Student and Parent Loans
Public Service Loan Forgiveness (PSLF)
  • Federal law now provides for partial forgiveness of federal loans for borrowers who work in public service employment for ten years after graduation.  While the Department of Education has not yet issued regulations on this provision, the following information reflects Penn’s understanding of how PSLF will work.

  • PSLF applies only to Federal Direct Loans, not to Stafford or GradPLUS Loans borrowed through non-federal lenders (which would be the case for loans borrowed while at Penn).

  • Therefore, if you think you might qualify for PSLF, you may want to consider consolidating your Stafford and Grad PLUS (and, perhaps, your Perkins, Health Professions, and Nursing Student) Loans into a Federal Direct Consolidation Loan after July 1, 2008.  NB: There are some potential disadvantages to consolidation; click here for further information on consolidation.

  • PSLF works in conjunction with Income-Based Repayment (IBR).  Under IBR, you may have your monthly payment capped, based on your income.  Any balance remaining after ten years of repayments based on either IBR or a standard ten-year repayment schedule will be forgiven.  Note that this means you would have a balance subject to forgiveness after ten years only if you qualified for IBR at some point during the ten-year period.

  • While generic IBR forgiveness provisions (after 25 years) apply to borrowers on graduated or extended repayment plans, PSLF requires the borrower to make payments under either a ten-year plan or IBR.

  • To qualify for PSLF at the end of ten years of repayment you must be employed in an eligible public service job for the entire ten years.  (Periods of deferment, e.g. for continued enrollment, do not count toward the ten years.)

  • The PSLF and IBR provisions are effective July 1, 2009.  However, it is our understanding that payments made before then under the existing Income-Contingent Repayment (ICR) provision will be counted toward the ten-year period.  ICR is similar to IBR, but has higher monthly payment caps.

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