Here’s Why Public Service Loan Forgiveness In US Doesn’t Work Right

3 years ago



Student loan forgiveness is always the talk of the town. Earlier this year, US Congress authorized a $350M fund to improve the existing student loan forgiveness program. However, ~90% of applicants who applied for the temporary expanded public service loan forgiveness (TEPSLF) program have been denied. The Typical Student team learned what went wrong.


Why Are US Students Denied PSLF?





Many US student borrowers faced a situation when after over a decade of loan payments, they would learn they didn’t qualify for the PSLF. This mostly happens because these students are enrolled in the wrong payment plan.


The main advantage of public service loan forgiveness (PSLF) is that specific not-for-profit and government employees can have their federal student loans canceled after a decade of on-time payments. However, the majority of borrowers are rejected for not fulfilling the requirements of the program.


What Are The PSLF Requirements?




Below you’ll find the public service loan forgiveness requirements. In case a student borrower doesn’t meet one of them, they can make changes to comply.

  • Student borrower must have federal direct loans.
  • Borrower’s employer must be a government organization at any level, a 501(c)(3) not-for-profit organization or other type of not-for-profit providing public service.
  • By the end of the payment period, a borrower needs to have made 120 qualifying, on-time payments. These can be made either in an income-driven repayment plan, or the standard repayment plan.

Should Student Borrowers Wait For Improvements In the System?


This year’s fix to the program implemented by the Congress, was meant to help people who had been “denied the loan forgiveness simply because they had been repaying their debt in a disqualifying plan.” So, the program basically gave them a second chance to have their debt canceled. However, the fix has proved to have too many imperfections. As told by CNBC, the government are working to make necessary improvements to help more students with their debt.  

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