The Education Department has transformed Public Service Loan Forgiveness, making it easier for borrowers to qualify for relief.
Since taking office, the Biden administration has made piecemeal fixes that have overhauled the Public Service Loan Forgiveness (PSLF) Program. The changes, which address longstanding administrative failures by the U.S. Department of Education's loan servicers, have led to over 113 thousand public servants receiving $6.8 billion in loan cancellation through PSLF, according to the department. That number will only increase as FedLoan Servicing and its successor, MOHELA, process more applications under the changes.
Keep reading to learn more about changes to the PSLF Program.
KEY PSLF CHANGES
- The limited PSLF waiver opens the forgiveness program to more public service workers, including those with the wrong type of loans.
- Over 3.6 million borrowers will get at least three years of credit toward income-driven repayment forgiveness.
- 40 thousand public servants will be immediately eligible for debt cancellation after getting retroactive credit for periods where their loans were wrongfully placed in extended forbearances.
- Several thousand people who've paid their loans for at least 20 years will have their debt written off through income-driven repayment forgiveness.
- Borrowers with commercially held FFEL loans need to consolidate to benefit from the waivers.
PSLF Temporary Waiver
Created by Congress in 2007, the Public Service Loan Forgiveness Program allows borrowers with high student loan balances relative to their income to have their debt wiped out if they work in government or nonprofit jobs for 10 years.
The tax-free federal student loan forgiveness incentive attracted thousands of borrowers to vital but low-paying public service work. But a decade later, the department reneged on its promise. Over 98 percent of public servicer workers who applied were rejected because of complex rules and shoddy administration by student loan servicers.
Last October, the Education Department used powers it gained during the coronavirus pandemic* to make good on its word. It took a chainsaw to the PSLF Program and temporarily cleared the path toward forgiveness for teachers, nurses, military service members, federal employees, nonprofit workers, and so on.
Under the Limited PSLF Waiver, borrowers who've worked for qualifying employers anytime on or after October 2007 will get credit for payments made toward:
- government-backed, Federal Family Education Loans
- late payments
- past payments made on non-qualifying repayment plans
- payments for less than the amount due
The department also will automate eligibility for federal employees next year and give active-duty military service members PSLF credit for periods they put their loans on forbearance while deployed.
The temporary waiver ends on October 31, 2022.
Not sure if your employer qualifies? Use the PSLF Help Tool on studentaid.gov to check your employer's eligibility using the EIN from your W2.
* The Education Department's authority to temporarily soften the eligibility requirements for PSLF comes from the HEROES Act.
MOHELA will take over PSLF from FedLoan
The Education Department will transfer all borrowers with complete PSLF forms from FedLoan or their current servicer to MOHELA. Once transferred, borrowers will be able to work with MOHELA to monitor their progress towards PSLF.
Learn More: MOHELA Student Loan Forgiveness
IDR Waiver & Adjustment
Last month, the Education Department said it would use a one-time waiver to adjust payment counts for student loan borrowers pursuing loan forgiveness.
The credits will benefit public service workers and borrowers looking to have their loans erased under the PSLF Program and through an income-driven repayment plan. The department will give borrowers credit for:
- monthly payments made under any plan.
- time spent on deferment before 2013 (in-school deferment doesn't qualify).
- forbearances of over 12 straight months.
- 36 cumulative months of forbearance.
Full-time employees of government agencies and non-profit organizations will get credit toward the 120 qualifying payments needed for PSLF forgiveness for eligible forbearance periods.
These changes will be applied automatically by the end of the year unless you have commercially held FFEL Loans. If you do, you can benefit from the IDR Waiver only if you consolidate the loans into a Direct Consolidation Loan before the department implements the changes, which won't be until January 1, 2023.
You can consolidate your loans on the Federal Student Aid website, studentaid.gov.
Learn More: What is IDR Forgiveness?
"Student loans were never meant to be a life sentence, but it's certainly felt that way for borrowers locked out of debt relief they're eligible for," said U.S. Secretary of Education Miguel Cardona.
TEPSLF still exists
The Temporary Expanded PSLF Program still exists, but the fixes the government introduced with the temporary PSLF rendered the program moot.
TEPSLF helped borrowers who paid under the wrong repayment plan get rid of their student debt by giving them credit towards the public service program as if they had made their payments under a qualifying plan.
But it did nothing for you if you made payments towards the wrong type of loans — FFEL and Perkins Loans. You had to consolidate and start your payment count from the beginning after you consolidated into the Direct Loan program.
The PSLF Waiver gives borrowers credit for payments made on the wrong loan repayment plan and toward the wrong loan.
Simply put, the waiver helps more public service workers get rid of their student debt.
Find the PSLF changes confusing? Let's talk.
You're not alone if you're unsure whether you're eligible for the PSLF Program. It's a confusing program with many rules that you have to follow strictly. Schedule a 10-minute call with me to see how I can help.