Public Service Loan Forgiveness (PSLF) is a federal student loan program that can offer student loan borrowers full tuition forgiveness if they work for certain nonprofit or government organizations. PSLF is a lifeline for millions of student loan borrowers who work in traditionally low-paying, high-demand fields in positions that often require a college or college degree.
However, the requirements of the program can be difficult; Borrowers must make 120 “qualifying” monthly payments required for federal direct loans under an income-based repayment plan while working full-time for a qualifying employer. Failure to meet just one of the eligibility criteria may result in delays or rejections.
Even if borrowers do everything right, Student loan service companies can make mistakes. Service providers may provide inaccurate or misleading information or send confusing or unclear correspondence. Credit servicers can also make errors in counting qualifying PSLF payments, and could take months (or longer) to correct their mistakes.
One of my clients – we call him Ted to protect his privacy – recently applied for and received PSLF. But the process was kind of a roller coaster ride for him. It was like this.
Ted graduated in 2008. After graduation, he consolidated his state student loans through the state direct consolidation program, making them eligible for the PSLF program. He then entered earnings-related payback and began working for a non-profit organization.
Over the next 10 years, Ted changed employers several times, but always worked for either a 501(c)(3) nonprofit organization or a domestic government organization. He reconfirmed his income-based repayment plan annually. He also regularly submitted an Employment Verification Form (ECF), an application form that allows the US Department of Education to certify qualifying employment and the number of qualifying PSLF payments the borrower has made to date.
The PSLF application
Ted applied for PSLF in February 2019 after making his 120th qualifying payment. The current PSLF application process requires borrowers to submit a separate PSLF application (similar to an ECF) for each of their current and previous PSLF employers. Ted received conflicting information from his credit servicer as to whether or not this was actually necessary, but he erred on completeness and thoroughness.
The first response to Ted’s PSLF application
About 30 days after submitting the PSLF application, Ted received a series of five confusing letters from his credit servicer:
- The first letter stated that his application was incomplete because an EIN was missing. Actually, that wasn’t true.
- The second letter stated that Ted’s loans were on hold while his PSLF application was being processed. (Borrowers have the option to opt out of a forbearance if they wish).
- The third letter stated that Ted had been denied PSLF because he had not made enough qualifying payments. Remarkable that In the same letter, Ted’s qualifying PSLF payments were listed as 120 — the exact number of qualifying payments required to have his loan forgiven.
- the The fourth letter again stated that Ted had made 120 qualifying payments.
- The fifth letter again stated that Ted’s loans were in administrative forbearance.
Ted immediately called his loan servicer (FedLoan Servicing) for an explanation. He was told that his PSLF application had indeed been provisionally approved (not denied) and submitted to the US Department of Education for final approval. He received no explanation for the contradictory and confusing correspondence. FedLoan informed him that the final approval process of the Dept. of Ed could last up to six months.
The final decision
After several weeks with no response, Ted called FedLoan for an update. He was told that his application status was “unclear”. Ted then filed a request for an investigation with the US Department of Education’s ombudsman unit, which deals with borrower disputes. He received a prompt response, but was again told his PSLF application status with the Department of Education was “unclear” and was not given a timeline for a resolution. Ted was concerned.
Then, just days after submitting his original PSLF application, Ted received an email from FedLoan stating that he had been approved for PSLF and his account was considered fully paid. Ted logged into his online account and saw that his balance was $0.00.
Ted was thrilled to finally have his PSLF loans forgiven after more than a decade of hard work at nonprofit and government organizations. But the application process was stressful and confusing at times. Here’s what we learned:
- When submitting the PSLF application, it is better to be as thorough as possible and include a PSLF application for each qualifying employer. The current process is a bit absurd, and it’s possible Congress will make it easier in the futurebut for now this seems to be what is required.
- Contact your credit servicer immediately if you receive any confusing or conflicting information.
- Escalate disputes immediately if your credit servicer does not adequately address your concerns. This can be done through management, in writing, or by filing complaints with the US Department of Education ombudsman or FSA Feedback Division.
Overall, Ted’s experience is a success story because she had a good outcome, and it should give hope to other student loan borrowers that PSLF is really “real” and can work. But it wasn’t an easy process, nor was it stress-free. So if you’re on track for PSLF and nearing your 120th payment, buckle up and prepare for some big ups and downs.