Every borrower considering a student loan forgiveness program needs to know what a public service loan forgiveness calculator is.
It is one of the most useful tools that you have at your disposal to help solve your student loan debt problems.
In 2019, Forbes reported that the student debt crisis in the U.S had reached an all-time high of $1.5 trillion.
Of the nearly 45 million borrowers, according to a report from the Federal Reserve, the average debtor owes between $20,000 to $25,000.
Because of the amount owed, some borrowers have to turn to a debt forgiveness program.
If this is you, here’s how you can calculate how much of your student loan can be forgiven. But before we get into the details of a PSIF calculator, let’s explain how this type of forgiveness program works.
What Public Service Loan Forgiveness Is
Public service loan forgiveness (PSLF) program is a type of student loan forgiveness program that annuls any existing loan debt you have if you meet specific requirements.
The program was first created in 2007 by the U.S. Department of Education as part of the College Cost Reduction and Access Act.
Its primary purpose was to give an incentive to millennial graduates so that they consider branching into the public service.
In public service, salary rates are lower than in most private firms.
However, the logic is that under such a program, the government compensates your salary and time invested in your job by making you eligible for loan forgiveness.
That way, you get to fast track your repayment plan and get rid of your debt.
Let’s take a look at how you can use a PSIF calculator to determine how much you will save in loan forgiveness.
How the Public Service Loan Forgiveness Calculator Works
A public service loan forgiveness calculator will prompt you to enter some information in order for it to generate results.
Ensure that you have this information with you before using it. This includes:
- Federal Student Loan Balance (your Federal Direct Loan)
- Interest Rate (Annual)
- Adjusted Gross Income
- Expected Annual Income Growth (if applicable)
- Number of persons in your household (family size)
- Date loan was taken out (before/after July 2014)
After you’ve entered the data, click ‘Calculate.’
Then, the system will issue you results that tell you how much you’ll be paying within the term of the loan:
- First Payment
- Last Payment
- Total amount to be paid
- Amount forgiven
Granted, you do not need to input truthful data in order to generate results from the calculator.
However, we advise that you use realistic figures.
That way, even if you are using hypothetical data, you will get a sense of how public service loan forgiveness works in real life.
Qualifying for Public Service Loan Forgiveness
In order to qualify for this loan forgiveness program, you need to meet several requirements.
To start with, only loans that are part of the federal Direct Loan Program are eligible for PSLF. Private student loans aren’t eligible.
Here is a breakdown of some of the other requirements:
Employment at a government agency or specific non-profit organization. It’s important to note that your employer is the one who is evaluated and not the job that you do for them.
For example, you could be working as an outreach officer whose role is to establish linkages with charity organizations.
However, if your employer does not fit into the threshold set by the State, you don’t qualify.
These are the types of organizations that meet the government’s criteria:
- Government organizations (federal, state, etc)
- Non-profit organizations that do not pay tax as per Section 501(c)(3) of the International Revenue Code or those which have specific qualifying public services
Full-time employment: Full-time employment counts as either one of the following two scenarios listed below:
- Working 30 hours a week
- You meeting your employer’s definition of full time
Along with the application, you’ll need to submit an employment certification form for your current employer and each employer you had while making the 120 payments.
If you are working more than one qualifying job and the total number of hours adds up to 30 or more, you also meet the requirement.
That said, if you are working for a non-profit organization, the following does not count as hours on employment:
- Religious instruction
- Worship services
- Any other time devoted to religion
Qualifying payments: You must have made at least 120 monthly payments to qualify for the program. Also, you must:
- Be working for a qualifying employer at the time you submit the application for forgiveness
- Still be with a qualifying employer at the time the remaining balance on your direct loans or federal loans are forgiven
Keep in mind that payments don’t count if they’re made while you’re in school, in deferment or forbearance, during a grace period, or if your loans are delinquent or in default.
For more information, please see the list of eligibility requirements by the Federal Student Aid. You can also contact your servicer to verify details about your loan terms.
If you don’t qualify for this student loan repayment option, you should look into income-driven programs. Such as the Income-Based Repayment program (IBR), Income-contingent repayment (ICR), the Revised Pay as You Earn program (REPAYE). These programs might adjust your repayment term and even the loan amount.
The Final Word On Public Service Loan Forgiveness
A public service loan forgiveness calculator is an essential tool.
Not only does it calculate your loan payment schedule under a federal forgiveness program, it lets you plan ahead.