Cracking the Code: Public Service Loan Forgiveness for New Lawyers

Pursuing a career in law provides ample opportunities to contribute meaningfully to society. For new lawyers, especially those with a passion for public service, navigating the labyrinth of student loans can be daunting. This is where the Public Service Loan Forgiveness (PSLF) program comes into play, offering a beacon of hope for those committed to serving the public good.

What is Public Service Loan Forgiveness?

The PSLF program was established by Congress in 2007 to encourage individuals to enter and continue working full-time in public service jobs. The allure of the PSLF program lies in its promise: after making 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, the remaining balance on your Direct Loans will be forgiven. Unlocking the basics of this program can significantly ease the financial burden for new lawyers dedicated to public service.

Recent Statistics: Starting Salaries in Public Interest Legal Careers

According to recent data from the National Association for Law Placement (NALP), the starting salaries for public interest legal careers can vary based on the type of work. The median entry-level salary for civil legal services lawyers was around $64,200 in 2023, while those starting at other public interest organizations and public defenders were closer to $69,500. These salaries, while trending up, still pale in comparison to the salaries offered in the private sector, making the PSLF program an attractive option for those dedicated to public service.

The Primary Requirements of the PSLF Program

To successfully navigate the PSLF program, it is crucial to understand its core requirements to unlock eligibility:

• Qualifying Employment: You must be employed full-time by a government organization, a not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code, or a private not-for-profit organization that provides certain public services.
• Direct Loans: Only federal Direct Loans qualify for PSLF. If you have other types of federal student loans, you may need to consolidate them through a Direct Consolidation Loan to make them eligible. Just be sure you understand the benefits and drawbacks of consolidation first.
• Qualifying Repayment Plans: You must be on the 10-year standard plan or an income-driven repayment (IDR) plan, such as Income-Based Repayment (IBR), to make qualifying payments. Read more about available IDR plans and updates on the federal injunction blocking implementation of the Saving on a Valuable Education (SAVE) plan and enjoined components of other income-driven plans.
• 120 Qualifying Payments: You must make 120 qualifying monthly payments. These payments do not need to be consecutive, but they must be made while you are employed full-time by a qualifying employer and on a qualifying repayment plan.

The Importance of Annual Certification Forms

Staying on track for PSLF requires diligence and attention to detail. One of the most critical steps in this process is the annual submission of two key forms:

• IDR Certification Form: This form ensures that your IDR plan is based on your current income and family size, which may change from year to year. Failing to submit this form can result in your monthly payment amount increasing, potentially making it more difficult to meet the PSLF requirements.
• PSLF Form: Signed by both you and your employer, submitting this form annually helps you and the Department of Education track your progress towards meeting the 120 qualifying payments.

PSLF in Action

Let’s look at an example of a new law school graduate going to work in public service who has $160,000 in federal student loans at an average interest rate of 6.5%. They choose the IBR Plan, which caps their monthly payments at 10% of their discretionary income. For simplicity, let’s assume their adjusted gross income is the median starting salary mentioned above – $69,500. Running these numbers in the AccessLex Student Loan Calculator, and selecting the results for PSLF, yields the following estimated repayment summary:

$391 - $646
Per Month

Repayment Period
120 Months

Total Interest Paid
$61,176

Total Amount Paid
$61,176

Forgiveness
$202,824

This illustration is for educational purposes only.

To recap: Over 10 years, our new lawyer makes 120 qualifying monthly payments ranging from $391 to $646 per month based on assumed pay raises, while employed full-time by a qualifying public service organization. Over this period, they could pay approximately $61,176 toward their loans (all of which is just going to interest). After consistent adherence to the PSLF requirements – submitting their IDR certification form and PSLF form annually – the remaining $202,824 (the original principal plus all the interest the monthly payments didn’t quite cover) is forgiven, federally tax-free.

Call-to-Action

For new legal professionals committed to public service, understanding and leveraging the PSLF program can be a game-changer. Here are the five steps to crack the code and get started:

1. Assess Your Loans: Ensure that you have Direct Loans or consolidate your federal student loans into a Direct Consolidation Loan if necessary.
2. Select an IDR Plan: Choose an IDR plan that suits your financial situation and submit the IDR certification form annually.
   • Read more about available IDR plans and updates on the federal injunction blocking implementation of the Saving on a Valuable Education (SAVE) Plan and enjoined components of other income-driven plans.
   • For those in the current forbearance waiting for the outcomes of the SAVE Plan injunction, you may be able to switch to another PSLF-eligible plan or “buy back” this time toward PSLF eligibility via a newly launched PSLF buyback program.
3. Verify Your Employment: Complete and submit the PSLF form each year to certify your employment and track your progress.
4. Stay Informed: Keep up-to-date with any changes or updates to the PSLF program and income-driven repayment plans.
5. Make Your Voice Heard: Be sure to write your Members of Congress and let them know how important the PSLF program is to your financial future.

The PSLF program offers a viable pathway for new legal professionals to manage their federal student loans effectively. By understanding the program’s requirements, staying organized with annual certifications, and keeping abreast of updates to repayment plans, new lawyers can unlock the potential of PSLF as a key component of their financial strategy. Embrace the opportunity, stay committed, and crack the code to let your legal career thrive without the weight of student debt holding you back.

For personalized financial coaching and to talk more about your PSLF action plan, schedule free calls with Accredited Financial Counselors through AccessConnex by AccessLex^℠.