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98% of Public Service Loan Forgiveness applications rejected: What to do with your college debt

98 percent of those who applied for the Public Service Loan Forgiveness program were denied, as of April 2021. Here's what to do with your student loans if your application was denied. (iStock)

The Public Service Loan Forgiveness (PSLF) program was established in 2007 with good intentions: student loan borrowers who become public servants may have a portion of their federal student loans forgiven after 10 years of working full-time and paying off their loans.

In practice, though, student loan forgiveness has only been granted to 2% of PSLF applicants as of April 2021, according to data from the U.S. Department of Education. As a result, millions of teachers, military personnel, nurses, first responders and nonprofit workers are unable to get the student debt relief they were promised.

President Joe Biden's proposed federal budget accounts for making thorough improvements to PSLF. But until tangible progress is made, public servants who were banking on student loan forgiveness must continue repaying their loans or risk losing PSLF eligibility.

Private student loans won't be eligible for the PSLF program so instead, borrowers could consider refinancing their private student loans with Credible at a lower interest rate to save money. Be careful not to refinance your federal student loans, though, as you may no longer qualify for loan forgiveness and would be giving up current federal forbearance opportunities.

Keep reading to learn what you should do with your student loans if you were rejected for PSLF.

  1. Make sure you have the right type of loan
  2. Verify that you work for a qualifying employer
  3. Keep a record of your student loan payments
  4. Consider other student loan assistance programs


1. Make sure you have the right type of loan

The vast majority of rejected PSLF applications were because the applicant did not have the right type of loan. To be eligible for the Public Service Loan Forgiveness program, your student loans must be federal direct loans, including:

  • Direct subsidized and unsubsidized loans
  • Direct PLUS loans
  • Direct consolidation loans

The type of federal loan you have is listed at the top of your monthly bill and within your loan contract. If you don't have access to your statements, you can find out what type of federal loans you have by logging in to the Federal Student Aid website or by calling the Federal Student Aid Information Center at 1-800-433-3243.

Since borrowers with private student loans aren't eligible for forgiveness, they could consider refinancing while interest rates are historically low. Student loan refinancing rates on 10-year fixed-rate loans were as low as 3.57% during the week of July 7, 2021, according to data from Credible.

If you decide to refinance your private student loans, visit an online loan marketplace like Credible to compare rates across multiple lenders.


2. Verify that you work for a qualifying employer

A small portion of Public Service Loan Forgiveness forms was rejected because they didn't meet the employment certification requirements. PSLF applicants must be employed by a federal, state, local or tribal government or an eligible nonprofit organization. This includes military service.

PSLF also requires its applicants to make qualifying payments while working full-time for that organization.

You can search for a qualifying employer using the PSLF Help Tool.


3. Keep a record of your student loan payments

The PSLF program requires that borrowers make 120 qualifying payments while working full-time for a qualifying employer. It's important that you keep your own record of these payments in case you need to dispute the information from the Department of Education.

Federal loan payments are currently suspended during the COVID-19 forbearance period, which ends on Sept. 30. 2021. Although you don't have to make payments, you will receive credit toward PSLF as though you made payments during this time.


4. Consider other student loan assistance programs

Since PSLF has such a high rejection rate, it may be best to seek out other student loan forgiveness programs. These are typically offered based on occupation, so do some research for programs in your field. Here are a few examples:

Want to learn more about your options? Get in touch with an experienced loan officer at Credible to learn more about what to do with your student loans, including refinancing.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.