April 16, 2021

Does Refinancing Student Loans Negate Public Service Loan Forgiveness?


One of the biggest things that discourage aspiring graduates from realizing their dreams is student loan debt. In some cases, borrowers spend most of their lives paying their debt off. It’s not that they don’t want to pay or do not have the means to do so, what makes it extra difficult are the outrageous interest rates that come with student loans. In this article, we'll dive into ways to negate those high interest rates, specifically by pursuing public student loan forgiveness or by refinancing student loans.

What Is PSLF?

Public Service Loan Forgiveness is a federal program that aims to forgive student loans after 120 on-time payments. People who work at a government agency or a nonprofit organization are eligible for this program. If you have private loans, they are not eligible for PSLF. ☹️

To qualify for this program, you also need to work full-time (at least 30 hours per week). You’ll have to work in public service for 10 years while paying your student loans. After that, you may apply for PSLF to have your remaining debt forgiven.

What Are the Implications of Choosing This Option?

PSLF is a good option for people who want to pursue a career in public service. However, ten years can be considered too long for the sake of loan forgiveness. This is especially true if you don’t have a definite career path drawn out yet. The time you should have spent planning and building your career path is used instead to pay off student loans. In this case, you may have to consider something else such as choosing to refinance your student loans.

Are There Any Alternatives to PSLF?

Yes, there are alternatives. PSLF is the most widely known federal forgiveness program, but there are other similar options that you may consider.

  • Income-driven repayment plan: This is a good choice for people who have higher student debt amounts in relation to their current income. Being enrolled in an income-driven repayment plan is also a requirement for the PSLF program. Read more about income-driven repayment and the different plans to choose from here.
  • Loan forgiveness for nurses: Nurses have many related programs to choose from. Most of these can forgive up to 85% of unpaid loans.
  • Loan forgiveness for teachers: Teachers who work in Title 1 elementary or secondary schools are eligible for the Teacher Loan Forgiveness program. After five years of complete and consecutive service, teachers can have either $5,000 or $17,500 forgiven depending on the subject and grade level they teach.
  • Private refinancing: For this approach, you have to consolidate most of your loans with the help of a private lender. You can get the payment terms restructured with better terms and lower interest rates. To be eligible to refinance a federal loan, you need to have a stable income source and a good credit score. This may be the best choice for you if you don’t plan on working in public service, especially if taking advantage of income-driven repayment does not benefit you. Going for a student loan refinancing option might be a good idea if you’re also not planning on claiming federal loan benefits anyway.

Consolidating What You Learned

Does refinancing student loans negate Public Service Loan Forgiveness? The answer to this question is: yes. Refinancing federal student loans will negate PSLF! This means that you’re no longer qualified for income-driven repayment plans or federal forgiveness programs. If you’re financially stable and can pay for the loans regularly, refinancing should not be an issue at all.

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