What Is Public Service Loan Forgiveness?

Public Service Loan Forgiveness?

Public Service Loan Forgiveness (PSLF) is a federal program that forgives the remaining balance on certain federal student loans for borrowers who work full-time for qualifying public service employers. The program was created in 2007 as part of the College Cost Reduction and Access Act (CCRAA) and is intended to incentivize borrowers to pursue public service careers by offering loan forgiveness after a certain period of time.

To be eligible for PSLF, borrowers must make 120 qualifying payments while working full-time for a qualifying employer. Qualifying employers include government organizations, non-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, and other types of non-profit organizations that provide certain types of qualifying public services.

Borrowers must also have qualifying loans, which include Direct Loans (including Direct Consolidation Loans) and some older federal loans that have been consolidated into a Direct Consolidation Loan. Private student loans and Parent PLUS loans are not eligible for PSLF.

Once borrowers have met the eligibility requirements, the remaining balance on their qualifying loans is forgiven tax-free. The forgiven amount is not considered income, so borrowers do not have to pay income taxes on the amount forgiven.

It's important to note that not all public service jobs qualify for PSLF, and not all borrowers will be eligible for the program. Borrowers should carefully review the eligibility requirements and the application process before pursuing PSLF.

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