The Public Service Loan Forgiveness (PSLF) program was established in 2007 as a way to help struggling graduates who were performing a public service get rid of their student debt. Students apply to the program, work for a qualifying employer, submit the appropriate paperwork, and make 120 on-time payments, after which the government forgives any outstanding debt. Sounds great, right?

Unfortunately, in practice, the program hasn’t been all that successful. We recently took a hard look at the state of student loan debt in this country and highlighted some surprising statistics from the U.S. Government Accountability Office (GAO). These figures suggest that PSLF has only created confusion and stress for most of the over 1.1 million borrowers who have tried to qualify since the program began. As of April 2018, only 55 borrowers have actually received assistance. How did it go so wrong? I’ll tell you the whole sad story.

A man filling out an application form on a sunny desk.

Image source: Getty Images

1,173,420 students requested to certify their loans and employer as eligible

Requesting to certify your loans and employer is a crucial step on the long road toward PSLF. The government won’t just take your word for it, so anyone interested in taking advantage of this opportunity must prove that they are eligible with each employer. It is highly recommended, though not compulsory, that borrowers do this each year -- or when they switch jobs. That way,  they don't have to track down their old employers when they are finally ready to apply. As of April 2018, nearly 1.2 million borrowers have done this.

890,516 had their loans and employer certified as eligible

Nearly 283,000 borrowers were rejected because their loans or employers did not count for PSLF. Only federal Direct Loans qualify for PSLF. If you have other types of federal student loans, like Federal Family Education Loans (FFEL) or Federal Perkins Loans, you can consolidate them into a new federal Direct Loan in order to take advantage of PSLF. Private student loans are never eligible for PSLF.

There is no master list of qualifying employers, but typically you must work for the government or a nonprofit organization during the full 10 years you are making your qualifying payments. Borrowers who didn’t realize they had the wrong type of loan or who didn’t choose their employers carefully will have to go back to the drawing board.

520,267 borrowers made at least one qualifying payment

While over 500,000 of the eligible borrowers pursuing PSLF made at least one qualifying payment, the remaining 370,000 did not. The GAO report states that this was due to these borrowers not being on a qualifying repayment plan, placing their loans in deferment or forbearance, still being in the grace period after graduating, or recently consolidating their loans, among other reasons. Payments more than 15 days late also don’t qualify for PSLF.

The PSLF program requires borrowers to use an income-driven repayment plan. Part of the logic here is that these plans ensure there’s some debt left to forgive. If you stuck with the standard repayment plan, your loan would be paid off in 10 years and there would be nothing left for the government to write off. 

The income-driven repayment rule created a lot of confusion for graduates who otherwise followed all of the rules and only realized they didn’t qualify for PSLF when they submitted their application and were told none of their payments qualified. Due to this misunderstanding, the government enacted Temporary Expanded PSLF (TEPSLF). This is available to graduates who would have otherwise qualified for PSLF except they chose the wrong repayment plan. The government has set aside $350 million for this purpose, but it’s first come, first served and when the money’s gone, that’s it.

19,321 submitted a PSLF application

September 2017 -- 10 years after the introduction of PSLF -- was the first month that borrowers were eligible to submit a PSLF application. As of April 2018, over 19,000 borrowers had done so. What happened to the other 501,000 who were pursuing PSLF? 

Undoubtedly, many of them were unable to make 120 qualifying, on-time payments, but others simply might not be at 120 qualifying payments yet. Those who began pursuing PSLF months or years after the program’s inception would count in the above figures but would not have submitted a PSLF application simply because they don’t have enough qualifying payments at this time. 

8,458 had qualifying employment and loans

Of the over 19,000 applicants that submitted a PSLF application between September 2017 and April 2018, only 8,458 had qualifying employment and student loans. Another 2,431 were still being processed at the time that this data came out and may or may not have been approved.

The remainder didn’t qualify because they forgot to certify their loans and employers or they didn’t know they had to. Failing to submit an Employer Certification form annually, choosing the wrong repayment plan, or leaving a qualifying employer for a non-qualifying employer without checking with a loan servicer could also have contributed to so many rejected applicants. 

184 recorded 120 qualifying payments

Nearly 8,300 PSLF applicants with qualifying loans and employers didn’t have the required 120 qualifying, on-time payments and so were not able to get PSLF at that time. Less than 1% of all who have pursued PSLF have made it this far. As of April 2018, only 55 of these borrowers had actually received loan forgiveness, while the remaining 129 were still waiting for the government to process their applications. They have likely been approved since then.

How to join the ranks of the 55 PSLF recipients

Obtaining PSLF isn’t easy, even when you do understand the rules. But the problem that has plagued over 1 million would-be recipients to date is confusion about how the program operates. If you’re a new college graduate trying to beat the odds, make sure you understand exactly what you’re supposed to do. Ask your student loan servicer about anything you don’t understand and don’t forget to submit your paperwork annually. If you switch employers, verify that your new employer qualifies for PSLF before making the move. It is a lot of hoops to jump through, but it’s worth it in the end.