Public Service Loan Forgiveness, a critical federal student loan forgiveness program for borrowers working in public service jobs, has been in the news a lot lately. Keeping track of all the new developments can be overwhelming and confusing for borrowers. Here’s a breakdown of the latest updates.
Public Service Loan Forgiveness background
Public Service Loan Forgiveness (PSLF) can wipe out the federal student loan debt for borrowers who work 10 years or more in qualifying public service employment. To get their student loans forgiven under the program, borrowers must make 120 “qualifying” payments. A qualifying payment is an on-time, full payment that is:
- Made on Direct federal student loans,
- Under either a 10-year Standard or income-driven repayment (IDR) plan,
- While working as a full-time employee (at least 30 hours per week) for a qualifying nonprofit or government organization, or part-time for multiple qualifying nonprofit or government organizations if the borrower’s working hours are at least 30 per week on average.
But the PSLF program and its eligibility requirements were often poorly communicated to borrowers since its creation in 2007. And widespread administrative errors and inadequate oversight have plagued the program.
The result has been a student loan forgiveness program that can provide significant benefits for borrowers who meet all the requirements but that also has historically rejected up to 99% of applicants.
Limited PSLF Waiver is in the final few months
In October 2021, the Biden administration enacted a temporary fix to the PSLF program’s many problems. Called the Limited PSLF Waiver, the initiative eases some of the complex PSLF rules that tripped up millions of borrowers and major loan servicers, and it effectively has allowed many more borrowers to qualify for relief. The administration relaxed the program rules even further in April 2022 through a separate initiative targeting income-driven repayment (IDR plans).
Collectively, the reforms will allow borrowers to get retroactive credit towards PSLF for past loan periods that would not have qualified, including:
- All past periods of loan repayment, regardless of the type of federal student loan, payment plan, or whether the payment was made in full or on time;
- Certain periods of deferment or forbearance.
Time is running out for borrowers to qualify
The initiative is temporary, however, and will end on October 31, 2022. While over $8 billion in student loan forgiveness has already been awarded to borrowers under the waiver initiative, according to the Department of Education, advocacy groups warn that millions of borrowers may not even be aware of its existence, potentially jeopardizing their eligibility as the program winds down.
Under the waiver, borrowers with FFEL loans or Perkins loans would need to consolidate those loans via the federal Direct consolidation program by the deadline. Borrowers who haven’t submitted required PSLF Employment Certification forms would need to do so, as well. These processes take time, and time is running out.
The Education Department is stepping up outreach efforts to notify borrowers of the Limited PSLF Waiver initiative.
“Check your inboxes,” said Education Secretary Miguel Cardona in a tweet on Thursday. “This week [the Education Department] is emailing approximately 22 million borrowers about the limited Public Service Loan Forgiveness waiver with information on seeing if your employer qualifies, submitting your form, and getting your loans forgiven.”
Will the PSLF Waiver be extended?
Advocates are urging the Biden administration to extend the Limited PSLF Waiver initiative to allow more borrowers to qualify for student loan forgiveness. But so far, top officials have not indicated that an extension is under consideration, and they are urging borrowers to apply before the October 31, 2022, deadline.
Education Department releases proposed new PSLF regulations
While the Limited PSLF Waiver initiative nears its expiration, the Department has also been working on overhauling the regulations that govern PSLF. This could provide more lasting fixes to the program.
In 2021, the Education Department held rounds of negotiated rulemaking — a process by which key stakeholders convene in a committee to discuss proposed new rules for key programs. The goal is for the negotiated rulemaking committee to reach a consensus on any proposed changes. But if no consensus is reached, the Department of Education can draft regulations on its own, based on input from the committee and the public.
New PSLF improvements and expansion
Following the negotiated rulemaking committee’s failure to reach consensus on overhauling PSLF in 2021, the Department released proposed new PSLF regulations earlier this month. The new rules provide several improvements to the PSLF program, including allowing more kinds of payments to count towards PSLF, as well as certain limited deferment and forbearance periods.
The new rules also would modestly expand the definition of qualifying employment to include non-tenured faculty. And the new regulations would help facilitate a more streamlined and automated PSLF application process.
The proposals are not final
The Department’s proposals are not final, and a public comment period must precede the finalization of the regulations (which are not expected to be in effect until summer 2023).
But the proposed overhaul does not go nearly as far as Limited PSLF Waiver. The Department has indicated that more drastic changes would require legislation by Congress.
Democrats release PSLF reform bill that shortens time to loan forgiveness
Last week, House Democrats unveiled the “Simplifying and Strengthening PSLF Act of 2022,” a companion bill to a similar bill filed in the Senate. The bill would enact legislative changes to fundamentally change key elements of the PSLF program and would go further than the regulatory tweak the Department is currently working on.
One of the most sweeping aspects of the legislation would reduce the required qualifying employment period for PSLF from 10 years to five, dramatically accelerating student loan forgiveness for millions of borrowers.
The bill would also codify some key aspects of the Limited PSLF Waiver by allowing any prior period of repayment to count as a qualifying PSLF payment, regardless of the type of federal student loan, the repayment plan, or whether payments were made in full or on time.
Will the bill pass?
Advocates in support of the bill have referred to the legislation as “badly needed” and a “just and moral response” to the student debt crisis.
But the bill’s future is uncertain. Even if it could pass the House, it is unclear if it would garner enough support in the Senate to become law.