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9 Ways People Accidentally Sabotage Student Loan Forgiveness

If you work for the government or a qualifying nonprofit, you can get your student loans forgiven via the Public Service Loan Forgiveness (PSLF) program. If you do everything right, your loans are forgiven after 120 qualifying payments—about 10 years.

But the program is picky—and there are a lot of ways you can mess it up. It’s not unusual for people to believe they’ve been paying toward PSLF for years, only to have their forgiveness denied at the end over a technicality.

Here are nine ways people mess up on PSLF. Don’t let any of these happen to you.

1. Flaking on a payment—even just one 

To get PSLF, you have to make 120 qualifying payments. There are a lot of, um, qualifications for those, but the first characteristic of a “qualifying” payment is that it isn’t late. Payments don’t qualify if they’re over 15 days late.

2. Forgetting to submit your Employment Certification Form every year

Another thing that’s really important to qualifying for PSLF is that your employer qualifies. And the Education Department won’t just automatically know your employer qualifies. You have to tell them. Every year.

The Employment Certification Form (ECF) tells the government who you work for, so the government can ascertain that you still work for an employer that qualifies. You should send this form in on three different types of occasions:

  1. The minute your start your first job in public service
  2. Once a year after you get that job; and
  3. Whenever you switch to a new employer.

It’s entirely possible to think you’re making qualifying payments toward PSLF for years, only to find out the government didn’t count your payments because you didn’t send in your ECF. So don’t forget.

3. Making common errors on your ECF

Yup, the ECF is maniacally important. If you send it in with errors, your payments may not count for PSLF. Here are all the i’s you have to dot and t’s you have to cross.

Get the info right

Don’t mess up on the Employer Identification Number (EIN). It’s on your W-2. Don’t forget to fill in all required fields.

And be sure all your answers are consistent with last year’s ECF (unless you changed jobs). For instance, if you give a different start date from your previous form, your PSLF could be tanked.

Initial any corrections

Now that we’ve told you to be super careful about not making errors, you may want to make some corrections. But hold up! Did you initial those corrections?

This is necessary—if you’re in Section 1 or 2 (the sections for borrowers). If you’re in Section 3 or 4 (the section for employers), your employer has to initial.

4. Not getting a signature from the right person at your company

Your ECF needs to be signed by an “authorized official” at your place of work. Usually, this is someone in your HR office.

This is also the person who has to initial any corrections in Sections 3 and 4. If you’re not sure, ask your HR department who your PSLF authorized official is.

5. Not consolidating the federal loans that don’t qualify

Not all federal loans qualify for forgiveness. Only Direct Loans do (these are often referred to as Stafford Loans). If you’re like most people and have a bouquet of loans including FFEL, Parent or GradPLUS, and Perkins loans—those won’t be forgiven even if you meet all other criteria. 

If you’re not sure what type of loan you have, head on over to StudentAid.ed.gov and log in. Look for the word “Direct” in the names of your loans. The ones that don’t have that word don’t qualify for forgiveness.

You can make them qualify, however, by consolidating all your federal loans under a Direct Consolidation Loan. Don't get shut out of loan forgiveness when you have this handy loophole readily available.

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6. Not getting into an income-driven repayment plan

When you first start paying back your federal student loans, you’re automatically enrolled in the 10-year Standard Repayment Plan. It’s just like it says on the can—it takes you ten years to pay back. If you stay in this plan, your PSLF will kick in right when you make your last payment—so the amount of loans you're forgiven will be $0. Perverse, huh?

To get around this, you have to lengthen your payment terms so there will be something to forgive (this also has the perk of reducing your monthly payment). You can do this by enrolling in income-driven repayment.

There are four income-driven repayment plans, and they set your payment based on a calculation of your discretionary income. You can apply using this form.

Note that income-driven repayment plans forgive your student loans too, after 20 or 25 years. But remember, we're not discussing that here—only forgiveness under PSLF, which takes 10 years. (Ten is faster that 20.)

7. Forgetting to recertify for income-driven repayment

Now that you’re enrolled in an income-driven repayment plan, you have to keep qualifying for—and recertifying for—that, as well as PSLF. Fun, huh?

At this point, qualifying for PSLF may be starting to look like a second job that no one is paying you for (until your forgiveness kicks in, provided you don’t mess up).

But you can cut down on the workload by recertifying for your payment plan at the same time as you send in your ECF every year. Make it a fun routine, with snacks or a glass of wine or whatever.

8. Being in deferment or forbearance on your loans

Any payments you make while on deferment or forbearance don’t qualify for PSLF. You can qualify again only by getting your loan out of these states and onto an income-driven repayment plan.

The catch here? In some situations, your loans are put in deferment automatically—like when you enroll in grad school (which you might be doing while working for a qualifying employer and thinking you’re making qualifying payments toward forgiveness).

If that’s your situation, you can waive the deferment. You’ll have to get in touch with your loan servicer to do it.

9. Trying to pay off your loan early

If you have the extra cash, you may think it’s a good idea to put more toward your student loan and try to wrap this up early. You’d be wrong.

Under PSLF, you don’t get forgiveness until the 10 years are up, even if you pay more than the minimum payment every month. Each of your 120 qualifying payments has to be separate, and you can only make one per month.

If you stick a little extra into any of your payments, you’re just reducing the amount of money you get forgiven later on. We like to call this “shooting yourself in the foot.”

Oh, and another thing? Sometimes your employer will make a big one-time payment toward your student loan because they have a loan repayment program for employees. If you have one of those coming, ask your employer if you can break it up into separate monthly payments rather than getting it paid as a lump sum.

So there you have it. All the hoops you have to jump through to qualify for PSLF. If you ever have any questions, contact FedLoan Servicing, the PSLF servicer for the Department of Education—they’ll set you straight.

Don’t qualify for PSLF? Want to reduce your student loan payment? See if you’re Refi Ready. 

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