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A 1099 versus W-2 to qualify for PSLF

Started by TwoKiwis, September 11, 2016, 06:16:37 pm

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In my state (New Jersey), most mental health agencies are going to per diem and contract position and workers get paid on a 1099. The PSLF program requires being paid on a W-2. After 4 years I still cannot find a nonprofit where I can get the W-2. 
Another issue is that most hospitals, clinics, etc. are now privately or corporate owned so they no longer qualify for the program because they are no longer non-profits because large healthcare systems are buying up the hospitals.

I have a PHD in psychology and I do contract (case by case) work for the court system helping an underserved population due to low income, mental health issues. My work is to help children and families. Most non profits consider me overqualified which is what I hear at every job fair, etc. Honestly, I have diligently tried to find something for 4 years now. I even started taking my PHD off my resume and I started applying for reception positions. My loan is now $350,000 and I am on the IBR plan but I am trying to cut the loan from 25 years to 10. Any ideas how to get around the W-2 issue? The work I do is absolutely public service and needed in my community. Can I form my own non-profit organization and draw a W-2 from there? It seems as though my profession is being prejudiced from this program and it seems unfair.
I need help and guidance. Thank you.


You are correct, you must be an employee of the non profit to qualify, not a contract worker. A 1099 means you're not an employee, but an independent contractor, and you treat your employment for taxes as if you're self employed.

It doesn't just happen in medicine, it happens in the science and education fields as well.

As of right now, there is no option for you, except to see if you can get employment, not just contract work. You are doing the right thing with IBR, and understand your want to get that debt gone as fast as possible.


Hello, Thank you for your response. One option may be to have my spouse create a nonprofit and work for that agency and draw a W-2. The work I do is community work for the underserved. Could that work? There does not seem to be anything in the application or certification form that says it would not be OK. It seems like they just want you to do community work. Especially since they do not care what industry you work in, just that it is nonprofit. 
Thank you.


That won't work because the non-profit you create is actually a for-profit contractor. You'd have a hard time certifying that you're a 503c.