Will Uncle Sam Pay Off Your Student Loans?

The author describes the circumstances under which federal employees can qualify for Public Service Loan Forgiveness.

Being a Federal Employee has many perks, including great benefits and retirement packages. One perk that many federal employees fail to notice is loan forgiveness. Although not all loans and employees are eligible, it has been an incredible opportunity for many.

To qualify for PSLF (Public Service Loan Forgiveness) a number of conditions have to be met,  including the following:

  • Work for the Federal, State, Local, or Tribal Government or a Non-profit organization
  • Work full time for that organization
  • Have Federal loans
  • Repay those loans with a income-driven repayment plan
  • Make 120 qualifying payments

Let’s dig into the details of some of these.

Eligible Loans

A loan is eligible if it is made under the William D. Ford Federal Direct Loan Program (Basically, if it is a direct loan).

Loans from the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan (Perkins Loan) Program do not qualify unless they are consolidated into a Direct Consolidation Loan. 

Student loans from private lenders do not qualify for this program.

Qualifying Payments

For a payment to be qualified it must be made:

  • after Oct 1, 2007
  • under a qualifying repayment plan
  • for the full amount due as shown on your bill
  • not more than 15 days late
  • while you are employed full-time by a qualified employer

You must make at least 120 payments for the loan to be forgiven which comes out to at least 10 years. This 10 years doesn’t have to be consecutive if you are employed by a non-qualified employer in the middle of the ten years.

Another huge perk of this program is that the forgiven amount does not count as income. This differs from many loan forgiveness programs on the private side.

For example, in other programs, let’s say you get $30,000 worth of loans forgiven, you’d have to include an extra $30,000 in your taxable income. With this program, this is not required. Bottom Line: More money in your pocket.

While there are a number of requirements for this program, it can be an incredible benefit if you qualify.

So many people miss out on incredible benefits just like this because they simply don’t educate themselves on what is available. Don’t miss out. Take the time to educate yourself about what makes the most sense for your situation, and it could not only mean you keep so much more of your money, but that you can live in confidence knowing you are planning and ready for the future.

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.