As described on the Federal Student Aid website, “The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.”
Private loans are not eligible for public service loan forgiveness, so you must borrow only Direct Loans if you wish to retain eligibility for PSLF. However, as described below, relatively few HLS graduates would benefit from PSLF, and the Low Income Protection Plan (LIPP) provides much more flexibility than PSLF. Because the Direct Loans on the HLS Preferred Lender List may have a higher repayment cost than private loans, you should carefully consider whether you are likely to qualify for or use Public Service Loan Forgiveness when evaluating your borrowing options.
To receive a benefit from PSLF, a borrower must be enrolled in an income-based repayment plan for at least part of the repayment period in order to ensure that there will be a remaining loan balance to forgive after 120 qualifying payments (10 years of payment) have been made. A qualifying payment must be made while the borrower is in qualifying employment as defined on the Federal Student Aid website. Qualifying employment is limited to work in government organizations at any level, not-for-profit entities that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, and other entities that provide “certain types of qualifying public services.” Work at for-profit organizations, including private public interest law firms, labor unions, partisan political organizations, and government contractors is not qualifying employment under PSLF. Borrowers who do not meet all the conditions of PSLF will not qualify for forgiveness.
There is a significant risk associated with PSLF: depending on your income level, loan payments in an income-based repayment plan may not be sufficient to pay the monthly accruing interest on your loans. In that case, during the time you are enrolled in an income-based plan, the outstanding debt on your Federal loans will increase and you will make no progress repaying your loans. This could dramatically increase the total repayment cost of those loans unless you qualify for loan forgiveness under PSLF.
The HLS Low Income Protection Plan (LIPP) is not integrated with PSLF and does not require participation in PSLF. LIPP covers loan payments made on a 10 year repayment plan, which means that the total monthly loan payment (the LIPP participant’s share plus the share paid by the LIPP benefit) reduces the outstanding balance on the loan according to the standard repayment schedule. LIPP also has no minimum participation requirement; you can enter and exit LIPP when you choose. Most LIPP participants are required to pay at least a portion of the monthly loan payment according to the LIPP Participant Contribution Scale, and the monthly payment on an income-based repayment plan can be lower than the LIPP Participant Contribution at a given level of income and loan debt. However, because the PSLF is essentially an all-or-nothing benefit that requires 10 years of qualifying employment, and carries with a significant risk of a higher total repayment cost on an income based repayment plan, the PSLF is not a good option for everyone.
Which HLS graduates might benefit from Public Service Loan Forgiveness?
- Graduates who will meet all the PSLF qualifications as described on the Federal Student Aid website (typically, those who will be in eligible public service work for at least 10 years of repayment) and are not eligible for LIPP assistance either due to their income, assets, or ineligible debt.
- Graduates who will meet all the PSLF qualifications as described on the Federal Student Aid website (typically, those who will be in eligible public service work for at least 10 years of repayment), have determined that they can pay a lower amount on an income-based repayment program than the LIPP Participant Contribution, and are willing to take the risk of a substantially higher total repayment cost if they fail to meet the PSLF qualifications.