Why You Shouldn’t Bank on Student Loan Forgiveness

2 min read

Posted on July 21, 2021

Young woman with her arms crossed wondering about student loan forgiveness

The Public Service Loan Forgiveness (PSLF) program looks enticing on the surface. But like many things that seem to be too good to be true, there’s a catch. To better understand if this is the right path for you, let’s take a quick look at the eligibility requirements and some of the pros and cons of the plan.

PSLF was originally passed in 2007 as part of the College Cost Reduction and Access Act and makes it possible – provided you meet certain requirements – to make loan repayments for just 10 years with the remainder of the interest and principal written off.

The idea of having your loans forgiven after 10 years may be very appealing to medical professionals, teachers, social workers, businesspeople and those in the non-profit sector. But before you make a very serious decision about your future, it’s important to understand the requirements and some of the tradeoffs you must make when you choose this option.

Eligibility Requirements for PSLF

Before you pursue this repayment course of action, be mindful of the fact that there are several requirements that borrowers need to satisfy to be eligible:

  • Qualifying Employment: You must work in “public service.” This is defined as working for a governmental organization, not-for-profit organization that is tax-exempt, or a not-for-profit organization that provides a specific public service (ex: public health).
  • Qualifying Employment Status: You must be a full-time employee of the organization.
  • Have a Qualifying Loan: This means a Direct Loan. If you have other federal student loans you can consolidate them into a Direct Consolidation Loan.
  • Qualifying Repayment Plan: All the government’s income-driven repayment plans are qualifying plans.
  • Make 120 Qualifying Payments: This means you make all your monthly payments reliably, on-time, for 10 years.

An Important Career Choice

To qualify for PSLF, you must work for a qualifying employer. While this seems like a fairly simple requirement, bear in mind that you are ultimately making a career decision when you pursue this path. By making the choice to work in public service, you are eliminating the option of starting your own private practice, launching a business or working for a more lucrative private company.

Not only is it possible to make more money in the private sector, but some professionals prefer running their own business as an overall career choice.

Letting the promise of student loan forgiveness shape your career may ultimately lead you down a path that isn’t right for you. That being said, for teachers, physicians interested in public health and those set on working for a non-profit charity, PSLF can be a great option. Just take the time to think about your goals before you make this important decision.

It’s an Incentive, Not a Solution

PSLF and other forms of loan forgiveness tied to income-based repayment plans are designed to be incentives, not solutions. Having a portion of your debt forgiven may make a substantial dent in your overall debt burden, but make sure that you’re committed to serving in the public sector.

You should approach this program with caution. Take a minute to review the eligibility requirements and see how they match up against your career goals. Arming yourself with knowledge about the pros and cons of PSLF will ultimately help you make the right decision.


The information provided in this blog post is not intended to provide legal, financial or tax advice. We recommend consulting with a financial adviser before making a major financial decision.

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