6 Reasons Why Loan Forgiveness Is Denied

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By Mark Kantrowitz

June 1, 2020

Public Service Loan Forgiveness (PSLF) is a program that forgives the remaining balance on Direct Federal Loans if you are employed full time by a U.S. federal, state, county, local or tribal government or not-for-profit organization.

A student loan borrower applies for public service loan forgiveness after making payments for 10 years, yet the loan servicer denies their application, saying that none of the payments qualified. Why didn’t the borrower qualify for loan forgiveness?

There are many reasons why a borrower might not qualify for public service loan forgiveness. Here are some of the most common reasons.

Employment Is Not Qualified

Borrowers who work for only a for-profit employer are not eligible for loan forgiveness. Borrowers must work full-time for the federal, state, county or local government or for a 501(c)(3) tax-exempt charitable organization. If a borrower works for a government agency, they must work directly for the government, not through a government contractor.

Loan Payments Are Not Qualified

Payments and employment prior to October 1, 2007 does not count toward loan forgiveness. The forgiveness is not retroactive.

The qualifying payments must have been made at the same time as the borrower was working full-time in a qualifying job.

The loan payments must have been made on time, within 15 days of the due date. Late payments do not count.

Partial payments do not count.

The borrower must not be in default on their federal loans.

Payments made during a deferment or forbearance do not count.

Lump sum payments count as a single payment, with limited exceptions, such as lump sum payments made in connection with AmeriCorps, Peace Corps and the U.S. Armed Forces.

Some Loans Are Not Eligible

The student loans must be in the right loan program.

  • Loans in the Direct Loan program are eligible.
  • Loans in the Federal Family Education Loan Program (FFELP), also known as the guaranteed student loan program, and the Federal Perkins Loan program are not eligible, but they can become eligible by consolidating them into a Federal Direct Consolidation Loan.
  • Private student loans are not eligible.

Consolidating federal loans resets the clock on loan forgiveness.

Repayment Plan Is Not Eligible

To qualify for Public Service Loan Forgiveness, the borrower must be repaying the loans in the right repayment plan, which includes the four income-driven repayment plans and standard repayment.

Temporary Expanded Public Service Loan Forgiveness (TEPSLF) allows the borrower to qualify if their loans were in extended repayment or graduated repayment, but only if the loan payments during the last year were at least as much as they would have been under an income-driven repayment plan.

Parent PLUS loans are eligible for income-contingent repayment if they entered repayment on or after July 1, 2006 and the loans are included in a Federal Direct Consolidation Loan.

Borrower Error in Counting Payments

Many borrowers who have applied for public service loan forgiveness have not made the 120 qualifying loan payments. It takes at least 10 years to make 120 qualifying payments. If you haven’t been in repayment for at least 10 years, it is impossible for you to have made 120 qualifying payments.

Loan Servicer Error in Counting Payments

It is also possible that the loan servicer did not count the number of qualifying payments correctly. There have been cases where the loan servicer counted only about half of the qualifying payments correctly.

If you believe the loan servicer has not counted the number of qualifying payments correctly, you can file an appeal with the loan servicer, FedLoan Servicing (1-855-265-4038), or with the FSA Ombudsman (1-877-557-2575) at the U.S. Department of Education. You can also file a complaint with the U.S. Department of Education’s Feedback Center.

A good place to start:

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