Definition
A federal program that forgives the remaining balance on eligible federal student loans after a borrower makes a required number of qualifying monthly payments, measured in years of full-time work for a qualifying employer, typically a government agency or a nonprofit. Payments count only when made under a qualifying repayment plan, usually an income-driven one, while working for a qualifying employer.
Why it matters
PSLF makes a low income-driven payment a feature rather than a problem: the less you pay along the way, the more is forgiven, and PSLF forgiveness is not taxed as income. It rewards paperwork discipline, since employment must be certified and payments tracked for years.
Example
A public school teacher owes $70,000 and earns $52,000. On an income-driven plan her payment is about $230 a month, which does not even cover the interest. After ten years of certified public-service employment and qualifying payments she has paid about $27,600, and the remaining balance, by then above $70,000, is forgiven with no tax bill.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.