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PSLF vs. Refinancing Student Loans

PSLF vs Refinancing Student Loans
Rebecca Safier
Rebecca SafierUpdated July 31, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you borrowed student loans to pay for college or graduate school, you may have options to reduce the amount you need to repay over time. One helpful method is Public Service Loan Forgiveness (PSLF), a government program that forgives federal loans after 10 years of public service. Another option is student loan refinancing, which involves trading in your loans for a new loan, ideally at a better interest rate. Understanding how both student loan PSLF and refinancing work can help you choose the student loan strategy that’s right for you. Here’s what you need to know.

What Is Public Service Loan Forgiveness (PSLF)?

Wondering, what is PSLF? Public Service Loan Forgiveness is a federal student loan forgiveness program designed for those who work in government or public service after college. It will forgive your entire federal student loan balance after 10 years of working full-time (30 hours a week) with a qualifying employer. During this time, you must make 120 full, on-time payments on your student loans. Your loans also typically need to be on an Income-Contingent Repayment. In recent years, there have been a number of reforms aimed at making the PSLF program more accessible. Most recently, in fall 2022, the Biden-Harris administration released new rules expanding the types of payments that qualify for PSLF. Payments made late, in a lump sum, or in installments will count as qualifying. These new regulations will go into effect on July 1, 2023.Because of these changes, it’s wise to read over the details of the student loan PSLF program carefully on the Federal Student Aid website to see if you could meet the criteria. Is PSLF worth it? Although 10 years might feel like a long time, it could be well worth the commitment if you get your remaining student loan balance wiped away. 

Who Qualifies for PSLF?

When it comes to qualifying for student loan PSLF, it matters where you work. To be eligible, you must work at least 30 hours per week for 10 years at a qualifying organization, such as: 
  • Federal, state, local, or tribal government organization, including the U.S. military
  • Not-for-profit 501(c)(3) organization 
Typically, only Direct loans are eligible for PSLF as long as they are not in default and have been put on an income-driven repayment plan. If you have other loan types, such as Federal Family Education Loans (FFEL) or Perkins loans, you can make them eligible through Direct loan consolidation. Be careful, however, because consolidating can reset the clock on your PSLF progress. If you’ve already made a few years of payments and then apply for consolidation, you may have to start back at square one. Because of the ever-evolving rules of this program, it’s a good idea to explore these updates and speak with your loan servicer about your individual situation. 

Applying for PSLF

If you’re interested in receiving loan forgiveness through PSLF, here are the steps you’ll need to take. 

Check Your Qualifications 

Your first step is to research the program’s requirements at studentaid.gov and check your qualifications. Make sure that your organization, student loans, and repayment plan all fit the bill. Remember that private student loans are not eligible for PSLF.

Consider Direct Loan Consolidation 

If you have FFEL or Perkins loans, consider consolidating them into a Direct loan consolidation to make them eligible for PSLF. 

Apply for Income-Driven Repayment 

The traditional requirements for PSLF dictate that you pay your Direct loans off on an income-driven repayment plan. These are: President Joe Biden has announced a new program called the SAVE plan, which could potentially reduce the income-driven repayment to 5% of your monthly income.Some of these plans also come with an interest subsidy, which could ease the burden of interest charges for a few years.

Submit the PSLF Employer Certification Form 

As you’re working toward PSLF, submit the Employer Certification form to your loan servicer on an annual basis. This form can help you make sure you’re on track and working for an eligible employer. If you don’t submit these forms, you may have to track down documentation of all 10 years at once when you apply for PSLF. 

Make On-Time Payments 

Currently, you must make 120 full, on-time payments to qualify for PSLF, so make sure to keep up with your student loan bills. It can help to set your loans on autopay so you never miss a payment. An added perk of autopay is that you’ll score a 0.25% reduction on your interest rate. The new rules mentioned earlier that expand the types of payments that qualify for the PSLF program, including late payments and those made in installments, went into effect on July 1, 2023. 

Work 30 Hours Per Week 

The PSLF program requires that you work full-time at a nonprofit or other qualifying organization, which it defines as 30 hours per week. Your years in service don’t necessarily have to be consecutive. As long as you have a total of 10 years of public service under your belt, you could pursue loan forgiveness.

Submit Your PSLF Application 

Once you’ve hit the 120-payment requirement, you can submit your application for PSLF. In fact, Federal Student Aid recommends filling out and submitting both the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application. You can get started with the PSLF help tool. You’ll need either your most recent W-2 or your employer's Federal Employer Identification Number (EIN).Recommended: Getting Rid of Student Loan Debt: 13 Options

What Is Student Loan Refinancing?

While PSLF can be a great option for borrowers who are committed to careers in public service, it may not be the right move if you have different career plans or want to pay off your student loan debt faster. In that case, an option worth exploring is to refinance your student loans. Refinancing involves trading in your student loans for a new one with revised rates and terms. Student loan refinancing is offered by private lenders, who look at your credit and income when reviewing your application. Borrowers with the best credit scores tend to get the lowest rates. By lowering your interest rate, you could reduce your monthly payment and pay less interest charges over the life of your loan. Lowering your interest rate even a small amount could make a big difference if you have a large loan balance. If you can get a better rate on a private student loan, it’s usually a good idea to refinance it. In fact, you could refinance multiple times if it keeps leading to lower rates. However, you want to be cautious about refinancing your federal student loans with a private lender. When you refinance federal loans, you lose access to federal programs and protections. This means your federal loans would no longer be eligible for PSLF, income-driven repayment, or any other federal offerings. If you’re working toward PSLF, it wouldn’t make sense to refinance your federal student loans. 

PSLF vs Refinancing Student Loans

Student loan PSLF offers full loan forgiveness of your qualifying federal student loans after 10 years of public service. Refinancing, on the other hand, is a much quicker process that you can generally complete in a matter of weeks. By refinancing, you may be able to lower your interest rate and select new repayment terms. Is PSLF worth it? If you’re committed to a career in public service and have a large federal student debt balance, PSLF could be the right choice. You can lower your monthly payments on an income-driven plan and get the rest forgiven after a decade. You might use a PSLF payment calculator to see how much you could save.On the other hand, borrowers who don’t wish to work in public service or want to start paying off student loans faster may find refinancing to be a better strategy. Just remember that refinancing federal loans makes them ineligible for PSLF, and the process is not reversible. You might also consider striking a balance by refinancing your private student loans for better rates while leaving your federal loans as they are. That way, you could reap the benefits of refinancing your private loans while continuing to work toward forgiveness of your federal loans.

Can Refinanced Student Loans Be Forgiven?

Refinanced student loans cannot be forgiven under federal forgiveness programs, such as PSLF. By refinancing your federal student loans with a private lender, such as a bank credit union, you trade them in for a new, private student loan. Private student loans are not eligible for federal forgiveness programs.

Refinance Student Loans With Lantern

If you’re considering refinancing your student loans, Lantern can help you compare student loan refinancing offers from multiple lenders at once. That way you can quickly and conveniently find the best new rates and terms for your situation.

Frequently Asked Questions

Can you refinance student loans in PSLF?
Does PSLF forgive all loans?
Is PSLF worth the risk?
Photo credit: iStock/zimmytws
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About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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