The Forgiveness Gauntlet
PSLF is not automatic. It is a strict bureaucratic process with a historical rejection rate of 98% (before recent fixes). Success requires Obsessive Record Keeping.
The "Three Pillars" of Eligibility
1. Employer
Must be Gov (Fed/State/Local) or 501(c)(3) Non-Profit. Private contractors don't count.
2. Loan Type
Must be "Direct". FFEL or Perkins loans must be consolidated into a Direct Consolidation Loan.
3. Plan
Must be an IDR plan (SAVE, PAYE, IBR). Standard repayment won't leave a balance to forgive.
Sarah had 4 years of qualifying payments (48 credits) on her undergrad loans. She went back
for her Master's and then consolidated ALL loans together.
Old Rule: She would lose all 48 credits and start at 0.
New Rule (IDR Adjustment): She gets a weighted average count,
preserving much of her progress. Understanding this rule saved her ~$20,000.
PSLF FAQ
Yes! The $0 payments during the COVID-19 pause (March 2020 - Sept 2023) count as progress toward the 120 total, assuming you were employed by a qualifying employer.
No. Unlike IDR forgiveness (which can be taxable), PSLF is completely tax-free under federal law (internal revenue code 108(f)(1)). Note: Mississippi is the only state that currently taxes it.