Busting Myths: PSLF and Independent Contractors

Independent Contractors May Qualify for PSLF

In the most recent December 2015 update to the PSLF Employment Certification Form, we discovered that the Department of Education has clarified the Employment Eligibility section for independent contractors.

We spoke to our student loan attorney and FedLoan Servicing (the official loan servicer for PSLF) and we discovered that…

Multiple sources from other internet student loan sources were WRONG when they claimed independent contractors couldn’t qualify for PSLF.

Turns out, you can be an independent contractor and qualify for PSLF under certain circumstances. It all depends on the organization that hires and pays you.

Under page 5 of the PSLF Employment Certification Form, it states:

“If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work.”


Our Phone Call to FedLoan Servicing for Confirmation

We called FedLoan Servicing and this is what happened:

Q1: I’m just wondering what this means, I’m looking at the Employment Certification Form and it says on page 5: “If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work.” Can you tell me what that means?

A1: With contract employees, the company that’s paying them has to be the nonprofit employer, not the site that they’re going to work.


Q2: If I were an independent contractor and I was hired and paid by a nonprofit as an independent contractor, am I a contracted employee for PSLF?

A2: You are a contracted employee, however, because the nonprofit organization is the one that would be paying you, it would qualify for the PSLF.


Q3: So when they talk about the organization where you perform the work, what are they talking about with that, if I’m an independent contractor?

A3: That’s where you go to actually do your job


Q4: So that’s not the non-profit?

A4: No, it is not. There is 2 different places your employment would qualify for PSLF, especially if you’re a contractor. If you’re a contractor, it would be by your current income and if you’re working with a qualifying employer, like the state/federal/local government. If you were not self-employed or you were contracted out to a specific spot and that spot is paying you, then that spot has to be a nonprofit.


Q5: Can we go through an example? So if you’re a designer, that’s where you’re performing your work, at the design company, but you as an independent contractor with your own design company, you are hired by a nonprofit and that nonprofit pays you as a designer? That’s okay?

A5: That’s perfectly fine.


Q6: There’s conflicting information on the internet where they say that anytime you’re a contractor, that doesn’t qualify.

A6: With contractors, it all depends on where you’re working, not necessarily what you’re doing.


Q7: So it just matters who hired you and who paid you?

A7: Correct.


Q8: A lot of websites are saying that you just can’t be an independent contractor, which I guess is false?

A8: That all depends on the contract itself.


What’s the Cause for Confusion?

Our student loan attorney also confirmed that the law for PSLF, PSLF Q&A’s, PSLF Facts all support the fact that independent contractors may qualify for PSLF if the independent contractor was hired and paid by a qualifying organization such as a 501c3 organization. The attorney suggested that perhaps the confusion stemmed from the old version of the PSLF Q&A, February 3, 2010 PSLF Q&A’s:

“Q30: I am employed full-time by a private company, doing work under contract with a state government agency. Does this employment qualify for PSLF?

A30: No. You must be directly employed by the public service organization.”

In Q&A30, it appears the answer is based on the assumption that the student was paid and hired by the “private company,” not the state government agency. However, this answer may have been misconstrued by the other student loan websites because it almost sounds like you can’t be an independent contractor.

The independent contractor for PSLF is allowed under the PSLF law:

Full-time (1) means working in qualifying employment in one or more jobs for the greater of—
(i) (A) An annual average of at least 30 hours per week, or
(B) For a contractual or employment period of at least 8 months, an average of 30 hours per week; or
(ii) Unless the qualifying employment is with two or more employers, the number of hours the employer considers full-time.
(2) Vacation or leave time provided by the employer or leave taken for a condition that is a qualifying reason for leave under the Family and Medical Leave Act of 1993,29 U.S.C. 2612(a)(1) and (3) is not considered in determining the average hours worked on an annual or contract basis.

The independent contractor for PSLF is allowed under the December 2015 PSLF Q&A’s (keep in mind the teacher example is just an example and per our conversation with FedLoan Servicing and our student loan attorney, independent contractors may qualify for PSLF; it all depends on what organization (must be PSLF qualifying organization) hired you and paid you):

Q32: I am a teacher who does not teach over the summer break. If I make payments during the summer, do those payments count toward PSLF?

A32: Payments you make during the summer will count if you have a contract for an employment period of at least eight months and you work an average of 30 hours per week during that period, and if your employer still considers you to be employed full-time during the summer break. Of course, the payments must otherwise meet all PSLF requirements. In this circumstance, your employer should include the dates of the summer break when reporting your dates of employment on the PSLF Employment Certification Form, even though you are not actually teaching during that period.


Want to know if your independent contractor job qualifies for PSLF? Apply for PSLF at the FedLoan Servicing Website.

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  • Nora Kristine Marks

    Unfortunately, there are some other details that will make this helpful to only those who are directly paid by the government or non profit and who are not PLLC’s or LLC’s. If you are in business for yourself and you have federal or state contracts, AND you are an PLLC and pay yourself from your company for tax purposes, you do not qualify unless your company itself is a nonprofit. So you have the choice at being taxed at the full 33% in federal income tax and your payroll taxes (14%) and dropping your LLC or PLLC status or keeping your PLLC or LLC status and foregoing loan forgiveness. If anyone hears differently on this I’ll be happy to know.

    • http://www.holdfasttodreams.org askhftd

      Right, to qualify for PSLF, you need a PSLF-qualifying employer to be hiring and paying you.

      The PSLF Certification Form states: “If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work.”

      So, is there any way you can get a PSLF-qualifying employer, such as a 501c3 nonprofit to pay you? This might be a possibility: government pays PLLC, PLLC pays nonprofit, nonprofit pays employee/independent contractor (you). You’d need to look into whether you can start a nonprofit with requisite purposes for that.

      The PSLF rules are simultaneously broad and restrictive. To qualify, you need to fit right within the PSLF rules.

      Good luck!!

      • George J Williams

        Just contacted FedLoan and they said my work as an independent contractor for a non profit does not count. Very confusing. In fact, my contract states that I am independent contractor, but I work much like an employee: come to the office daily and have an office and a computer, report to manager, no flexibility in terms of work schedule, only benefit received is healthcare. Do I have any options?

        • http://www.holdfasttodreams.org askhftd

          According to the new October 2017 version of the Employment Certification Form (https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf), page 5:

          “To qualify for PSLF, you must be an employee of a
          qualifying employer. An employee is someone who is hired
          and paid by the employer. You may physically perform your
          work at a qualifying or non-qualifying organization, as long
          as you are an employee of a qualifying employer. If you are
          working at the location of or with an organization under
          contract with your employer, the organization that hired
          and pays you must be a qualifying employer, not the
          organization where you perform your work.”

          From the above, you’ll see the Dept of Education/PSLF program has its own definition of “employee.”

          If you want to check if your employment qualifies for PSLF, you should fill out the Employment Certification Form and submit it to FedLoan Servicing.

          Hope this helps!

  • Jennifer M

    So this holds true as a temporary worker? I work at/for the government, but was hired through a temp agency (because that’s how the government hires contingent workers). The expectation is that I’ll be hired on permanently once a position opens up. But in the year I’ve been wirking as a “temp” worker, that time doesn’t count?

    • http://www.holdfasttodreams.org askhftd

      Unfortunately, it looks like it all depends on the organization that’s hiring and paying you.

      Under page 5 of the PSLF Employment Certification Form, it states:

      “If you are a contracted employee, the organization that hired and pays you must qualify, not the organization where you perform your work.”

      Is there any chance the temp agency is also a PSLF-qualifying organization? If not, then you could qualify for PSLF once the government hires and pays you.

      You may contact FedLoan Servicing and take a look at their Employment Certification Form for more info.

  • Michael Terry

    I saw an email about this program in my inbox last July. My question is, if I am employed by a defense contractor that also does various contracts for government entities like HHS and CMS, does that qualify or is a defense contractor’s status as a for profit exclude them? The confusion is that we fall under GSA (Government Services Act) for employment criteria and the DOL sets our pay rate per GSA.

    • http://www.holdfasttodreams.org askhftd

      So then you wouldn’t be hired and paid by the government, but rather a private, for profit defense contractor? That sounds like you may fall under Q35 of the PSLF Q&A’s (see page 9 of https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pdf):

      Q35; I’m employed full-time by a company that is doing work for a qualifying PSLF employer under a contract. However, the company that I work for is not a qualifying PSLF employer. Does this employment qualify for PSLF?

      A35: No. You must be employed full-time by a qualifying employer.

      The Q27 of the PSLF Q&A’s (see page 7 of above link) goes into more detail about government employers:

      Q27: What counts as a government employer for the PSLF Program?

      A27: In addition to any federal, state, local, or tribal government agency, eligible government employers for the PSLF Program include the U.S. military, public elementary and secondary schools, public colleges and
      universities, public child and family service agencies, and special governmental districts (including entities such as public transportation, water, bridge district, or housing authorities).

      View a listing of most government agencies and departments at USA.gov.

      Note: Service as an elected member of the U.S. Congress is not qualifying employment for PSLF.

      You may contact FedLoan Servicing and take a look at their Employment Certification Form for more info.

      Good luck!

  • Sara Z

    I’m looking at expanding my contracted work, but it would mostly be short/small contracts. Would I need to list each of those as a separate “employer” on my taxes (rather than reporting all the income together as my independent income) and file a separate PSLF certification for each in order for those to qualify? Pretty much all of my contracts would be with nonprofits and government. Thanks for your help!

    • http://www.holdfasttodreams.org askhftd

      Yes, each employer requires a separate PSLF Employment Certification Form (ECF). If you look at the ECF (https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf), there’s only room for a single employer’s info. It’s recommended that you submit the ECF periodically, at least annually and before you switch to a new employer.

      Also, you mentioned government contracts, please review the following (https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service):

      Government contractors: For-profit government contractors are not qualifying employers. You must be directly employed by a qualifying employer for your employment to count toward PSLF. If you are employed by an organization that is doing work under a contract with a government agency or other organization, then it is your employer’s status, not the status of the organization that your employer has a contract with, that determines whether your employment qualifies for PSLF.

      As for the taxes, usually each employer should have a separate 1099-misc, schedule c, etc., but you should check with your accountant about your specific situation.