Federal Student Loan Waivers for Public Service and Income-Driven Repayment Plans

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Since the start of the pandemic, the White House — under the Trump and Biden administrations — has frozen student loan payments, waived interest, and paused collection activity on most federal student loans. It will also help millions of borrowers receive billions in debt relief through two waivers that affect two existing student loan forgiveness programs:

  • Public Service Loan Forgiveness
  • Income-Driven Repayment Plan Forgiveness.

Ahead, learn how these waivers can help you.

The PSLF Waiver

Last October, the U.S. Department of Education overhauled the Public Service Loan Forgiveness (PSLF) Program to help hundreds of thousands of people get closer to the relief they were promised when the program was created in 2007. The department softened the program’s rules to deliver on the relief promised to military service members, nurses, teachers, and so on but wasn’t delivered under Congress’s previous fix — Temporary Expanded Public Service Loan Forgiveness.

Here’s how the Limited PSLF Waiver works:

People with the wrong loan types — Federal Family Education Loans and Federal Perkins Loans — can consolidate their loans into a Direct Consolidation Loan so that the payments they made on those loans before consolidating will be credited towards forgiveness. They also will receive credit for payments made under the wrong plan, for less than the full amount due, and payments made after the due date.

Related: Are Parent PLUS Loans Eligible for PSLF?

The PSLF Waiver has an added benefit for active-duty service members. Those who put their loans on hold while deployed will have those months counted towards the 120 qualifying payments needed to have their debt wiped out.

As of last week, 145 thousand borrowers have used the waiver to receive over $8 billion in tax-free loan cancellation.

To apply, use the PSLF Help Tool on the Federal Student Aid website, studentaid.gov. You’ll be able to see if you worked for a qualifying employer* and complete the employment certification form. Once done, submit the PSLF form to the new PSLF servicer, MOHELA.

The public service waiver period ends on Oct. 31, 2022.

Learn More: PSLF Changes

*A qualifying employer is any 501(c)(3) non-profit organization or local, state, or federal government agency. Other nonprofits can qualify if they provide a public service.

IDR Waiver & Account Adjustment

One of the main perks of federal student loan debt is that borrowers can get their remaining loan balance erased after paying under a qualifying repayment plan for 20 to 25 years. Until recently, that benefit was theoretical. When the time came for the Education Department to start clearing its books of these aged loans, only a handful of borrowers had made enough qualifying payments — despite faithfully paying for years.

An NPR investigation blamed vendors hired by the department to manage its student loan system. Several student loan servicers failed to record borrowers’ qualifying payments on income-driven repayment plans accurately. Some had no system at all for tracking payments and identifying when borrowers qualified for loan forgiveness, found a GAO investigation.

On top of that, many loan servicers wrongfully steered struggling borrowers into forbearance instead of guiding them into an IDR Plan, which can reduce monthly payments to zero. Read more about forbearance steering.

In April, the Education Department announced it would fix these widespread breakdowns by using one-time waivers and adjustments to retroactively increase the payment counts towards income-driven repayment forgiveness for millions of borrowers. Borrowers will get credit for past payments made under any student loan repayment plan and for periods when their accounts were in lengthy forbearances and some deferments.

To qualify for the IDR waiver, your loans must be held by the Education Department. All loans made under the Direct Loan Program qualify. If you have commercially held FFEL Loans or Perkins Loans, you must consolidate them into a federal direct loan to receive the adjustment.

Visit studentaid.gov to find out what type of loans you have.

The department plans to complete the adjustments by January 1, 2023.

Related: Who Qualifies for Student Loan Forgiveness

Bottom Line

Without an extension, eligibility for the waivers will end this year. If you’ve held full-time eligible employment anytime after Oct. 2007, it makes sense to take the steps necessary to secure PSLF credit. Likewise, if you’ve been paying federal loans for years and have a high loan balance, consolidating your non-Direct Loans will ensure that you’ll benefit from the account adjustment.

Let’s talk if you have questions about how to qualify for these benefits before time runs out. Schedule a call with me today.

UP NEXT: How to Apply for Student Loan Forgiveness 2022

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