If you’re a federal student loan borrower and you work in the public sector, you have likely heard of or are enrolled in the Public Service Loan Forgiveness (PSLF) program. This program is designed to encourage work within the public sector – public education, military, law enforcement, etc. – by offering loan forgiveness to eligible borrowers. Once borrowers have met the program requirements, they can be rewarded by having their remaining loan balance forgiven.

In addition to PSLF, the federal government also offers other loan payment programs to all borrowers –public sector employees or otherwise – including Direct Loan Consolidation, which essentially rolls multiple loans into a single loan. Aside from simplifying payment, Direct Loan Consolidation often signals an opportunity to avoid default, lower payments, or take advantage of multiple repayment plans offered by the federal government.

Despite the harsh reality of student debt, both of these plans can offer borrowers an opportunity to work toward a loan-free life. But if given the opportunity, should borrowers double down and take advantage of both?

How Public Service Loan Forgiveness Works

PSLF allows borrowers with eligible employment the opportunity to make regular payments in exchange for loan forgiveness. Typically, loan forgiveness is available in as few as 10 years, though it depends on how many qualifying payments the borrower makes.

PSLF is only available to student borrowers with direct student loans. If you do have direct loans, eligible borrowers must also meet the following requirements:

  • Be employed in a qualifying organization, which includes government organizations, 501(c)(3) organizations, and other not-for-profit companies that have a primary purpose of providing public services. Additionally, those who are full-time volunteers with the AmeriCorps or Peace Corps may also qualify for PSLF.
  • Make 120 qualifying monthly payments. Qualifying payments are those that are for the full amount due for the payment cycle, made timely (within 15 days of the due date), and made under a qualifying repayment plan. Additionally, only payments made while employed by a qualifying employer will be considered as qualifying.
  • It’s important to note that 120 qualifying payments need not be consecutive payments and may not be made while you are in “in-school” status or paying during a grace period, deferment, or forbearance.
  • All applicants must submit a completed Employment Certification for Public Service Loan Forgiveness for every year or whenever your employment status changes. Once submitted and reviewed, the government will inform you if they need additional information; how many, if any, payments were qualifying; how many total qualifying payments you have; and how many additional payments you must make before your loans are forgiven.

Assuming you’ve reached the required 120 qualified payments, the next step is to submit a PSLF application. Additionally, in order to receive PSLF, you must be working for a qualifying employer at the time your application is submitted.

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To find out more about PSLF, including qualifying employment, visit StudentAid.ed.gov.

The Pros and Cons of Direct Loan Consolidation

Direct Loan Consolidation can provide borrowers with a variety of benefits. Multiple loan payments will be lumped into a single loan by a single institution, and in many cases, you can lower your monthly payment by increasing your repayment terms (e.g., from 10 years to 30). By consolidating federal loans, you may also become or remain eligible for government programs including income-based repayment (IBR), forbearance, and PSLF.

However, some borrowers may find that Direct Loan Consolidation can have an adverse effect, as longer payments can lead to more interest accrued over time, and since the interest rate associated with a Direct Loan Consolidation is a weighted average plus a small percentage, some find that consolidation efforts can be negated when lower interest rates on some loans are averaged in with higher interest rates. Additionally, some consolidation can also have a negative impact on repayment plans if you’re working toward a set number of payments to seek forgiveness, which we’ll discuss next.

How Consolidating Your Loans Can Impact Public Service Loan Forgiveness

How do the two programs work together? Borrowers who consolidate their federal loans will still have access to PSLF, which means they can take advantage of some consolidation perks while engaging in PSLF.

However, loan consolidation will reset the clock, so to speak, and any qualifying payments made prior to the consolidation will be erased. For borrowers just entering PSLF or those who have not made a significant number of qualifying payments, that might not be a deal-breaker. However, if you’re well into your PSLF payment history, Direct Loan Consolidation would have an adverse effect on your chances at timely loan forgiveness.

Can You Lower Your Payments Without Consolidating?

Are you considering Direct Loan Consolidation because you want to make your loan payments more manageable but you don’t want to consolidate? Here are some additional options available to you:

  • Enroll in an income-driven repayment plan such as the Income-Based Repayment (IBR) or Pay As You Earn Repayment (PAYE) plans.
  • If you don’t want to change your plan but need some room to breathe, consider using a deferment or forbearance, which can temporarily pause or lower your monthly payments.
  • If you can secure a lower rate in the private sector, it might make sense to refinance your student loans; however, keep in mind that while this may lower your payment, it will remove any possibilities for PSLF.
The federal government offers a host of programs to borrowers in need, and PSLF and Direct Loan Consolidation represent two of those options. However, if you’re currently enrolled in PSLF and are considering a federal loan consolidation, be sure to weigh the pros and cons before resetting the payment tally.