If you’re working in the nonprofit or public arts, or plan to be, and you’re carrying Federal student loans, it’s a good time to be sure your record-keeping is in order. As a tag-along to the recent health care reform legislation, the Federal government also enhanced its approach to student loans. As a result, there may be loan forgiveness in your (distant) future.
The Public Service Loan Forgiveness program is intended to provide financial incentive and reward to those who choose and remain in a career in public service. “Public service” is broadly defined in the legislation to include any federal, state, or local government organization or agency and most charitable non-profit organizations (primarily 501c3, but not exclusively). You become eligible for principal and interest forgiveness after 120 on-time monthly payments while working for a qualified organization (the payments don’t have to be sequential).
That means at least 10 years of on-time payments, along with evidence that you worked for a qualified organization at the time (hence the record-keeping recommendation). Plus, the clock starts retroactively on October 1, 2007, so at least a few years of past payments could qualify. There are also specific rules about what types of loans qualify, so you should be sure your ducks are in a row now to be sure you’ll be eligible.
The year 2017, when the first requests can be filed, may seem like a distant future. But if you’re carrying a reasonable amount of Federal student loans and paying only the minimum, it could mean a rather nice gift for those who follow the rules and keep the files. If you’re interested, there’s a handy Q&A document available for download (PDF).