501(3) and nonprofit that provides a service to the student are eligible for tax-free relief of student loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program.
Public Service Loan Forgiveness allows federal student loan borrowers to be encouraged to pursue careers that improve society. These include teaching, military, law enforcement, and social work. PSLF promises to tax-free forgiving nonprofit employees who make full-time, 10-year-worth of payments.
The Covid-19 epidemic has led to two important changes to the PSLF Program.
- First, even though your loans remain in forbearance, credit can be given if you work for an employer that is eligible.
- Second, credit was temporarily granted by the U.S. Department of Education for payments made toward FFEL Loans back to 2007.
To find out if your employer is eligible for the program, you can access the PSLF Help Tool via the federal student aid website.
If your job isn’t eligible, read on to learn more about how you can qualify for student loan forgiveness from nonprofit organizations and other options.
Do student loans get forgiven if you work in a nonprofit?
Working for a non-profit doesn’t automatically make your student loans forgiven. After you have made 120 monthly loan payments, you qualify for the Public Service Loan Forgiveness Program. All payments must be made by:
- Qualifying repayment plan — Standard or income-driven repayment plan
- For the total amount due.
- On-time — Within 15 Days of your loan due date
- On or after October 1, 2007.
- While you work full-time as a volunteer for a non-profit employer.
What nonprofits are eligible to receive student loan forgiveness?
Not all nonprofit organizations are eligible for PSLF or other student loan forgiveness programs. Nonprofit employers that are eligible include:
- 501(c)(3) nonprofits.
- Charter schools.
- Nonprofit organizations without 501(c),(3) status (e.g., employer 501(c), 501(c), etc.) that serve a qualifying public purpose are not eligible.
- The religious organizations.
- AmeriCorps / the Peace Corps
- Eligibility requirements for the program apply to all government agencies, whether they are federal, state, or municipal.
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How to apply for nonprofit student loan forgiveness
Two routes can be used to request forgiveness on student loans that are not for profit:
The Public Service Loan Forgiveness Policy
The PSLF Waiver
The PSLF Program was created in the first place and has caused problems for borrowers since its inception. It’s the one under which less than 1% of applicants were granted forgiveness. The PSLF Waiver, a temporary expansion to PSLF. It provides relief Congress was trying to offer borrowers in the Temporary Expanded Public Service Loan Forgiveness Program. The PSLF Waiver is available now through Oct. 31, 2020. You will receive credit towards PSLF for any payments made on federal loans.
PSLF is the same forgiveness option as this limited waiver. The PSLF Waiver is a legislative attempt to fix a broken program and give government and non-profit employees the right to cancel. Both applications are identical.
Step 1, Obtain the correct type of loan.
PSLF is not available to loans that were made under the Direct Loan Program. You can combine federal student loans, such as Perkins Loans and FFEL Loans, into a Direct Loan Consolidation Loan to be eligible for the program. Private student loans cannot be considered.
Parents PLUS Loans, such as Direct Consolidation or Parent Loans, do not qualify for the limited waiver. However, they are PSLF-eligible.
List if loans are eligible for PSLF.
- Direct Loans
- Federal Family Education Loans- Stafford Loans or Parent PLUS Loans for Federal Family Education Loans.
- Perkins Loans can be combined to form a direct loan.
It is not possible to consolidate a joint spousal consolidation loan under the FFEL program into a Direct loan.
Step 2 – Work full time for the right kind of employer
Your eligibility is not affected by your job title or description. It doesn’t matter what job title, description, or role you have with the nonprofit.
Two options are available to determine whether your nonprofit is eligible for funding:
The studentaid.gov PSLF Tool can be used.
Send an employment certification to the contractor in charge of PSLF for the Education Department. FedLoan Servicing. You can submit this form each year with your annual recertification. Or wait until your eligibility for forgiveness to certify that you have employment retroactively.
Full-time work must be at least 30 hours per week. This is possible even if your work hours are split between two nonprofit employers.
Step 3 – Transfer to an IDR plan.
Borrowers who qualify for income-driven payments will be able to save the most by paying all eligible repayments. Even if income is low, it will not affect your ability to pay. You may find your monthly payments to be less if you earn a lot or have Parent Plus Loans.
Step 4 – Pay 10 years’ worth of interest.
You have to make 120 monthly payments in order to be PSLF-eligible. They don’t have to be consecutive. You can put a halt to payments by making a deferment or forbearance. Then you can start again. You can also change your job. Switching from a nonprofit that qualifies to another job is one example. When you start receiving payments or return to a qualifying employer, you will be able to pick up where your previous work was.
Two things to keep in mind
- First, PSLF doesn’t apply to student loan payments that were made while you are employed by a qualified employer.
- Second, after August 2020, lump-sum or early payments prior to your recertification deadline are eligible for forgiveness. This would apply to your 11 next payments, for example, if you had $100 monthly bills and paid $1100.
Step 5 – Apply for the forgiveness of student loan debts
After paying your final amount, you can submit the HTML application. Applying for the PSLF requires that you continue to work full-time with a qualifying employer.
If you don’t have an employment certification form, send it to your current employer. This step is optional if your employment has been with the same nonprofit organization since Oct. 1, 2007.
FedLoan Servicing can notify you when your application is received. You don’t need to pay while your application process is ongoing. All payments above 120 are refunded once eligible loans have been forgiven.
Your nonprofit employer doesn’t qualify for PSLF? You have other options.
If you find out that your employer doesn’t meet PSLF’s strict requirements, don’t be discouraged. There are other options.
- Find out more forgiveness opportunities. The federal government offers many student loan forgiveness programs.
- Keep in an income-driven plan. IBR/ICR/PAYE, PAYE, PAYE, REPAYE, and REPAYE can forgive your balance after 20 years or 25 years, depending upon the plan and whether federal loans were used for graduate school. Right now the forgiven amount does not qualify for tax exemption. That could change in 2026.
- Seek out refinance offers. A student loan refinance can help you save money, get out faster, and lower your interest rate. You should know that federal loans are no longer eligible for federal benefits such as loan forgiveness or income-based payment options.
