I have a number of physical therapy and occupational therapy friends and colleagues planning on obtaining student loan forgiveness through the Public Service Loan Forgiveness Program.
Many of them are not quite sure if they know all of the rules required by the Public Service Loan Forgiveness program.
Even more of them are concerned they might not be given the forgiveness, even if they believe they are doing everything in their power to make sure they qualify.
All of them wish they had known all of the points I have listed below.
My hope is that this list helps not only those physical therapists and occupational therapists currently on the Public Service Loan Forgiveness track, but also therapists and students not yet pursuing Public Service Loan Forgiveness but thinking of doing so.
Let’s get started.
1. Not All Student Loans Qualify
Understand that only federal student loans can qualify for Public Service Loan Forgiveness. If your student loans are with a private lender, then they will not qualify for Public Service Loan Forgiveness. If some of your student loans are federal and some are with a private lender, then the student loans that are federal can still qualify for Public Service Loan Forgiveness but the student loans that are with the private lender will not qualify.
To add salt to the wound, not even all of the federal student loans qualify for Public Service Loan Forgiveness – only William D. Ford Federal Direct Loans do. Examples of Direct Loans include Stafford Loans that are either Direct Subsidized or Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidated Loans.
Direct Consolidated Loans are individual loans that would not qualify for Public Service Loan Forgiveness, such as Federal Family Education Loans (FFEL) or Federal Perkins Loans, but once consolidated do become eligible for Public Service Loan Forgiveness. Unfortunately, none of the payments you’ve already made before consolidation count towards Public Service Loan Forgiveness. Only the payments you make after consolidation count towards Public Service Loan Forgiveness.
Financial Pearl: As of the writing of this article, the Limited-Time Public Service Loan Forgiveness Waiver Opportunity has taken effect. This waiver makes it possible to get the previous student loan payments that you’ve made count towards getting Public Service Loan Forgiveness even if you were in a different student loan program, different repayment plan, or even if you made late payments or only partial payments. However, you must still meet certain requirements to qualify. For example, you must still either have Direct Loans or you must consolidate your loans into Direct Loans by October 31, 2022. To learn more, visit the Federal Student Aid Office of the U.S. Department of Education’s website here.
2. Do Not Refinance Your Student Loans
Do not refinance your federal student loans. Refinancing student loans can only be done with a private lender and doing so essentially converts your federal student loans into private student loans, thus rendering them ineligible for Public Service Loan Forgiveness.
3. Choose Where You Work Wisely Because Not All Employers Qualify
To qualify, your employer must either be a federal, state, local or tribal government organization (including the U.S. military) or a not-for-profit organization falling under the Internal revenue Code 501(c)(3).
- Here are a few common examples of jobs that can qualify for Public Service Loan Forgiveness:
- Working for a university that falls under the Internal revenue Code 501(c)(3)
- Working for a university hospital that falls under the Internal revenue Code 501(c)(3)
- Working for a county hospital that falls under the Internal revenue Code 501(c)(3)
- Working for a Veteran Affairs (VA) hospital
- Working for the United States Military (check out this interview with an occupational therapist working for the military)
The Federal Student Aid Office of the U.S. Department of Education recommends that you use their PSLF Help Tool to find out if an employer may qualify for Public Service Loan Forgiveness.
Financial Pearl: Get a physical therapy/occupational therapy job right after graduation with an employer that qualifies for Public Service Loan Forgiveness so you don’t waste any years working for an employer that doesn’t qualify.
4. If You’re A Student, Choose Your Clinical Rotations Wisely
Figure out whether the Public Service Loan Forgiveness track is in fact the path that you want to take to manage your student loans while you’re still a student attending a physical therapy/occupational therapy graduate school program. That way you can try to get clinical rotations at places you might want to work at once you graduate from physical therapy/occupational therapy school that qualify for Public Service Loan Forgiveness.
5. Choose Your Work Schedule Wisely
If you want to qualify for Public Service Loan Forgiveness, you will have to maintain a full-time work schedule. However, the good news is that the definition of what is considered full-time is working only at least 30 hours per week.
Also, you can combine different jobs that add up to 30 hours per week, so these hours don’t have to come all from the same job.
Financial Pearl: If you want to do a physical therapy residency and get Public Service Loan Forgiveness, make sure that your employer will qualify for Public Service Loan Forgiveness, as described in number 3 above, and that you will be allowed to work at least 30 hours per week, as described in number 4 above.
6. Enroll In The Correct Plan
Make sure you are enrolled in an Income-Drive Repayment (IDR) Plan. Only student loan payments made while enrolled in an Income-Drive Repayment Plan count towards getting Public Service Loan Forgiveness.
An Income-Driven Repayment Plan allows you to make smaller monthly payments compared to the payment which would be required each month if you were to make 120 (10 years x 12 months) equal payments over a 10-year period (otherwise required for Public Service Loan Forgiveness). The amount of these smaller monthly payments is based on your income and family size.
Since the Income-Driven Repayment Plan payments are smaller than what would be required to actually pay your loans off yourself in the same 10-year timeframe, you will have a balance left after making your 120 payments. That remaining balance is what the Public Service Loan Forgiveness plan forgives.
At the same time, you should keep in mind that these smaller payments can allow your student loan balance to increase, sometimes quite significantly, during the 10-year timeframe as interest continues to accrue. Since you are planning on having your student loans forgiven through Public Service Loan Forgiveness, this is not typically seen as a problem. However, if something goes wrong and you don’t end up qualifying for Public Service Loan Forgiveness at the end of the 10-year timeframe, you can then end up being responsible for a much higher student loan balance even after making your 120 required payments.
See #13 on this list on how to prepare for that potential welcome scenario.
1. Revised Pay As You Earn Repayment Plan (REPAYE Plan)
2. Pay As You Earn Repayment Plan (PAYE Plan)
3. Income-Based Repayment Plan (IBR Plan)
4. Income-Contingent Repayment Plan (ICR Plan)
Picking the best Income-Driven Repayment Plan for you can be difficult to determine. Since you are aiming to get your loans forgiven, it would be in your best interest to pick the Income-Driven Repayment Plan that requires you to pay the least amount possible and maximize the amount of student loans you have forgiven.
To help you choose which Income-Driven Repayment Plan might be best for you, the Federal Student Aid Office of the U.S. Department of Education recommends that you use their Loan Simulator, which you can access by clicking here.
7. Make Sure Your Payments Qualify
You must make a total of 120 qualifying monthly payments to obtain Public Service Loan Forgiveness. But what makes a payment “qualify?”
The Federal Student Aid Office of the U.S. Department of Education deems a payment will qualify if the payment was
- Made after October 1st, 2007
- While you are working full time
- While you are enrolled in a qualifying student loan plan.
We already discussed the definition of working full time by the Federal Student Aid Office of the U.S. Department of Education in #5 above and we discussed which plans qualify in #6 above, so refer back as needed.
To qualify, a payment must also be made in full and on time. However, the Federal Student Aid Office of the U.S. Department of Education states that “on time” is defined as not taking place more than 15 days after the payment is due.
Financial Pearl: It is important to note that your 120 monthly payments do not need to be consecutive – you can take time off from making payments. This can open up a window of opportunity to consider changing jobs if you desire to do so. If you do, though, just make sure to fill out the necessary paperwork – see #8 below for more details.
8. Submit the Employer Certification Forms As Recommended
The Federal Student Aid Office of the U.S. Department of Education recommends that you complete and submit the Public Service Loan Forgiveness form every year or when you change jobs. This will help ensure that the employer you are working for does, in fact, qualify you for Public Service Loan Forgiveness.
If you fail to submit the Public Service Loan Forgiveness form each year, then the Federal Student Aid Office of the U.S. Department of Education will require you to submit the form for every employer you have worked for when it comes time to obtain student loan forgiveness.
I highly recommend that you complete and submit this form as stated above. I can easily imagine some potentially bad scenarios if you don’t. For example, what if you left a job on poor terms (it does happen) but then you had to go back and ask that previous employer to sign your Public Service Loan Forgiveness form because you didn’t do it during the time you had worked there?
Or, better yet, what if you had assumed the employer you were working for qualified you for Public Service Loan Forgiveness and you made all 120 payments only to find out that your employer did not, in fact, qualify and that you would have been made aware of this much earlier on had you submitted the form each year.
Submit the form!
To learn more about the process of submitting the form, click here to go to the Federal Student Aid Office of the U.S. Department of Education’s website and scroll down to the heading “How to Fill Out and Submit the PSLF Form.”
9. Keep Your Own Records
I think the well-known quote “Trust, but verify” applies here.
Keeping your own records can help ensure that, if any information is lost, you still have the proof you may need.
Even the Federal Student Aid Office of the U.S. Department of Education recommends that you keep W-2 forms and pay stubs that show that your employer qualifies for Public Service Loan Forgiveness, the dates that you worked for each employer, and the number of hours you worked to qualify as full time just in case your student loan servicer requests additional paperwork.
In addition to this, I recommend keeping records of each payment you have made. In case records of any of your qualifying payments are misplaced, be ready to provide evidence showing that they were actually made.
10. If You Are Married, Choose Your Tax Filing Status Wisely
If you are married, then your tax filing status affects not only the amount you may owe in taxes but also the amount of your student loan payments each month.
In general, filing married but separately often results in paying more taxes. The purpose of this article is not to go into depth about taxes, so I will just leave it at that. However, if you are interested in learning why, click here to read TurboTax’s explanation under the heading “Consequences of Filing Your Taxes Separately.”
More specifically, the Federal Student Aid Office of the U.S. Department of Education states that if you file jointly then your monthly student loan payment amount will be based on the combined income of both you and your spouse. However, if you file separately, your monthly student loan payment amount will only be based on your income unless you are in the Revised Pay As You Earn (REPAYE) – then it will still be based on the combined income of both you and your spouse.
If you are like me and married to someone who is in our profession (my wife is an occupational therapist), then both of you may have student loans. If you fit this scenario and you both file jointly, then the Federal Student Aid Office of the U.S. Department of Education will take your spouse’s student loans into account when determining your required monthly student loan payment amount.
In the end, you won’t know if filing jointly to pay less in taxes or if filing separately to reduce the monthly student loan payment is in your best interest until you crunch the numbers. I recommend doing so with your tax advisor.
11. Qualifying Payments When Taking Time Off
Understand that time you take off from work can still count towards Public Service Loan Forgiveness. This can include vacation time permitted by your employer and time taken off under the Family and Medical Leave Act (FMLA) of 1993.
Financial Pearl: Be sure to keep this in mind when preparing to have a baby or contemplating using FMLA leave.
12. Buying Your Future House
Understand that, even though you may be anticipating your student loans will be forgiven via Public Service Loan Forgiveness, the entirety of your student loan balance will still be counted against you when assessing your debt to income ratio to help determine if you can qualify to buy a house.
When a lender determines what is known as your debt-to-income ratio, your debt obligations you pay each month are analyzed against your monthly income. The good news is that, with the Public Service Loan Forgiveness track, you are already in an income-drive repayment plan (as we discussed previously above in #6) and these plans can provide you with a lower monthly payment than other plan options.
13. Hope For The Best, Prepare For The Worst
Although you anticipate that your student loans will be paid off after making the 120 qualifying payments, you should still prepare for the unexpected. After all, only 2.16% of Public Service Loan Forgiveness applications have been accepted since November 2020.
Slowly saving up the remaining balance (the amount we discussed in #6) you owe on your student loans can be one way to provide yourself with a safety net. If you unexpectedly get rejected from Public Service Loan Forgiveness, then you can still pay them off. On the other hand, if your loans do get forgiven as planned, you can still direct that large sum of saved up money towards other needs.
14. Other Forgiveness Options
If meeting the circumstances required for Public Service Loan Forgiveness is not for you, but you would like to have your loans forgiven, other paths do exit.
For example, the Income-Driven Repayment Plans can also provide student loan forgiveness in 20 or 25 years.
FINAL THOUGHTS. . .
I hope this article has helped prepare you to pursue Public Service Loan Forgiveness should you choose to do so.
Do you have questions about your student loans or other information to add? Before moving on, please help make the Money Mobilizer a supportive and welcoming community for our current and future colleagues by leaving a question or sharing your knowledge below!