, count.

A qualifying repayment plan is also necessary for payments to count towards PSLF. While the 10-year Standard Repayment Plan is a qualifying plan, borrowers pursuing PSLF typically enroll in an income-driven repayment (IDR) plan. IDR plans, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), or Saving on a Valuable Education (SAVE), adjust monthly payments based on income and family size, which can result in a remaining balance to be forgiven after 120 payments.

Preparing PLUS Loans for PSLF

For many PLUS loan borrowers, particularly those with Parent PLUS loans or older FFEL PLUS loans, preparation is necessary to align their loans with Public Service Loan Forgiveness (PSLF) requirements. The primary preparatory step involves consolidating these loans into a Federal Direct Consolidation Loan.

Consolidation is important for Parent PLUS loans because, on their own, they typically do not qualify for most income-driven repayment (IDR) plans. Without consolidation, a Parent PLUS loan is only eligible for the Income-Contingent Repayment (ICR) plan for PSLF purposes. However, consolidating Parent PLUS loans makes the new Direct Consolidation Loan eligible for ICR, and in some specific cases, other IDR plans depending on the consolidation strategy.

To apply for a Direct Consolidation Loan, borrowers can use the online application available on StudentAid.gov. The application requires personal identifying information and details about the loans to be consolidated, including loan servicer information and account numbers.

The consolidation process typically takes between four and six weeks from the date the application is received. During the application, borrowers will select a repayment plan for their new Direct Consolidation Loan. It is important to choose an income-driven repayment plan to ensure payments count towards PSLF, as the goal is usually to have a remaining balance forgiven. Consolidation generally results in a new loan, and payments made on the original loans before consolidation do not count toward PSLF on the new consolidated loan.

Applying for Public Service Loan Forgiveness

Once PLUS loans are eligible and employment and payment criteria are met, the next step is to apply for Public Service Loan Forgiveness (PSLF). This process involves submitting the PSLF Form, which certifies qualifying employment and tracks progress toward the 120 required payments.

Borrowers can generate the PSLF Form using the PSLF Help Tool on StudentAid.gov. This tool assists in determining employer eligibility and guides the borrower through completing their portion of the form. The form requires the borrower’s personal information and details about their employment, including the employer’s Employer Identification Number (EIN) and dates of employment.

After the borrower completes their sections, an authorized official from the qualifying employer must sign the form to certify employment. This official is typically from the human resources department. Once signed, the PSLF Form can be submitted electronically through StudentAid.gov, or by mail or fax to the designated student loan servicer.

It is recommended to submit the PSLF Form annually or whenever there is a change in employment. This helps to keep track of qualifying payments and ensures that employment is certified regularly. While not strictly required until the final application, regular submission helps to prevent issues with employment verification later.

After 120 qualifying payments have been made and certified, the borrower submits a final PSLF application. Upon submission, the loan servicer reviews the application and notifies the borrower of their payment count and the outcome of their forgiveness request. The remaining balance of the eligible federal student loan debt is then forgiven, and this forgiven amount is not considered taxable income under federal law.