Generally speaking, the earliest the Public Service Loan Forgiveness (PSLF) clock can start is six months after graduation. This puts recent grads, graduate students, and those working full-time during school at a significant disadvantage. Working for the government or another PSLF eligible job alone is not enough. Borrowers must be in repayment on an eligible repayment plan.
The PLSF rules for full-time employees who are also attending school are a bit complicated.
Fortunately, there are a couple of ways to work around the default rules. Using the strategies outlined below, some borrowers may be able to get an early start on their Public Service Loan Forgiveness countdown.
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The Challenge for Employed College Students and Recent Grads
Many people simplify the PSLF requirements to say that student loan forgiveness happens after ten years of government or non-profit work. However, a bit more is required. Borrowers must make 120 certified payments to qualify for PSLF. These payments don’t need to be consecutive, and they can be $0 payments, but the certified payment tally is the critical requirement.
The problem for those working full-time while attending school is that students get an automatic in-school deferment on their federal loans. If the loan is on an in-school deferment, a borrower cannot make certified payments.
Similarly, recent grads are given a six-month “grace period” after leaving school. Here again, the grace period is automatic, and time at a PSLF-eligible employer will not count towards the required ten years.
Fortunately, this is a way to avoid both hurdles.
Declining the Six-Month Grace Period
If you start working a government or non-profit job right after college, the grace period will delay PSLF.
Under the law, there is no mechanism to decline or waive the grace period. However, it is possible to skip the grace period and start the PSLF clock early.
During Federal Direct Consolidation, borrowers have the option to enter repayment on their consolidated loan immediately. Thus, it is possible to consolidate immediately after graduation and start repayment. This move would move up the PSLF clock.
There are a couple of downsides to this approach. First, federal direct consolidation can take several weeks at the minimum. The time during the consolidation process will not count towards PLSF. Secondly, federal direct consolidation isn’t always a good idea. Transforming federal loans into a federal direct consolidation loan has benefits, but it also carries risks. Borrowers should understand the pros and cons of federal consolidation before starting the process.
PSLF for Government Employees in School
Even though the in-school deferment is automatic in most cases, declining is an option for some borrowers.
Suppose a teacher is working on her Master’s Degree while teaching full-time at a PSLF-eligible employer. She could reach out to her loan servicer to decline the in-school deferment for the loans already in repayment.
However, there is a big limitation to this exception. The request would not apply to new loans borrowed during the return to school.
If a graduate student were to use this approach, they would essentially have two “batches” of loans. The undergrad loans would have one tally of certified payments, and the graduate loans would have a separate count. If PSLF were the goal for both the undergrad and graduate loans, it wouldn’t make sense to enter repayment early on the undergrad loans. Because monthly payments are based upon income rather than the loan balance, getting PSLF early on some of your loans doesn’t help much. Instead of making a total of 120 certified payments, a borrower who started early with some of their loans would make a few extra early payments, but a subsequent 120 would still be necessary for the graduate loans. The most efficient route will usually be to make 120 certified payments that count towards all loans.
In other words, if your loans are in two “batches” with different clocks, you will have to make more than 120 certified payments.
The one time this approach could work would be for borrowers who are paying for graduate school without federal loans. If you are paying for school yourself or your employer is paying for school, declining the in-school deferment could be a huge advantage.
Skip the Early Start: Focus on Starting the PSLF Clock On Time
While it is possible to avoid an in-school deferment or a student loan grace period, the advantage is usually minimal.
Borrowers who are focused on earning Public Service Loan Forgiveness will usually be best served by making sure they start on time.
During repayment, many borrowers experience delays that can pause the countdown towards PSLF. For recent grads, a delay getting enrolled in an income-driven repayment plan can be a major issue. Work with your servicer to make sure you are enrolled as quickly as possible. For borrowers in repayment, missing an employment certification deadline can cause you to fall out of your IDR plan.
Another problem happens when borrowers realize their employer wasn’t actually eligible and they have to switch jobs. The PSLF Help Tool is an excellent resource for verifying employment eligibility. Within a month or two of starting repayment, it is a good idea to submit an Employer Certification Form (ECF) to ensure all the requirements are met.
Wanting to get an early start is commendable, but most borrowers should focus on avoiding delays.