What Payment Plans Are Eligible for PSLF?

The Public Service Loan Forgiveness (PSLF) program offers a path to debt relief for individuals dedicated to public service. This government initiative aims to forgive the remaining balance on eligible federal direct loans. Forgiveness is granted after a borrower makes 120 qualifying monthly payments while working full-time for a qualifying employer. Understanding the specific repayment plans that count toward PSLF is important for borrowers pursuing this benefit.

Eligible Payment Plans

Borrowers must repay federal direct loans under specific repayment plans to qualify for PSLF. These include all Income-Driven Repayment (IDR) plans and the 10-year Standard Repayment Plan. IDR plans calculate monthly payments based on a borrower’s income and family size, making them adaptable to changing financial situations.

IDR plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and Saving on a Valuable Education (SAVE). IBR and PAYE generally cap payments at 10% or 15% of discretionary income, never exceeding the 10-year Standard Repayment amount. ICR calculates payments as the lesser of 20% of discretionary income or a fixed plan over 12 years. The SAVE Plan, which replaced REPAYE, also bases payments on discretionary income.

While the 10-year Standard Repayment Plan is eligible for PSLF, borrowers often find their loans are paid in full by the time they make 120 payments. Most borrowers pursuing PSLF choose an IDR plan, as these plans typically result in lower monthly payments, leaving a balance to be forgiven after 120 payments.

Ineligible Payment Plans

Certain repayment plans do not qualify for PSLF, and borrowers should avoid them. These include the Graduated Repayment Plan, the Extended Repayment Plan, and the Alternative Repayment Plan. Payments made under these plans will not count toward the 120 qualifying payments required for forgiveness.

The Graduated Repayment Plan starts with lower payments that gradually increase over time. The Extended Repayment Plan allows borrowers to repay their loans over a longer period, up to 25 years, resulting in lower monthly payments. These plans are ineligible because their payment structures are not based on income or extend beyond the standard 10 years, meaning payments are not structured to leave a remaining balance after 120 payments.

Navigating Payment Plan Changes

Borrowers can change their repayment plan at any time, especially if on an ineligible plan or switching between eligible IDR plans. The process involves contacting the loan servicer or using the studentaid.gov website, which offers an online application for IDR plans.

Applying for an IDR plan requires providing income and family size information. This often involves allowing the Department of Education to access federal tax information directly from the IRS, which expedites the application and annual recertification. If recent tax information does not accurately reflect current income, such as due to decreased earnings, borrowers can submit alternative documentation like recent pay stubs. Once the change is requested, continue making payments under the previous plan until the new plan is approved and implemented.

Understanding Qualifying Payments

Beyond an eligible repayment plan, specific criteria must be met for a payment to be “qualifying” for PSLF. Each payment must be for the full amount due and made on time, within 15 days of the scheduled due date. Payments must also be made while employed full-time by a qualifying employer.

Full-time employment for PSLF means working at least 30 hours per week, whether for a single employer or combined part-time jobs. Regularly submit the PSLF Employment Certification Form (ECF). This form tracks qualifying payments and employment periods, ensuring accurate progress toward the 120 required payments.

Loan Consolidation and PSLF Eligibility

Federal student loan consolidation plays a role in PSLF eligibility, particularly for older federal loan types. Loans like Federal Family Education Loan (FFEL) Program loans or Federal Perkins Loans are not directly eligible for PSLF. They must first be consolidated into a Direct Consolidation Loan to become eligible.

Consolidation combines multiple federal loans into a single new Direct Loan, which then qualifies for PSLF and Income-Driven Repayment (IDR) plans. Historically, consolidating loans could reset the PSLF payment count to zero. However, a temporary PSLF “IDR Account Adjustment,” also known as the “Payment Count Adjustment,” offered a one-time review to count past payments on consolidated loans. This adjustment provided credit for periods of repayment, and certain deferments or forbearances, that might not have previously counted. Borrowers with commercially held FFEL or Perkins loans needed to consolidate them by April 30, 2024, to fully benefit from this adjustment.