Achieve Student Loan Forgiveness in 10 Years With the Public Service Loan Forgiveness Program

Student loans are, for many, a necessary means to an end. Whether you are the borrower or the spouse, one of your main concerns upon graduating is how to pay off student debt and/or how to have those loans forgiven ASAP.

I am a “lucky” spouse whose husband had a cry-worthy amount of law school debt upon graduation. When he landed his first job at a nonprofit hospital, an entirely new world of student loan forgiveness opened its doors to us. Enter the Public Service Loan Forgiveness Program.

What is this program and why might it be important to you?

This program, if you qualify, allows your student debt to be forgiven after 10 years (as opposed to the traditional 20 or 25), and the forgiven amount is tax-free to you as the borrower. If 10 years isn’t enough to make you excited, the tax-free aspect of this should be. If you are a borrower and you are thinking about going into a nonprofit career (and yes, being a medical doctor at a hospital can count; I have a family member to prove it), this is a program you should not ignore.

Here are the basics to qualify:
1. You must work for the government or a qualifying nonprofit organization.
2. You must work full time.
3. Your loans must be Direct (don’t worry, you can consolidate your federal loans into a Direct Loan if they aren’t Direct already).
4. You must repay your loans with an income-based repayment program.
5. You must make 120 qualifying payments.

There is some documentation involved with the Public Service Loan Forgiveness Program, and proof of your annual income and that of your spouse (if applicable) is required.

Here is where the help of a financial professional can come in handy:

The payments that you make are based on your annual income, so the lower your annual income, the lower your monthly payments, and thus the higher the amount of debt that can be forgiven after 10 years. This means paying attention to things like deferrals to retirement accounts and whether you should file jointly with your spouse or separately. There are some stringent rules to follow, and it is advisable to talk with a financial professional and make a call to the helpline before making any decision that could affect your loan repayment plan.

Is it worth the hassle?

First, let’s be honest: Student loan repayment in general is a hassle, whether you’re trying to figure out which repayment program makes sense for you, fighting a high interest rate or making payments according to an income-based repayment program. Second, my short answer is yes. Even if you decide to change careers down the road or decide that you would rather work for a for-profit institution, you would have still made qualifying payments on your loans and would be steps closer to either loan forgiveness or full repayment.

Finally, to reemphasize, I highly recommend talking to a financial professional and the student aid helpline when you are considering taking on student debt, repaying student loans and, of course, generally planning for your financial future.

Lori Pilon, CFP®
Financial Advisor

This article appeared in our Q2 2021 newsletter for young investors. Read the entire newsletter here:


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