Public Service Loan Forgiveness for Physicians
Public Service Loan Forgiveness offers full federal student loan forgiveness for physicians who work for a non-profit organization. This 10-year program can pay off all of your student loans if you meet the qualifications.
Here’s What You Need To Do To Qualify:
To use Public Service Loan Forgiveness, you’ll need to meet three main qualifications for 120 payments:
- Work for a qualifying organization
- Have Direct Federal Student Loans
- Be on an Income-Driven Repayment Plan
In 2017, the first round borrowers became eligible for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. It’s been a long time coming, with more than half a million borrowers enrolled as the program enters its tenth year.
So why aren’t we hearing about anyone having their loans forgiven?
As many borrowers are finding out, having your loans forgiven through PSLF is more complicated than just enrolling. When October 2017 rolled around, thousands of people found out they were ineligible for reasons ranging from the obvious to the obscure. To put it simply, anyone looking for loan forgiveness through public service loan forgiveness needs to monitor their eligibility like a patient in critical care.
If you’re uncertain about your PSLF eligibility status – or whether you should consider the program in the future – read ahead for the details.
What is Public Service Loan Forgiveness – PSLF?
Public Service Loan Forgiveness (PSLF) is a program in which federal student loans may be eligible for forgiveness after 10 years of working for a government or non-profit entity. The program was established in 2007 to encourage college graduates to work for lower-paying organizations.
There are two main requirements. Only borrowers with federal student loans, not private loans, qualify for this program. You also must work for an eligible employer while making qualified payments for 120 months, typically over 10 years. Any time spent in default or in forbearance on a loan won’t count toward your forgiveness. If you’re unemployed for a month, that month won’t count toward your 120 minimum.
While working toward PSLF, graduates can choose from one of several income-driven repayment plans, which have a lower monthly payment than the standard plan. By choosing an income-driven repayment plan, they can reduce their monthly payment while still aiming for loan forgiveness.
Though the federal government has other forgiveness programs, none are as beneficial as PSLF. Student loans forgiven through the public service loan forgiveness program are not considered taxable by the IRS the way other programs are – and you only need to make qualified payments for 10 years to get your loans forgiven.
Doctors who plan to work for non-profit or public hospital organizations should absolutely consider PSLF. They’ll save thousands on their student loans and shorten their repayment timeline at the same time.
Is PSLF Right for Me?
If you’re unsure if Public Service Loan Forgiveness is the right student loan payoff strategy for you, consider the:
- The Math – How much you’ll pay out of pocket.
- The Job – Do you want to work in a private practice?
- The Timeline – Do you want to be done with your loans before 10 years from now?
First Consideration: The Math
Using an online calculator, you can model what your estimated total out of pocket cost will be if you pursue PSLF. We created a tool just for you, that you can use for free at loanbuddy.us.
Enter your information, and our calculator will run an in-depth analysis on your projected payments based on the strategy you choose.
Second Consideration: The Job
If you’re a resident and have not decided if you want to work in a non-profit or private practice setting, you might be considering your student loan balance as part of the equation.
While you could pay much less by pursuing PSLF, you might actually earn quite a bit more by working for a private practice. Each path has its own financial pros and cons, however, I encourage you to look past these financial implications for a moment to view each path based on the workload, hours, and type of environment. Review these factors independent of your loans before making your decision.
Third Consideration: The Timeline
Some residents we’ve spoken with decided not to pursue PSLF because the thought of having their student loans for another 10 years was anxiety-inducing. They reviewed the math, and even though they could save money by pursuing PSLF they decided to shave a few years off their payoff timeline and crush their student loans instead.
Does my Employment Qualify?
PSLF requires physicians to work for a government or 501(c)(3) not-for-profit organization. An organization without the 501(c)(3) designation that still serves the public as its main objective may be eligible. Working in private practice will disqualify you from public service loan forgiveness, as will working for a for-profit hospital.
You must work full-time for the employer so independent contractors or those with part-time hours don’t qualify for public service loan forgiveness. There is no income limit to PSLF.
Many doctors give up on public service loan forgiveness because they can earn more in private practice, but paying the full cost of student loans could easily negate that larger income. Making $20,000 more a year won’t matter much if you’re carrying a six-figure loan balance.
Of course, if you’re giving up $200,000 a year to work for a non-profit, you’re likely better off choosing a private job. Still confused? Talk to a fee-only financial planner to see how the math works out. They can go through your situation with a fine-tooth comb, giving you the information you need to make your decision with confidence.
Which Loans Qualify for Public Service Loan Forgiveness?
Only federal Direct Loans qualify for public service loan forgiveness. If you have a Perkins or Federal Family Education Loan (FFEL) loan, you have to consolidate them into a Direct Consolidation Loan in order to apply for PSLF.
If you have a mix of Direct Loans, FFEL, and Perkins Loans, make sure to only consolidate the non-Direct loans. When you consolidate your loans, the clock for public service loan forgiveness restarts, and any eligible payments you’ve made are erased. Borrowers with Perkins or FFEL loans should make sure not to include any Direct loans when they consolidate.
What Repayment Plans Qualify?
To earn a qualifying payment, you’ll need to be on an Income-Driven Repayment Plan. Because these repayment options are calculated off your income, payments change each year depending on your earnings.
How do you choose the right plan for you? Read below to see how each plan differs. If you’re still confused, use free online tools such as LoanBuddy’s calculator to see which repayment is the best for you.
Income-Based Repayment Plan (IBR)
If you are a new borrower after 7/1/2014, the monthly payment will be 10% of your discretionary income, which is the difference between your adjusted gross annual income and 150% of state poverty guidelines. If you were a borrower before 7/1/2014, the monthly payment is calculated at 15% of your discretionary income.
Under IBR plans, your spouse’s income only counts toward the total if you file a joint tax return. If you were a borrower before 7/1/2014, forgiveness under IBR would be after 25 years and if you were a borrower after, forgiveness was changed to occur after 20 years of payments.
Pay As You Earn Repayment Plan (PAYE)
Borrowers who choose PAYE will have a monthly payment of 10% of their discretionary income. Discretionary income under PAYE is the difference between your annual income and 150% of state poverty guidelines. PAYE doesn’t count your spouse’s income if you file separate tax returns. Under PAYE, forgiveness would occur after 20 years.
Revised Pay As You Earn Repayment Plan (REPAYE)
Monthly payments under this plan are limited to 10% of your discretionary income, which is defined as the difference between your annual income and 150% of poverty guidelines.
Under REPAYE, your income includes your spouse’s as well – even if you file taxes separately.
Income Contingent Repayment Plan (ICR)
ICR payments are the lesser of 20% of your discretionary income or how much you’d pay in a 12-year plan based on your income. Discretionary income for ICR plans is the difference between your yearly salary and 100% of the poverty guidelines for your state and household. Under ICR, forgiveness would occur at 25 years.
Why Doctors Shouldn’t Go Into Forbearance During Residency
For many medical school graduates, residency proves to be a challenging time financially. Looking for relief, often medical residents opt to go into forbearance during residency. It’s more common than you think.
Not all loans offer a grace period to put their student loan payments on pause through forbearance.
But is this a smart decision to make or one that will make their student loans even more difficult to afford? What exactly is forbearance, how does it affect your student loans, what other options do residents have if they can’t afford loan payments, and how does forbearance during residency hurt your future? Let’s take a look.
What is Student Loan Forbearance?
Forbearance is a period of time when borrowers can postpone student loan payments. Many people choose forbearance because they are having trouble paying their monthly student loan payments.
Forbearance is available for federal loans as well as private, although federal loans generally offer better forbearance terms than private lenders.
There are two types of student loan forbearance available to choose from, general and mandatory. Mandatory is more common among doctors during residency.
Forbearance During Residency: General Forbearance
With this type of forbearance, your student loan lender can choose whether to approve you or not, which is why it is also referred to as discretionary forbearance. General forbearance can be applied for if you are having trouble making student loan payments for these reasons:
- Financial hardship
- Medical expenses
- Employment Change
- Other Reasons approved by your lender
General forbearance is available for Direct Loans, FFEL Program loans, and Perkins Loans.
Forbearance is granted for no more than 12 months at a time. You can request another general forbearance when your time expires if you are still facing hardship. For Direct Loans and FFEL Loans, there is no limit on how long you can be in forbearance, but your lender may set a limit for you.
For Perkins Loans, the maximum length is 3 years total. For loans made under all three programs, general forbearances may be granted for no more than 12 months at a time.
Forbearance During Residency: Mandatory Forbearance
Mandatory forbearance is popular among resident doctors because lenders can’t deny you if you apply. This type of forbearance occurs because of extenuating circumstances that make it impossible to pay back your loan debt during that time. Circumstances include, but are limited to:
- Medical or Dental Internship/Residency
- National Guard Duty
- Monthly payments are more than 20 percent of your monthly gross income
Forbearance for medical residency is only available for Direct Loans and FFEL Program loans.
Mandatory forbearance is granted for no more than 12 months at a time. You can request another mandatory forbearance when your current period expires. You could stay in forbearance for the length of your residency if you wanted through mandatory forbearance.
Why Do So Many Doctors Choose Forbearance During Residency?
Doctors choose forbearance during residency because it’s a popular option for doctors.
The average salary for residents in 2017 was $57,200. Compare that to the median student loan debt of $192,000 for 2017 medical school graduates. Resident doctors often feel like they just don’t make enough money for the 3 to 7 years of their residency to afford student loan payments on top of other living expenses. Residency is a pivotal time in the life of doctors as well, with many important decisions occurring during this time. Forbearance is seen as the answer to not having to deal with student loan debt while living in this transition period.
Some student loans come with a grace period after graduation, where no loan payments are required. Direct Subsidized and Unsubsidized Loans have 6-month grace periods and Perkins Loans have 9-month grace periods. After that initial grace period, though, you are expected to start paying off your student loan debt. Some residents just don’t see that as a possibility.
Reasons to Avoid Forbearance During Residency
While forbearance seems like a good idea for doctors during residency, there are several reasons why it’s not the best option. In fact, choosing forbearance can increase your student loan debt drastically, making it harder to pay off in the long run. Here are some reasons to avoid forbearance.
Forbearance Doesn’t Pay Down Your Debt
When you choose forbearance, you are postponing payments on your student loans. Say your residency lasts 3 years and you are able to get approved for forbearance for the entire period. If you had been making payments that entire time, you would be 36 payments in already, leaving you less debt to worry about when you are making a larger salary as a licensed physician. Yes, you will have a higher salary to pay off your debt after residency, but all the extra interest negates that fact. Down the road, when you could be using that money towards something else, you will wish you just made the payments.
Forbearance Doesn’t Build Up Payments Towards Public Service Loan Forgiveness (PSLF)
If you are thinking about seeking student loan forgiveness, you are missing an opportunity by choosing forbearance.
First, in forbearance, you wouldn’t be making any qualifying payments towards PSLF. In order to be eligible for PSLF, you need to make 120 qualifying payments. Think about how many qualifying payments you would be giving up if your residency lasted 3 years? How about 7 years? You would only need 36 more qualifying payments until you could apply for forgiveness.
To be approved for PSLF, you must be on a qualifying repayment plan, which includes:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Standard 10-year repayment plan
Technically you can qualify for PSLF if you are on a standard 10-year repayment plan, but if you stay on that plan for the full 10 years, there will be very little or no debt left to be forgiven at the end.
If, however, you were to switch to one of the Income-Driven Repayment (IDR) plans, like PAYE or REPAYE, your payments will be significantly lower than standard payments, but would still count as qualifying PSLF payments. Because payments would be based on your salary, residency is the perfect time to be on an IDR plan because of your lower salary. The specific plan that is best for you would depend on your goals, salary, family, and other factors.
Interest Doesn’t Stop Accumulating During Forbearance
When you are in forbearance, your student loan payments stop. That doesn’t mean, however, that they don’t accumulate interest. In fact, interest continues to accrue on both subsidized and unsubsidized loans and capitalizes yearly. That means interest is added to your loan principal balance. If you are pursuing Public Service Loan Forgiveness this won’t matter as much to you, but for everyone else, this is a huge financial hit to take.
Once you are out of forbearance, your principal balance will have grown by thousands of dollars because of this capitalized interest. Because your interest was added to your principal during forbearance, you are essentially paying interest on your interest. This is commonly known as compound interest.
How much interest will actually accumulate during forbearance? Look at this example from the Association of American Medical Colleges (AAMC):
“For a 2018 graduate with $192,000 in Direct Loans, the capitalization of interest accrued
during school and grace will result in a principal balance of $222,400. During residency,
an estimated $1,100 in interest will accrue on this balance each month.”
You Miss Out on Tax Deductions
Residency is the one time in a doctor’s life that you can deduct student loan interest from your taxes. It’s a great perk, but one that you give up if you choose forbearance. In order to take advantage of this tax deduction, you have to be making student loan payments, which you aren’t doing during forbearance.
You can qualify for this deduction If your modified adjusted gross income (MAGI) is less than $80,000 or $160,000 if filing a joint return with your spouse. Modified adjusted gross income is simply your household’s adjusted gross income plus any tax-exempt interest income you may have.
Lost Subsidized Loan Benefits
Another reason to avoid forbearance is that you will lose subsidized loan benefits. If you have subsidized federal loans, under certain circumstances, the government pays part of your student loan interest. If you are enrolled in one of the income-driven repayment plans, depending on your income, your monthly payment might not be high enough to pay off accrued interest. The government will take care of the unpaid interest charged above your scheduled monthly payment for your first three years of residency. This is referred to as negative amortization.
If you have federally subsidized loans and decide to enter forbearance, you will lose access to this benefit. This one perk alone could provide a savings of hundreds or even thousands of dollars.
Paying Student Loans With a Lower Salary Isn’t As Bad As You Think
The thought of graduating from medical school and immediately getting hit with huge student loan payments can be scary. With so much transition in your life during this time, it’s easy to feel overwhelmed and think you can’t make your payments. However, if you enroll in the right income-driven repayment plan, your monthly student loan payments will end up being much lower, possibly even zero if you enroll before you start your residency.
Many medical students graduate and want to splurge to celebrate moving on from school to adulthood. Maybe a new car, a new wardrobe or even a new house or apartment. While those purchases are great and help you feel more like an adult, it makes more sense financially to get out from under your student loan debt during this time. It’s not fun to do necessarily, but neither is being in debt long term.
You may have to cut corners or give up some splurges in order to survive on a resident’s salary, but if the alternative is going into forbearance, work to cut your expenses and avoid the long-term cost forbearance can add. Ten years down the road you will look back and realize that paying your loans during residency wasn’t as difficult as it first seemed. You will be glad you had the foresight to make this wise financial decision and avoid forbearance.
Better Options than Forbearance for Doctors in Residency
If you haven’t realized it yet, forbearance should only be used as a last resort. It’s meant to be used in circumstances of real hardship so unless that’s your situation, choose another path for your student loans. What options are available that would be better than forbearance during residency?
Income-Driven Repayment Plans
If you have federal student loans and want to avoid forbearance, check out the income-driven repayment plans available through the government. There are 4 plans available:
The four income-driven repayment programs are:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
Each plan is unique and has different perks and drawbacks. Take time to become familiar with all of the plans so you can choose the one that is right for you. That will mostly depend on your life goals, family, future income, and more.
Consolidate Your Student Loans
Consolidating your student loans into one direct federal loan can be done in conjunction with an income-driven repayment plan. This only is an option for your federal loans, not private loans. This is especially helpful if you are pursuing PSLF. If you have Federal Family Education Loans (FFEL) or Perkins Loans, they aren’t eligible for PSLF. That is unless you consolidate them to a federal direct loan. If you wait to do this until after your residency, you miss out on all of those student loan payments made during residency counting towards PSLF.
If you aren’t pursuing PSLF, consolidating loans is still helpful since you only have to keep track of one loan payment. Most residents have a combination of multiple student loans. There are other forgiveness options available through the PAYE and REPAYE repayment plans that could be options if you plan to work in the public sector.
Using Signing Bonus to Pay off Student Loan Debt
If you are coming near the end of your residency and are looking at long-term employment options, one thing you can do is try and negotiate a physician signing bonus. Signing bonuses are becoming more common these days. Refinance your student loans during residency and then use your signing bonus to make a lump sum payment. Lump-sum payments are a great way to jumpstart your loan repayment. Also, cutting a large chunk of your loan principal will also save you thousands in interest over the life of your loans. Be sure to read your contract carefully and confirm it’s a signing bonus and not a loan or an advance that you will end up paying back.
See if you Qualify for Deferment Before Looking at Forbearance
If you feel you aren’t able to make your student loan payments during residency, deferment is another option to look at before forbearance. Deferment is very similar to a forbearance. You won’t have to make student loan payments during deferment. The difference is that you don’t have to pay interest during the deferment period for subsidized Stafford loans. If you have unsubsidized loans, interest will accrue and be capitalized just like it is with forbearance.
Deferment is not easy to qualify for and is limited in length usually, but it’s worth looking at if you aren’t able to make student loan payments because of various challenges, such as unemployment, financial hardship, or other reasons.
Living Frugally During Residency
Instead of choosing forbearance, you could simply spend the next few years continuing to live frugally. Avoid making big purchases. Cut back on eating out. Make financial decisions that offer flexibility in money gets tight. Medical residents generally work a ton of hours every week. Hold off on splurging on things like an upgrade in living arrangements or vehicle until you finish residency and can enjoy those purchases more. Take advantage of public transportation. Simplify your lifestyle and use that extra money to make your student loan payments. Living frugally isn’t always fun, but it beats adding thousands of unneeded dollars to your student loan principal.
While forbearance looks attractive and provides temporary relief during residency, for most people, there are far better choices to be made. Look at your financial situation carefully as well as your career, family, and life path to figure out the best option for you. Does it make sense to add more student loan debt later in life just to be able to skip payments now? Is it worth the extra interest you will pay if not pursuing PSLF? Ultimately that is your choice to make.
The $0 Payment Strategy for New Residents
As you graduate medical school and lead up to starting your residency, there’s a lot going on. Moving, figuring out how to budget, reviewing benefits if you’re offered any – and then deciding what to do with your student loans.
If you’re pursuing Public Service Loan Forgiveness, you’ve probably heard of the $0 payment strategy. This strategy essentially says that if you can, you should get a $0 payment while on an income-driven repayment plan for your first year of residency – that, get this, counts as qualifying payments for PSLF.
To get the $0 payment you’ll need to follow a specific process which includes ending your grace period early
Step 1: Wait until your status is updated to graduated
By starting this process too early, you risk being denied because your loan servicer thinks you are still in school.
Step 2: Apply for a consolidation loan
The only way to end your grace period early, is to consolidate your loans. The only way to start repayment under an income-driven repayment plan is to end or wait out your grace period.
By applying for a consolidation loan you can also apply to start on an income-driven repayment plan once the consolidation is processed.
The only way to obtain a $0 payment is to get on an income-driven repayment plan before you start earning money, so as a new graduate there is only a 1 to 2-month window. Some new residents can use a prior-year tax return if they filed one.
Step 3: Submit your employment certification form when you start working
We talk about the importance of filing your employment certification form annually to track your credit towards PSLF in this section.
If you’re able to complete steps 1 and 2 above before you start working, you could lock in a $0 monthly payment on an income-driven repayment plan and still earn credit towards PSLF.
You’ll only be able to earn credit for PSLF when you’re working, so if you have a monthly of $0 payments before that time you’ll lose a month of credit.
For new residents who are able to obtain a $0 payment for their first year of residency, the savings can add up. Instead of having a $350 monthly payment for a year, you could save that money or pay down private loans and credit cards if you have any.
How Public Service Loan Forgiveness Affects Investment Strategies and Taxes
If you’re working towards Public Service Loan Forgiveness, you might consider ways to lower your monthly payment to lower your total out of pocket cost. By lowering your monthly payment each year you do your annual update, you could stand to save tens of thousands of dollars over 10 years.
Lowering Your Adjusted Gross Income to Lower Your Payment
It may seem counterintuitive, but those looking to pay back their loans under PSLF should aim to lower their Adjusted Gross Income as possible.
The government looks at your adjusted gross income (AGI) to decide how much your monthly payment will be. Your AGI is how much you earn after subtracting retirement, Health Savings Account, and 529 contributions. Reducing your AGI will lower your student loan payment.
Your Adjusted Gross Income is calculated by using the formula below:
Your Gross Income
–Deductions for AGI (pre-tax savings, Health Savings Account contributions, etc.)
=Adjusted Gross Income
Because your monthly repayment plan varies depending on your income, doctors working toward PSLF should strive to reduce their Adjusted Gross Income as much as possible.
This strategy only works if you save in tax-advantaged accounts like traditional 401ks, IRAs, and 457s – not Roth IRAs. Contributions are also deductible on your taxes.
By lowering your AGI, you will lower your minimum amount due on your student loan payment. Typically, this will result in your outstanding loan balance to increase, which in turn, would increase the amount that will be forgiven after 120 qualified payments for public service loan forgiveness.
Changing Your Tax Filing Status to Lower Your Payment
Some couples consider filing their taxes as Married Filing Separately (MFS) to lower their monthly payment under an Income-Driven Repayment Plan. This strategy does not work if you use REPAYE, as this repayment plan includes your spouse’s income even if your file MFS.
If you’re married to another high-income earner, your normal monthly payment on an income-driven repayment plan will be higher than you want while pursuing PSLF. To lower your monthly payment, you can file your taxes separately from your spouse, and have their income excluded from the calculation of your monthly payment on an income-driven repayment plan.
However, filing taxes separately from your spouse can cause your tax burden to increase, sometimes drastically. Always have a tax professional run the numbers both ways before changing your filing status.
Here’s an example of what you’ll need to compare each year if you’re considering filing your taxes as MFS:
Spouse 1: Makes $70,000 – has the student loans
Spouse 2: Makes $200,000 – does not have any student loans
Option 1: Married Filing Joint
Let’s say that if this couple filed their taxes jointly, they would pay roughly $5,625 per month on income taxes. This is a fictional number because we don’t know their full tax situation. You would need to get this number from a qualified tax professional.
If they file jointly, their student loan payment on an Income-Driven Repayment Plan would be roughly $2,033.
Option 2: Married Filing Separate
Let’s say that if this couple filed their taxes separate they would pay roughly $6,750 per month in income taxes in total. Again, this is a fictional number because we don’t know their full tax situation.
If they file separately and use PAYE their student loan payment on an Income-Driven Repayment Plan would be roughly $367.
Now, this is somewhat of an extreme example. Spouse 2 makes quite a bit more than spouse 1, the one with the student loans.
In this example, they could actually save $541 a month by filing their taxes separately, here’s how:
- The spend $1,125 more in taxes each month
- The save $1,666 on their student loan payment
This nets them an extra $541 each month, that’s $6,492 a year. However, there are some other downsides of filing your taxes MFS that you should review with your tax professional before making the switch.
How to Complete the PSLF Employment Certification Form
You’ve made the decision to pursue Public Service Loan Forgiveness (PSLF). Now what? How do you actually apply for PSLF? Is there anything you can do to help your chances of being approved? The Public Service Loan Forgiveness Employment Certification Form (often referred to as the ECF) may have something to do with it.
One thing you can do to ensure you will be approved for PSLF is to fill out the Public Service Loan Forgiveness Employment Certification Form the right way. If you meet all the requirements for PSLF, you will end up saving thousands (possibly tens of thousands) of dollars on your student loan debt.
What is the PSLF Employment Certification Form?
The application process for Public Service Loan Forgiveness actually occurs after you’ve made your 120 qualifying student loan payments. The U.S. Department of Education and FedLoan Servicing provide an employment certification form as a way to verify your employment and qualifying payments.
Because you must be employed by a qualifying employer while making all 120 qualifying payments, being able to track all of your information is vital to PSLF approval. Filling out the PSLF employment certification form will make applying easier for you and for your loan servicer.
Who is Fedloan Servicing?
FedLoan Servicing is the loan servicer chosen by the federal government to single-handedly run the entire PSLF program. The employment certification form is sent to Fedloan Servicing. Once your form is received and processed, your student loans are then transferred to Fedloan Servicing.
How do I Submit the PSLF Employment Certification Form?
You can find the PSLF Employment Certification Form on the Department of Education website.
Once you have downloaded the form:
- Fill out Sections 1, 2, and 3, which contain your personal and contact information, authorization signature, and your employer information. Be sure to fill in every detail required.
- Give Section 4 to your employer to fill out and return to you. This should be filled out by someone with information about your employment, such as a direct supervisor or your human resources department.
- Section 5 and provide instructions for filling out the form as well as information on qualifying payments and employers. Be sure to read through all of this and verify that you meet all of their requirements before sending your form in for processing.
Where Do I Submit My Completed PSLF Employment Certification Form?
To turn in your completed employment certification form, you can mail it or fax it to Fedloan Servicing.
U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184
Fax Number: (717) 720-1628
If your student loans are already being serviced by Fedloan Servicing, you can upload your form through their website.
Once you’ve submitted an employment certification form it will be processed by Fedloan Servicing. After your loans are transferred over to them, they will determine how many qualifying payments you’ve made. You will receive a letter letting you know how many payments have qualified.
If they need more information or to verify any details, they will reach out during this processing period.
One thing you will want to do is to keep copies of every employment certification form you submit. That way you have them for your records and can refer to them if there are any issues during the process.
If you want to see how many total qualifying payments you’ve made, you can view that information by logging into your student loan account online.
Reasons you should Submit the PSLF Employment Certification Form Annually
After submitting your initial certification form, be sure to continue to submit the employment certification form at least annually. There is no cost for submitting this form and there is no limit to the number of times you can submit the form. You can wait until your 120 qualifying payments are made before submitting the form, but there are advantages to submitting the form annually.
A PSLF Paper Trail
If you are like most people, trying to remember 10 years worth of information is extremely difficult. That’s essentially what you are doing if you wait until you’ve made all your qualifying payments to send in your employment information. By submitting the employment certification form at the start, you begin a paper trail that both you and Fedloan Servicing can follow. If you submit the form annually, you are even better prepared when the time comes to apply for PSLF. Your information will be up to date and you won’t have to go back to employers and try to get them to fill out forms after the fact.
It Helps You Track Payments
Not only will turning in the form help start a paper trail, submitting it annually will help you keep track of qualifying payments. Ten years of payments are hard to keep track of so being able to log into your account any time and seeing your payment total is useful. Not only that, if there is any type of error made, you can also correct it in a timely manner instead of finding it during the application process.
It Helps You Track your Employment Record
Filling out the employment certification form annually will give you a record of your employment with qualifying employers. Having to go back to previous employers and have them fill out a form might prove to be difficult, depending on the circumstances behind you leaving their company. What if they refuse to help you out? What do you tell the government? By filling out the form annually, or whenever you switch employment, you avoid having to go back and retrieve old employment information.
Fedloan Servicing Becomes Your Loan Service Provider
As mentioned before, Fedloan Servicing id the federal loan servicer for the entire PSLF program. At some point, if you are pursuing loan forgiveness, they will take over handling your student loans. Doing this from the start of the process builds a relationship with them. It also allows you to become familiar with how they operate and establishes communications with them. Submitting the form annually continues that relationship and may end up coming in handy when you apply for PSLF.
Subscribe to Financial Residency on iTunes!There is no fee for filling out the PSLF employment certification form. There is also no limit to the number of times you can submit the form. Many people choose to submit their forms biannually. The Department of Education website even suggests submitting your form frequently, stating, “In order to ensure you’re on track to receive forgiveness, you should continue to submit this form both annually and every time you switch employers.”
It’s Practice for Applying for Public Service Loan Forgiveness
If you take a look at the Public Service Loan Forgiveness Application, it looks very similar to the employment certification form. Filling out the certification form annually will help you become more familiar with the type of information Fedloan Servicing is looking for and will make the application process much easier.
You Will Help Make PSLF Possible for Other People
If you’ve been keeping up on current events, PSLF is a hot topic in Washington, with several lawmakers working to end the program. One way to let the government know that PSLF is important is to continue to send in your employment certification form. The federal government tracks how many forms are submitted annually so the more they receive, the more it shows how valuable the program truly is to American citizens.
You have mounds of student loan debt and now that you’ve made a plan to pursue Public Service Loan Forgiveness and are submitting the PSLF Employment Certification form annually, what comes next?
One of the most common mistakes people pursuing PSLF make is to assume once they’ve made 120 qualifying payments, their loans will be forgiven. That would be wrong. In order to receive loan forgiveness, you need to apply for PSLF. You can find the official application here.
Another thing to keep in mind is just because Fedloan Servicing has been verifying and counting authorized payments doesn’t mean you will automatically be approved. The approval process is completely separate from employment certification and there’s always a chance that they question something you’ve submitted along the way. Nothing is a given until you receive the official word that your student loans have been forgiven.
If you are planning to pursue PSLF, take the time to fill out the employment certification form every year. This step is the single most important thing you can do to ensure you’re on track for loan forgiveness.
Getting in the Game Late
Are you already years into making payments, but haven’t started to certify your employment or track your progress? It’s ok.
As long as you have been on an Income-Driven Repayment Plan and your loans qualify, you could already have credits towards the 120 qualifying payment requirement.
Here’s what you can do to start down the Public Service Loan Forgiveness path if you have already made payments. If you worked for a private practice before this, and you’re now working for a qualifying employer, these steps apply to you as well except you probably won’t have past credit to claim.
Step 1: Make Sure PSLF Actually Saves You Money
If you’re already making six figures or more, starting PSLF now might not actually save you money. Run your numbers through an online calculator, such as LoanBuddy to make sure you’re saving money by pursuing PSLF.
Step 2: Check the Types of Loans You Have
Are all of your loans Direct Federal Loans? If not, you may need to consolidate a portion of your loans to make them qualify.
Step 3: Make Sure You’re on an Income-Driven Repayment Plan
If you are not already on an Income-Driven Repayment Plan, get on one as soon as possible to start making your payments eligible for PSLF.
Step 4: Get Credit for Past Payments
Fill out the employment certification form we mention above for each of the qualifying employers you’ve worked for. It doesn’t matter if you worked for them 5 years ago, submit the form. Once your employment certification form is complete, your loan servicer will change to FedLoan Servicing, the loan servicer who manages PSLF candidates.
Step 5: Keep Making Payments and Annual Updates
Now that you’re on track for PSLF, every year you’ll need to update your income for your income-driven repayment plan and submit the employment certification form. Keep an eye on the PSLF cumulative payment count on your student loan file. Once that number reaches 120, read the next section on how to apply for PSLF.
How to File for Public Service Loan Forgiveness Once You’ve Reached 120 Payments
Congratulations! You made it! Well, almost. Unfortunately, your loans won’t automatically be forgiven once you reach 120 qualifying payments.
To apply for forgiveness, you’ll start by filling out this form. Make sure you’re working for a qualifying employer at the time you apply, and don’t leave the non-profit space until your application is procced.
Sections on the PSLF Application Form
Section 1: Borrower Information
Basic information to identify who is applying for Public Service Loan Forgiveness.
Section 2: Borrower Request, Understandings, Certification, and Authorization
Here’s where you make the request for your loans to be forgiven. You can indicate that you do not want a forbearance while your application is being processed.
Section 3 & 4: Employer Information and Certification
This section should be filled out by your current employer. If they are unable or unwilling to complete this form, reach out to the Department of Education for assistance.
Nothing needs to be filled out by you or your employer past section 4.
Section 5: Instructions for Completing the Form
General information about filling out the actual form such as using black ink, and making sure they can read it.
Section 6: Definitions
Similar to a glossary, the form explains
Section 7: Where to Send the Completed Form
You may mail the form to:
U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184
You may also fax your application to 717-720-1628.
If FedLoan is already your loan servicer, you can upload the application to FedLoan Servicing’s website.
Section 8: Important Information About PSLF
This section dives into the requirements to be approved for PSLF.
Section 9: Important Notices
This section reviews the Privacy Act Notice and Paperwork Reduction Notice.
Common Headaches When Applying for PSLF
If you haven’t been filing the employment certification form every year, you may need to go back to old employers to prove your qualifying employment if you’ve worked for more than one employer while making qualifying payments.
The more complete your application is, the less likely you are to be denied your first time applying.
You should continue to make payments on your loans until they are forgiven and show a $0 balance in your account. Any payments made after you reached 120 payments are treated as overpayments and will be refunded after your forgiveness is processed.
Once approved, your outstanding principal and interest balances will be forgiven and overpayments refunded.
Is PSLF worth it?
In today’s world, the health of the student loan system kind of makes you wonder about its viability.
If you plan to make use of the student loan forgiveness programs, you’ll need to know a little more about how it works, and what you need to keep in mind while you are paying back your loans.
Podcast Episode: What’s Up with Student Debt and PSLF with Ben White
You’ll also need to know when it’s best for you to take advantage of the student loan forgiveness program.
Plus a lot of other details that surround student loan forgiveness programs!
A History Lesson…
Why was PSLF created?
It was created to incentivize individuals to work in public service, particularly in nonprofit.
The rules are that you must work for a qualifying employer (tip: make sure that your employer qualifies). You’ll make 120 monthly (on-time) payments based on your IDR plan.
Once you reach the end of the 120 payments, the remaining balance of your loans will be forgiven tax-free.
Here is a brief snapshot of how student loan forgiveness programs have evolved.
- The ICR was the only income-driven repayment program until July of 2009.
- When ICR started it was 20% of your discretionary income (or expected payment over 12 years)
For some individuals, there were some other payment options that were lower. They were going to extended repayments.
These allowed people to get a lower monthly payment. However, they didn’t qualify for PSLF, even if they had Direct Loans.
Then other programs were introduced.
- In approximately July 2009, the IBR Plan (Income-Based Repayment), was introduced
- In 2012, there was PAYE (pay as you earn)
- In 2015, we had REPAYE
These allow you to pay a smaller percentage of your discretionary income. They also allow your loans to be forgiven sooner and they actually qualified for Public Service Loan Forgiveness.
PSLF Now VS. Then
Do you qualify now?
You probably read through the rules, consolidated your loans (to make sure they all qualified), and chose a repayment plan.
You probably chose an IDR. You were proactive in setting yourself up for success with the program, and then you went through the program.
There was a time starting from approximately 2012 when you chose a plan and you qualified. It was easy. Every loan was a direct loan, and IBR was the most common. You fill out your paperwork and in 2022, you’ll be forgiven. Your diligence was only required in making sure you had the right employer.
The number of physicians who qualify for student loan forgiveness programs is increasing.
This is a growing issue that will eventually erupt in 2025 when 147,000 people are eligible to get forgiveness.
The Future of Public Service Student Loan Forgiveness
Are you worried that one day soon the public service loan forgiveness program will become extinct?
Our clients are concerned when they read the clickbait headlines that scream that most PSLF applications are being rejected.
After spending so much time working, and trying to figure out how to pay off their student loan debt, which for some new attending physicians is approximately $298,000.
Well, you can see it would be natural to feel panic if you thought the program would disappear mid-stride!
There is a lot of nonsense that’s being put out there is everyone’s getting rejected. It used to be very hard. The people reading today don’t know what ICR is. It was a horrible repayment option.
That’s why everyone turned to the graduated, and extended payment plans. They thought it was better for them, but it wasn’t because they didn’t qualify for PSLF.
What is true?
You need to work for a 501c3, be in an income-driven repayment plan (IBR, REPAYE, PAYE) and make 120 qualified on-time payments. They don’t even need to be consecutive.
One scenario might go like this:
You are working in a job that qualified for PSLF, then left to try out working in private practice, but then you decided to come back to a job with a 501c3.
When you go back, you can pick up where you left off with your 120 qualified payments, as long as you’ve kept very detailed records.
That includes making sure you have a copy of the annual certification form.
Is PSLF Worth It?
The Department of Education released a report in June that states that 1,216 have received loan forgiveness under the program.
However, compared to the number of people who have put in applications, there were still over 100,000 people that were rejected.
How is that possible?
Let’s keep in mind that there are private companies contracted by the government to deal with your student loans (and everyone else’s payments and loans). One of these companies, which is FedLoan Servicing, handles the PSLF applications.
The bottom line on FedLoan Servicing is that they are incompetent.
That’s an understatement, and they are being sued by several states because of how ineffectual they have been at handling the job they were charged with overseeing.
A huge problem is the program was released without all the components in place (i.e. the fine print).
A second challenge is that Congress put through a temporary expansion program (TEPSLF). Fed Loans set it up that you had to apply for PSLF. Only once you were denied for it, you could apply for the temporary expansion program.
The expansion program allowed people who didn’t originally qualify for forgiveness, to qualify under the expansion program. It was a long and nerve-wracking process.
I’ve written about the process of calling into customer service (which is nerve-wracking in and of itself).
First, you’re talking to a customer service representative that has very little experience in your unique student debt situation. If there is any problem and you call back you’ll get another representative, and have to go through all your information again.
The student loan forgiveness programs (and student loans) have always been in shambles and unfortunately, that means borrowers lose.
In the PSLF report, one of the rejection reasons was out of 100,000 people, 55,000 of them were rejected because they didn’t have 120 payments.
Is that true? Is that correct?
Well, that will depend on which customer service representative you were talking to. Remember when I wrote that you must keep very detailed records?
That includes who you talked with, what date, time, subject, and resolution. It also means that you need to keep a copy of your annual employment certification form.
The annual employment certification form is updated by FedLoan Servicing, and if you don’t have it as proof they could claim a number that doesn’t reflect how many years you actually qualify.
What if you’ve submitted your employment certifications, but they claim a number that differs from what you claim?
You can dispute it, and request a recount. However, be prepared to wait…an entire year. That’s really the current wait time.
It’s a sad reality that we’ve only had one client (out of hundreds), that had everything correct. They had fought with FedLoan Servicing for years in order to get everything correct.
We have clients that have gone through funding, filled out all the paperwork, but the one thing they didn’t think about was making sure the dates lined up.
Here is an example of what I’m talking about:
We had a client that went through three years of residency and a one-year fellowship. They had six or seven payments in their residency.
They had 37 payments in their one-year fellowship. Now, that’s just not possible–because the math doesn’t add up. However, the payments combined were the right amount.
Remember earlier in the blog, when I said FedLoan Servicing was being sued by several states because of their incompetence?
The irony here is that any discrepancy may cause your information to be rejected.
Suddenly, FedLoan Servicing wants to be “accurate” with their work.
What will happen if your employer made a mistake filling out your forms?
It regularly happens, some detail or date is wrong. You might never even know what the exact problem is because the form will be summarily rejected. That means you must become a detective in order to figure it out.
Do you have an eligible loan?
It will save you a lot of hassle to verify that your loan qualifies. A small percentage of people don’t have loans that are eligible for student loan forgiveness programs.
You must have the right kind of loans to qualify!
Old Borrower VS. New Borrower
As a new borrower, what advice do I have for you?
Read the small print before you sign the MPN (Master Promissory Note). It’s a binding contract between you and the government for your loans.
It also explains PSLF, describes the program, and your payment options.
New plans can be made and offered to old borrowers, but it can’t be forced on them. A new borrower is somebody who has no loans that are old. They are not an already existing borrower.
While there was a lot of hype and clickbait, this is not a time for knee jerk reactions. Student loan refinance companies will try to use emotional manipulation against you. They want to plant some doubt in your mind.
They’ll ask, “Why would you stay in this program when 99% of the people will be rejected?”
How does that help them?
They want you to refinance with them.
What does that mean for you?
That will take you out of the PSLF program, and once you’re out of the program, there’s no going back.
Do you know an attorney?
There are numerous attorneys who are interested in student loan forgiveness programs. It would be a very bad situation if a bunch of new attorneys were angry over being left high and dry by the PSLF program and decided to sue the government.
Imagine it…multiple attorneys suing in class action suits!
That’s just another reason you shouldn’t worry about the viability of PSLF.
Always an Angle
Let’s take a look at student loan refinancing companies.
They have what’s called an affiliate link, and there are affiliate links on Financial Residency.com. There are affiliate links on most pages, they are disclosed in a statement that says whoever owns the page might get paid for having the link on there.
What they’re not telling you is that when you click the link, that person’s probably also getting something. It will depend on volume, but they will get a percentage of the loan.
Let’s just say you have $100,000 in student debt, you go to refinance, you get to your $500 sign up bonus. The person whose site you are on, may receive 1% of your loan balance as the commission or referral payment.
That’s for bringing you to refinance, sometimes it’s done on a per loan basis. If you have a $50,000 to $100,000 loan balance, they may get X amount of money.
There are a lot of people writing for doctors, and you all have a ton of debts. That could mean they make a lot of money.
I have a guide that has 10,000 words in it. There is one referral affiliate link in there for Credible. In theory, I would get paid for that if you choose to click on it.
I don’t want you to refinance unless you absolutely must do it. It’s not something to rush into without due diligence.
So, Is PSLF Worth It?
There is a lot of quality information in our world today.
You must take control and search for answers. That’s especially true if you’re six-figures in debt.
I’ve written about the price of putting your head in the sand before, this is no time to indulge in ignoring a problem that will only grow.
And don’t worry about the student loan forgiveness programs. If you’re already a borrower, and you’re already in repayment that means you are safely in the program.
You need to understand student loan forgiveness programs and find out the best way to pay down the debt that you’re carrying or the weight will crush you!