3 key things to know about the student loan forgiveness program

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New federal rules aimed at giving student loan borrowers a chance to have their service loans forgiven have been approved ‘ but those looking to take advantage need to be alert.

The relief plan, part of the Trump administration’s recent $1.3 trillion budget bill, will be available on a first-come, first-served basis. That means when the $350 million fund administered by the Department of Education runs out, that’s it.

3 key questions (and answers) about the student loan forgiveness program

The Public Service Loan Forgiveness program (PSLF) was signed into law in 2007 by President George Bush as part of a stimulus plan to encourage more college graduates to enter public service.

The hotly contested budget bill, which includes a provision that servers keep the tips they earned in restaurants, only made it into law after deep compromises by both parties in Washington.

Adding to the suspense over student loan forgiveness is the fact that many people who didn’t initially qualify for the (PSLF) may be able to get approved this time around.

Who qualifies for student loan forgiveness?

As with the original terms of the plan, newly qualified applicants need to make sure they have a Federal Direct Loan (private student loans don’t qualify) and not be delinquent.

They also have to have made 120 payments in a qualifying loan repayment program.

“I think that this bill’s language brings a significant benefit to borrowers,” Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, told Nerd Wallet. “Congress recognizes that the communication about the Public Service Loan Forgiveness program was not as robust and clear as it could have been.”

What if you’ve been paying in the graduated or extended repayment programs?

Thousands of people, despite following what they thought were the rules for federal loan forgiveness, have found out that their repayment programs don’t qualify.

But there’s hope: The new spending bill will give debtors credit toward the 120 months rule. The catch is that you must switch over to an income-driven repayment plan.


Another stickler for many applicants is that they aren’t sure if they meet the rule of having worked 10 years in a public service job for a qualifying employer. The government says rather than focusing on what you do for a living, the key is who your employer is.

What are the rules governing qualifying employment?

People who work for labor unions, partisan political groups and any for-profit organizations don’t qualify for the program. But if you work for any of the following, you qualify:

  • A government organization (any level)
  • A not-for-profit group that is tax-exempt i.e. a 501(c)(3) organization
  • Other types of not-for-profit organizations that are not tax-exempt that meet certain public service requirements

Qualifying employment also extends to volunteers in the AmericCorps or Peace Corps, the government says. If you’re unsure whether you qualify, contact the DOE and tell them about your role in the organization you work for.

If you are unsure what type of loan you have, contact your loan servicer.

The clock is ticking on when the $350 million fund will become available. The Department of Education has yet to tell Congress how the money will be dispensed. But a deadline around late May is in the works.

Read more: Student Loan Guide