Public Service Loan Forgiveness

For some, public service loan forgiveness is a viable way to get rid of outstanding debt. Put in place by the College Cost Reduction and Access Act of 2007, this program is designed to help certain public sector employees pay off certain loans taken out for their education. Though rather restrictive in who it applies to, this program has proven to be a great opportunity for those who qualify. Read on to learn more about who is eligible for public loan forgiveness and how it works.

Eligibility for the program is determined by employment. Generally speaking, government workers (including policemen and firemen), teachers, military personnel, public health employees, education employees and those who work in social services may apply for public service loan forgiveness. There are a few other small career fields where the program applies, but the above constitute the majority of program members.

Only certain loans are forgiven under the program. In a nutshell, public service loan forgiveness applies mainly to student loans. These include Federal Direct PLUS Loans, Stafford Loans and Federal Direct Consolidation loans, among a few others. Private student loans and governmental loans for other pursuits aren’t considered.

If both you and your loan are eligible for the program, there are a few other things to consider. According to the act that established public service loan forgiveness, a person must have made at least 120 payments on their loan since the fall of 2007. For those planning on taking advantage of the program, this means that not all of your debt will be forgiven—you’re still responsible for those first 120 payments.

Those who meet the criteria have nothing to lose by applying for public service loan forgiveness. Because the program was tailor-made for those who pursue higher education and a public service career, it is highly incentivized. Being accepted into it not only clears you of all leftover debt from applicable student loans, it’s also tax free. So, if you receive this essentially several thousand dollar gift from the government, you won’t even have to worry about it during tax time. Of course, the government does expect that you keep your career in public service in order to receive the forgiveness. Though your income potential is undoubtedly lower in the public sector, this program helps to offset some of those opportunity costs.