Planning for PSLF

I’ve discussed (in great and somewhat confounding detail) income-based repayment (IBR), public service loan forgiveness (PSLF), and forbearance previously.

(Read it if you haven’t already. Go ahead, I’ll wait).

To sum up: the best and most straightforward reason to plan to apply for PSLF is if you want to both train and practice at a non-profit or academic center. And doing your income-drive repayment (IDR) right is important.

Now, you can’t actually “apply” for PSLF until you’ve made the 120 monthly payments (which, again, do not have to be consecutive). So you need to make 10 years’ worth of payments. However, there are a few things you should do on your way to this goal of tax-free loan forgiveness. You could wait until 120 payments are made to start the process, but you’ll avoid potential disaster if you keep the PSLF dream of loan-forgiveness in mind from the very beginning.

The PSLF formula:

Eligible Loans
+ Qualifying Payments (discussed below)
+ Qualifying Work (discussed below)
x 120 months (10 years)

= Public Service Loan Forgiveness

The Loans

PSLF is a government program run by the Department of Education. Eligible loans are exclusively of the “DIRECT” variety: Stafford, subsidized, unsubsidized, PLUS, consolidation, etc. If you have other non-eligible federal loans (e.g. Perkins), you can consolidate them into a DIRECT consolidation loan in order to be eligible. The 120 payments are calculated per loan, so if you consolidate, the counter resets. This means that you need to take care of any loan voodoo before you start making payments in order to not waste time/money. Go to to find out what loans you have if you don’t know.

The Payments

Payments must be required (monthly) while employed full-time (at least 30 hours/week). Extra payments, grace period payments, payments made during school, etc do not count. It’s 120 months, minimum, no short cuts. They do not have to be continuous payments.

The Work

A public service job is defined as any full time job at a non-profit, tax exempt, 501(c)(3) organization. Most teaching hospitals fall under this category and even some private hospitals fall under this designation. If you don’t know, just ask. Keep in mind that many technically “nonprofit” hospitals do not directly employ physicians but rather contract with them. You have to be an actual employee paid on W2 etc. So that really luxurious “nonprofit” with the great salary probably isn’t going to cut it.

For each different eligible job you hold, you must submit a PSLF employment certification form. This is something you should absolutely do at end of your tenure at any facility. While you could theoretically go back and submit the form for your transitional internship 9 years later, doing it as you go seems like a much safer bet. Once you submit your first employment certification form, your loan servicer will be switched to FedLoan (as opposed to one of the several others you may have been assigned to such as Nelnet, Navient, etc)

The Takeaway

The official FAQ PDF is an excellent read for the questions you are currently directing at your computer monitor. A briefer official FAQ with the barebones is here.

Keep in mind, there are several reasons to forget PSLF exists:

  • You want to work in private practice
  • You plan to enter into a contract that will include loan forgiveness
  • You don’t have a ton of debt (congrats)
  • Your cynicism overpowers your hope that the program will continue to exist when you can reap its benefits (even the first eligible loans won’t be forgiven until 2017)
  • The money you will pay for IDR during residency and fellowship will impact your quality of life in such a way as to overcome any future financial benefit in the long term (this is a tricky personal calculus). The fewer dollars you have, the more each individual buck is worth. As in all things, scarcity matters.

But if you still want to:

  • Get your loans in order
  • Sign up for IBR, PAYE, or (probably) REPAYE during intern year, minimize your payments as possible using tax returns or pay stubs (whichever is lower). PAYE will save you more than IBR.
  • Never pay more than you have to, which can include reducing your taxable income by maximizing tax deductions, contributing to pretax retirement accounts, etc
  • Fill out your employment certification forms as you can
  • Keep count and apply after 120 payments (with that final employment certification form, since you must still be working at a non-profit when you apply)


Yoni Kurland 02.19.15 Reply

Hi Ben, I just found your posts about PSLF, but I still have questions about consolidation. Is it really necessary? I have a fair handful of individual eligible loans – 10 or so – if I don’t consolidate, will I be making 10 individual payments every month? Will I have to submit 10 individual PSLF forms after 10 years?

Ben 02.20.15 Reply

All of your federal loans will be serviced by a single loan servicer (Nelnet, Fannie Mae, etc), who adds them together and requests a single monthly payment from you. They distribute everything, and no extra work is required for you. If all of your federal loans are PSLF eligible (i.e. “DIRECT” loans), then you don’t need to consolidate.

The reasons to consolidate really only apply if you have sizable non-DIRECT loans (e.g. Perkins). In this case you would need to consolidate these together into a DIRECT consolidation loan. The majority of people probably don’t have sufficient quantity of Perkins relative to Stafford or PLUS loans to make consolidating worthwhile. I just pay my Perkins separately; it’s a lower interest rate anyway. This is a nice FAQ.

Leonard 03.07.16 Reply

Hey Ben,
Just discovered your site, amazing info. here btw. Quick question regarding this topic. I’m currently finishing up my intern year, I signed up for IBR using my tax form from last year so my payments this year have been $0. Question though, do these “$0 monthly payments” count towards the 120 for PSLF? I have made some random payments of like $10 just to show I’m paying something, but honestly haven’t made them every month. Hoping to save as much as possible given my very large debt burden and PSLF seems the way to go. Thanks for all the info!

Ben 03.07.16 Reply

Yes, any “qualifying payment” should count. A qualifying payment is the monthly scheduled amount due, in your case $0. Random nonscheduled payments (even if on a monthly) basis shouldn’t have any impact. I know, sounds too good to be true, but this has been the party line since the PSLF program started. Next year, we’ll see if anything comes up as people begin to qualify.

You also may want to look into REPAYE at some point, depending on your circumstances. You’ll pay less compared with IBR. You won’t pay less per month if you’re in PAYE (and in some cases may pay more), but the forgiven interest can be a way to hedge your bets if PSLF won’t work out for you.

Leonard 03.10.16

Awesome, I only did the IBR instead of PAYE because I still had some unpaid college loans that didn’t qualify. Thanks for all the helpful info. Ben!

Ben 03.10.16

A LOT of people are in your shoes and I strongly suspect the majority of them will never realize nor explore their options, which is a shame! Good luck!

Courtney 06.27.16 Reply

I am currently on the IBR plan and have gotten in the habit of making extra payments in addition to my scheduled monthly payment. I think this is strategic because that means that my scheduled payment can be applied towards the interest and the extra payment can target the principal balance. It is nice seeing my principal balance actually go down when I do this. When my loans are eventually forgiven under this plan, it is considered taxable income. Since I have been contributing extra money, my hope was to not get slammed as much on taxes at the end of the payment period.
Now, I have just started working in the nonprofit sector and have been told to consider the PSLF plan. I know extra payments would not be considered part of the 120 qualifying payments and because forgiven loans are NOT considered taxable income under the PSLF plan, it doesn’t seem to make sense for me to continue to make extra payments. My question is – is there any reason making extra payments while enrolled in the PSLF plan would be strategic for the borrower? There are so many articles about how to strategically attack your student loans, but it doesn’t seem like there is any strategy for the borrower under the PSLF plan – just sit back and hope the program still exists when it finally comes time for the loans to be forgiven. Such a passive approach to managing my finances scares me and makes me fear that I could be screwing over my future self. If I enroll in this plan and it no longer exists down the road, I will have stopped making extra payments for no reason and will be faced with an even larger amount of debt since my principal balance would have grown astronomically. Any thoughts or advice you can provide would be greatly appreciated! This stuff terrifies me. Thanks!

Ben 06.27.16 Reply

1) PSLF only makes sense if after 10 years of payments, you get a lot of money forgiven. If you can pay off your loans yourself significantly faster, then don’t bother. Especially as few years of payments means less money being wasted paying down interest (10 years of payments is still 120 payments. That’s a lot of interest/money). If you’re on the fence about this possibility, it’s worth doing some math and also looking into private refinancing to possibly lower your rate.

2) PSLF changes, if they occur, are theorized to most likely be prospective and not retroactive. So old borrowers who made decisions based on the program’s availability would be least likely to be affected. No guarantee of course, but the historical precedent supports this.

3) You definitely do not want to make extra payments if attempting to qualify for PSLF. At all for any reason. Every dollar extra spent is a dollar wasted if the amount is ultimately forgiven. The advice here—doubly true if the future of PSLF concerns you—is to to take the money you would have otherwise spent making extra payments and invest in yourself. Put that money toward retirement in a Roth IRA or employer-sponsored 401k/403b (especially if there’s a match you’re not maxing out) and you’re putting it to a “forward-thinking” use regardless. It’s interest on your investments vs. interest on your loans. Doing this is responsible, and you won’t really get burned if things change on the student-loan front.

If the liquidity of your finances is an issue, put the money in a high-interest savings account or CD instead. Keep it safe, and if the loan situation changes, use these savings to pay down your debt faster or some other important life event (downpayment on a house, etc). As long as you don’t blow this cash on lifestyle inflation (i.e. more things), it’s okay (though retirement accounts will give you more bang for your buck due to tax savings and higher average investment return).

LS 02.24.17 Reply

Hey! I’m a social worker with a student loan debt. I’ve been working full time for almost 6 years at a social services agency, which qualifies for PSLF. I’m on IBR, my loans are consolidated through FedLoan servicing, and I fill out the annual form regarding my employment. I recently reduced my hours to 30/week, which still counts as full time at my job. Do you know, if I were to pick up a few hours of private practice work, like working as a therapist in someone’s private office either as a contractor or something, would that disqualify me from PSLF? I would still be working at my full time job and having my supervisor sign off on my full time employment there, so the payments I make would seemingly still count. And I would be reporting the additional income I make, since I used my tax form annually. I can’t seem to find anything about this on the internet! Thanks so much.

Ben 02.24.17 Reply

As long as you’re still hitting at least 30 hours AND considered full time (as you said), then your work qualifies for PSLF. You are not disqualified for working extra on top of that at a for-profit place.

Since you’re still on IBR and have been working for a while, I assume you don’t qualify for PAYE. You should double check and make sure that doing REPAYE wouldn’t save you money for PSLF.

LS 02.25.17

Hm I’m not sure. But my loans were through Direct Loans which a quick search online seems to disqualify me from PAYE

Ben 02.25.17

DIRECT loans themselves are qualified for IBR, PAYE, and REPAYE. Whether or not you can do PAYE is determined by when you got you loans (not before 2008 with at least one in 2011 or later). However, REPAYE is available to everyone. Not all of this applies to you, but I wrote a bit about REPAYE here.

AC 06.12.18 Reply

Hi Ben, I have heard that most attending jobs in radiology are private practice and it’s hard to find an academic one that would qualify as nonprofit for PSLF purposes. Do you know if this is true? Do you know anything about whether it’s worth pursuing or not for radiology residents? I will save me a lot of money but I don’t know if the difference in pay between academic and private practice (after taxes) will make up for the money saved in PSLF. Thank you!

Ben 06.12.18 Reply

Most people do enter practice, but that’s not the same thing as saying it’s hard to find an academic job. Where people end up is a complicated question, but in general, when the market is good, more people tend to take private practice jobs with better pay and vacation (thus making an academic job easier to get), and when the market is bad, people take what they can get.

For most residents, you don’t have to decide. Just making payments under IDR plan and you can switch later and get aggressive if you end up with nonqualifying work. Your situation may be different, but most residents will earn a REPAYE subsidy during training that will result in a low effective rate, often lower than most private companies even offer. I cover the approach in detail in my book.

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