The Public Service Loan Forgiveness (or PSLF) program forgives any of your student loans remaining after making 120 qualifying payments while working full time for a qualifying employer. While the income driven repayment options also offer forgiveness after 20 or 25 years of qualifying payments, forgiveness under these plans is counted as taxable income. Forgiveness under PSLF is completely tax free. Win-win!
Contrary to popular opinion, employment qualifying for PSLF has nothing to do with what you do. It only matters who you work for. If you work full time for any of the following employers (defined as 30 hours per week or more), your employment will qualify for PSLF:
- Any government organizations. This includes state, federal, and local governments.
- Non-profit organizations that qualify for tax exempt treatment under 501(c)(3).
- Other types of non-profit organizations that provide certain types of public services.
There are a few exceptions too. Labor unions and political organizations do not qualify for PSLF. But, qualifying employment reaches much farther than only teachers and social workers. Anyone working full time for the government or a 501(c)(3) non-profit can qualify:
- Lawyers working as prosecutors and public defenders
- Physicians working in teaching hospitals & medical schools
- Firemen & Police Officers
Some estimates count 33 million public service employees who could qualify for PSLF. As of June, 2015, only 335,520 people were enrolled in the program, or barely more than 1%.