Achieving and maintaining eligibility for the Public Service Loan Discount (PSLF) can be like a circus act.

After jumping through the hoops to get an eligible job and a repayment plan, you have to walk a tightrope of strict eligibility requirements and confusing fine print. If all goes well, your loans will eventually get canceled, assuming you don’t slip and fall into ineligibility along the way.

Wouldn’t it be nice if even part of this process could be a little easier? This is the idea behind creating your own non-profit organization to meet the PSLF eligibility criteria. Theoretically, this would allow you to find a job eligible for the PSLF on your own terms.

It is possible to get forgiveness if you start your own non-profit organization, as long as you make money from it, which can be difficult to do without a lot of experience. Here is what you need to know.

Basic PSLF Requirements

AT qualify for the PSLF, you must work at least 30 hours per week for an eligible organization. This can include one full-time job or two part-time jobs that add up to the required hours. You must also make 120 qualifying monthly payments while working for an qualifying organization.

Borrowers do not have to work for the same organization while making their qualifying payments or manage the same non-profit organization during this time. The 120 payments also do not have to be consecutive. If you spend three years running your own nonprofit, work for a private company for two years, and then join the nonprofit space, you may still be eligible for the PSLF.

Borrowers should complete the Annual Employer Certification Form and submit it to your student loan manager once a year. The duty officer will confirm if the job qualifies for the PSLF. Once you have confirmed 120 qualifying payments, you can file a formal request for forgiveness.

Types of loans and eligible repayment plans

Private student loans are not eligible for the PSLF. Your federal student loans must be part of the direct loan program to be eligible, including:

If you have Perkins Loans or Federal Family Education Loans (FFELs), you will need to consolidate them to be eligible.

You must also be registered in a income-based repayment plan (IDR) to be eligible for the PSLF, in particular:

However, if you’ve made payments using the wrong type of loan or the wrong repayment plan, all is not lost. The Ministry of Education temporary changes announced that allow borrowers to count many of these payments. As long as you were working for a PSLF-eligible employer, any payments made during that period can count toward the 120 payments needed to obtain a pardon.

To ensure all your payments are accounted for, some borrowers may need to submit a PSLF form by October 31, 2022. Borrowers with non-qualifying loans may also need to consolidate their debt by the same date. You can find full details of the actions you need to take on the Federal student aid website.

Can you qualify for PSLF if you start an association?

You may be eligible for the PSLF if you start your own nonprofit, says Mark Kantrowitz, an expert in student loans and financial aid. The nonprofit organization should be designated as 501 (c) (3), a company that provides qualifying services to the public or a private organization that provides public interest law.

The tricky part behind this requirement is that you have to actually make money from the nonprofit organization. If you are starting a non-profit organization and have another full-time job, you will not be able to prove that you are working full-time in your non-profit organization. This will disqualify you from the PSLF.

Creating an association can also be complicated. If you want to make it a full time job, you need to fundraise or apply for grants to receive funding. You may find this difficult to do unless you have experience working for a nonprofit organization.

Certain businesses that may appear to be ineligible for the PSLF are eligible. For example, if you start your own daycare business, it may be considered an eligible organization.

Once you have established your nonprofit organization, you will need to submit an employer certification form to the government. Normally, the government would contact your employer to verify that you are working there. You might run into problems if you are the only full-time employee.

Parents who have taken out a PLUS parent loan are also eligible for the PSLF. Parents will need to consolidate their loans into a direct consolidation loan to be eligible. Like other borrowers, they still have to meet the employer’s requirements. However, if they also run their own nonprofit organization and make 120 qualifying payments, they might be eligible for a loan discount.

How to start a nonprofit organization

Starting and running a non-profit organization can be more difficult than starting a regular business because you need to prove that you are providing a public service to be eligible for the tax exemption.

To be considered a non-profit organization, your organization is limited in the type of work it can do. You will need to choose a mission that matches the IRS definition of a 501 (c) (3). You will also need to complete certain forms in order to obtain federal and state tax exemption from the IRS, which allows you to avoid paying taxes.

Then you need to choose a board of directors made up of people who will support the association. This is a legal requirement, not a suggestion. You will also need to decide if your organization will be classified as a association, trust or company. Once you have chosen, you will need to file articles of incorporation in your state.

You may need to apply for the relevant permits and licenses, depending on the type of work you do and the requirements in your state. Doing all of this can take several months to a year, after which you will need to raise funds to support your salary and the mission.

Other options

If the idea of ​​starting a nonprofit seems too daunting, you might be better off finding employment with an existing 501 (c) (3), government agency, or other qualifying organization.

Here are some common employers eligible for the PSLF:

• Public health organizations
• Primary and secondary schools
• Colleges and Universities
• Military
• Law enforcement
• Early childhood education
• Public library

If you’re struggling to start a non-profit organization but still want to be your own boss, you can start your own for-profit business instead. This will not help you become eligible for the PSLF, but it will allow you to dictate the terms of your own career. If the desire for a more independent career has led you to consider starting a nonprofit organization, the PSLF path may not be the best fit for your goals and personality.

If you choose to start your own business or freelance, you can still use IDR plans. These offer a loan forgiveness after 20 or 25 years of payments. You will usually have to pay tax on the amount handed over, but you could still end up saving money in the long run.