A popular student loan forgiveness option for borrowers who work in the public and nonprofit sectors has been in the news a lot lately, as the Biden administration implements multiple initiatives designed to expand and improve relief.
The program’s requirements were already opaque and difficult to navigate. And some recent and upcoming developments, while helpful for many borrowers, may only add to the confusion about who qualifies.
Here’s what borrowers should know.
Background: Student Loan Forgiveness For Public Service Workers
The Public Service Loan Forgiveness program, also referred to as PSLF, can provide federal student loan forgiveness for borrowers in as little as 10 years. PSLF requires 120 “qualifying” monthly payments for a borrower to become eligible for loan forgiveness. Those payments don’t have to be consecutive, but if they are, it equates to 10 years.
Under the original PSLF rules, a “qualifying payment” must be made on Direct federal student loans under a specific kind of repayment plan (either a 10-year Standard plan, or an income-driven repayment plan) while the borrower works in qualifying employment. If a borrower meets all of those requirements and makes an on-time payment, that payment can count toward the 120 needed to receive student loan forgiveness.
The Biden administration has implemented two one-time initiatives designed to temporarily expand access to PSLF — the Limited PSLF Waiver, and the IDR Account Adjustment. Both initiatives temporarily broadened the definition of “qualifying payments” to include other types of federal student loans and repayment plans, as well as some past periods of deferment and forbearance. However, these initiatives largely left intact the definition of qualifying employment.
Qualifying Full-Time Employment For PSLF Defined
In general, “qualifying employment” for purposes of the PSLF program means full-time employment, with average hours of at least 30 per week, for either a 501(c)(3) nonprofit organization or a public or government entity of some kind at the federal, state, local, or tribal level. Employment for other types of nonprofits that are not 501(c)(3)’s can potentially qualify, depending on the nature of the organization’s work and the services provided, but the Department of Education makes case-by-case determinations.
As long as you work for a qualifying employer, your specific job title or role at the organization is not relevant to a PSLF determination. “The specific job that you perform doesn’t matter, as long as you’re employed by a qualifying employer,” says the Education Department in published guidance.
Some organizations that are technically nonprofits would not qualify for PSLF. These include partisan political organizations and labor unions.
Part-Time Employment Can Count Toward Student Loan Forgiveness In Some Cases
While PSLF requires full-time employment, part-time employment can qualify if you have at least two part-time positions, each with qualifying employers, and your combined hours are at least 30 per week on average.
Part-time employment for multiple qualifying employers can meet the full-time requirements for PSLF “as long as the combined number of hours you work for each employer equals at least 30 hours per week,” says the Education Department. “Each employer must be a qualifying employer for the employment to be included in determining whether you are employed on a full-time basis. For example, if you worked for one qualifying employer for 10 hours per week and you concurrently worked for a second qualifying employer for 20 hours per week, this would meet the full-time requirement of at least 30 hours per week.”
Contractor Work Generally Does Not Qualify For PSLF
In general, you must be directly employed for a qualifying employer for your payments to count toward student loan forgiveness under the PSLF program. To be directly employed, the employer must issue you a Form W-2, according to the Education Department.
Contractors performing services for qualifying entities may not be eligible if the contractor itself is not qualifying. “If you were hired by a government contractor and the contractor issues your Form W-2, you are employed by the contractor. In this case, although you may be doing work for a qualifying employer (a government agency), you are not an employee of the qualifying employer,” according to Education Department guidance.
In addition, borrowers who work as independent contractors and receive a Form 1099 instead of a Form W-2 would not qualify. Technically, an independent contractor is not an “employee” and may instead be self-employed. “If your employer provides you with an IRS form 1099 (instead of a W-2), you are considered a ‘contract employee’ and would not be eligible for PSLF,” says the Education Department.
Religious Work Can Now Qualify For Student Loan Forgiveness
Under the original PSLF rules, religious work such as leading worship services or engaging in religious instruction would not qualify for student loan forgiveness under the program, even if the organization itself qualified. But under a rule change that went into effect in 2021, religious-oriented work can now be eligible for PSLF, as long as the borrower meets all other PSLF requirements and works for a qualifying organization.
“Religious organizations are recognized by the IRS as 501(c)(3) organizations and are therefore eligible for PSLF,” according to updated Education Department guidance.
Employment Abroad Can Qualify For Student Loan Forgiveness Under Certain Conditions
In general, only employment for a domestic-based nonprofit organization can qualify for student loan forgiveness under PSLF. However, borrowers living abroad can still qualify if their employer is a qualifying organization. “If the organization operates in the U.S., your employment would qualify for PSLF purposes. If the organization does not operate in the U.S., your employment does not qualify,” according to the Education Department.
Similarly, employment for U.S.-based government agencies and organizations qualify for PSLF, but working for a foreign government does not. Working for an international nongovernmental organization (NGO) generally does not count, either, with some narrow exceptions. “If you work for a U.S. delegation to an international, intergovernmental organization, such as the U.S. mission to the United Nations, your employment qualifies because your employer is the U.S. government,” says department guidance.
Upcoming Changes To PSLF Employment Requirements
New regulations going into effect this July will tweak some of the employment rules for the PSLF program:
- The new regulations will simplify the definition of full-time employment to be 30 hours per week on average (rather than also requiring the employer to specifically consider the borrower to be full-time). “A single 30-hour-a-week requirement will make it easier for borrowers and employers to establish what it means to be full-time,” said the Education Department in a fact sheet summarizing the change.
- The new rules will also make it easier for adjunct faculty at colleges and universities to receive PSLF credit. Adjunct and contingent faculty will be able to receive 3.35 hours of work for every credit hour taught.
- The regulations will also provide some specific exceptions to the general rule that contractors cannot qualify for PSLF. The change will “allow a qualifying employer to certify employment for a contractor if that individual is providing services that by State law cannot be filled or provided by an employee of that organization.” The Education Department cited the specific example of California and Texas, which have laws that “generally prevent doctors at nonprofit hospitals… from working for the hospital directly. This change would cover those individuals as well as any other contractor whose employment is similarly barred by state law.”
The rules changes go into effect on July 1.
Resources For Borrowers Seeking Student Loan Forgiveness under PSLF
Borrowers interested in pursuing student loan forgiveness under the PSLF program should review Education Department resources to maximize the potential benefits:
- Review PSLF program requirements and detailed FAQs via the Education Department’s PSLF page.
- Review the IDR Account Adjustment, a one-time initiative that can expand who qualifies for PSLF. Some borrowers may need to take steps before the end of this year to benefit.
- Look up whether an employer qualifies for PSLF via the Education Department’s new “Employer Search” tool.