Over the few past decades, crushing student loans have prevented young Americans from getting married, starting a family, and purchasing houses. Many of them think student loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) are ideal ways to climb back out of debt. However, the answer to the question, “Is PSLF worth it?” is more complicated than a simple yes or a no.
There are many factors to consider regarding this program. This article will help you learn more about such components and ultimately decide if it’s ideal for you.
1. Long Wait
The PSLF is one of the few loan forgiveness options that the government offers federal, state, local, or tribal government and non-profit organization employees. It will take at least ten years of service to qualify for the program.
If this career path lines up with your life goals, then the PSLF is a viable option for you. However, if you have another profession in mind, you’re better off with other student loan payment solutions.
2. Low Approval Rates
Congress developed PSLF in 2007 during the latter years of the Bush administration. It offered a straightforward premise. The government will forgive the loan amount left after 120 monthly payments from employees of qualified organizations — teachers, firefighters, nurses, and public service workers, among others.
PSLF numbers show a shockingly low approval rate of 1%. The top rejection reason is not having enough qualifying payments, but the 99% disapproval rate is still a discouraging figure.
3. Growing Balance
You need to apply for an extended repayment program to qualify for PSLF. Loan extension is not a requirement, but there would be no loan to forgive under the standard ten-year plan. Extending your term to 20 or 25 years would equate to lower monthly payments — a welcome circumstance if you struggle with remittances.
However, the drawback is you end up with debt for an extended period. The more you prolong your payment duration, the more interest you incur.
4. Massive Tax Bill
You can wipe your balance completely when you get loan forgiveness from an income-driven plan, but you still have to think of your tax bill. With such programs, the government treats your forgiven amount as a taxable income that you should pay in full in the same year as the loan forgiveness.
On the plus side, the federal government currently does not tax PSLF. Also, the American Rescue Plan states that loan forgiveness programs until 2025 will be tax-free. However, such conditions might change after the pandemic.
Explore Your Repayment Options Now
Is Public Service Loan Forgiveness worth it? For some individuals, it could be. If you want to serve the government or a non-profit organization and you find yourself struggling with your monthly payments, you should consider this program.
However, the stringent requirements are not beneficial for most borrowers. Don’t let your student loan debt weigh you down, though. There is an ideal repayment option for you.
At Chipper, we’ve helped tens of thousands of members pay off loans four years faster, save an average of $307 on monthly payments, and achieve loan forgiveness. Become a member today to discover the best repayment solutions.