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?
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.
EDIT (06/27/18): Please see our newest post “The Evolving PSLF Employment Certification Form & Independent Contractors.”