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The PSLF Waiver is Failing to Help Most Eligible Borrowers. Here’s How to Help

The Biden administration recently released a stunning announcement: over 100,000 borrowers have been identified as qualifying for Public Service Loan Forgiveness (PSLF) under the temporary PSLF waiver rules the Department of Education recently announced. While that number is exciting given the tiny number of borrowers who qualified before these changes, it represents a failure of the PSLF waiver program.

Editor's note: The PSLF Waiver expired on October 31, 2022. It was a limited time opportunity that relaxed program guidelines and allowed borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF. However, many benefits of the program are still available through the IDR Waiver, a one-time account adjustment through the Department of Education. Find out more here.

I'll show you why that is, and what you can do to help more borrowers — particularly those from disadvantaged backgrounds — receive this urgently needed relief.

How many borrowers are eligible for the PSLF waiver?

To understand why I view the PSLF waiver as having failed so far, consider the huge pool of eligible borrowers who could get everything forgiven right now versus the much smaller number who have actually received it.

To receive PSLF between the announcement of the waiver and when it expires October 31, 2022, here are the requirements:

  • Have a cumulative 10 years of full time work experience at a non profit or government employer
  • Make 10 years' worth of payments on any payment plan while employed at a qualifying employer
  • Have Direct loans. If you do not have Direct loans, you must consolidate into a Direct Loan.
  • Apply through the PSLF Help tool.

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How many borrowers meet PSLF waiver requirements?

If you examine the Federal student loan portfolio statistics, in 2011, 36.5 million student loan borrowers owed a collective $848 billion. Since you need 10 years of payment credit, this pool of borrowers is the prime sample size who could have their loans forgiven immediately if they applied for the PSLF waiver.

Depending on the year, pre-pandemic, approximately half of borrowers were in active repayment. The rest were in a mix of default, forbearance and deferment.

Approximately 25% of the workforce performs PSLF eligible work (that's the proportion employed in the public sector).

So, an initial estimate of the pool of eligible borrowers would be 36.5 million * 50% in repayment in 2011 * 25% employed in the public sector = 4.56 million.

How many of that population has worked full-time for at least 10 years? According to the Bureau of Labor Statistics (BLS), 80% of workers work full-time.

Since you must have been full-time for 10 years, let's use a lower number and assume half of these workers have generated 10 years of full-time work experience.

So, take 4.56 million * 50% of public sector workers in this sample who were employed full time for 10 years while making payments = 2.28 million.

The 100,000 borrowers who have received forgiveness represent just over 4% of this population.

How fast is PSLF waiver acceptance increasing?

The Department of Ed is notorious for the delayed release of statistics, but they have done a good job of informing the public about how many borrowers are receiving benefits from the PSLF waiver.

Back in November 2021, approximately 30,000 borrowers had been identified as being eligible.

So, every five months, assume the uptake for the PSLF waiver triples.

With 100,000 borrowers being approved in March 2022, that would imply that the number of borrowers who would receive forgiveness could reach approximately 400,000 to 500,000 individuals by October 31, 2022, when the temporary waiver expires.

That rate of increase is likely optimistic, and it's still leaving the majority of borrowers behind who could be eligible.

Why is the PSLF waiver approval gap so large?

Keep in mind that to qualify, you need to have Direct loans. If you do not, then you must consolidate your loans.

Then, you must certify your credit through the formal application process on studentaid.gov.

Otherwise, the Department of Education cannot grant you credit by waiving the usual rules and allowing any payment plan to count.

In studies of retirement plans, a huge number of employees fail to sign up for their 401k even though they forgo literal free money in the form of employer matching.

The Biden administration designed the PSLF waiver so that it would withstand any potential legal challenges. To do so, they had to make a proactive application process instead of a reactive process where borrowers would not have to do anything.

The danger in that is what we're seeing in the approval success rate. A huge number of borrowers are failing to take the steps they need to take to get complete forgiveness.

Who will be harmed by a PSLF waiver failure?

In prior work, we've looked at the default rate for various disadvantaged or underrepresented populations.

What we find is that borrowers of color, first-generation students and borrowers with mental health conditions all have default rates three to five times higher than the population overall.

These are the same groups of borrowers who we would expect to have a small uptake of the PSLF waiver.

Income driven repayment (IDR) plans are available to these groups of borrowers. However, these options are not preventing disproportionate default because the IDR plans are extremely complicated and require proactive action.

Who is getting the PSLF waiver?

We should celebrate borrowers getting the forgiveness they qualify for. I see life-changing stories daily on Twitter and Facebook of borrowers who have had an entire home mortgage worth of student debt debt removed from their lives.

However, anecdotally, I notice that these borrowers are high information consumers. They're highly engaged, tend to have a graduate degree, are highly motivated and do a great job of following through when they don't understand answers to their questions.

In other words, borrowers with higher levels of education and income are more equipped to deal with the confusing requirements of the PSLF waiver than borrowers with less education.

The White House announced that 100,000 borrowers have received about $6.2 billion of forgiveness so far through March 2022. That means the PSLF waiver average forgiven balance is approximately $62,000. The average student loan debt in the US is approximately $37,000.

Since parent borrowers are excluded from the waiver unless they consolidate some of their own loans, this data suggests that the average beneficiary of the PSLF waiver so far is a graduate degree holder.

How you can help make the PSLF waiver a success

You might make a compelling argument that the PSLF waiver is a stunningly successful failure.

After all, over 100,000 borrowers have already received forgiveness when only a few thousand had received it prior to the waiver's announcement.

In that light, it's true that the PSLF waiver is bringing large-scale relief to borrowers.

However, the data shows that many borrowers are being left behind. Here's what you can do to help others receive this important benefit:

  • Normalize talking about student loans with friends and colleagues.
  • Point them to free resources like Federal Student Aid.
  • Tell your friends they need to contact their loan servicer and ask about the PSLF waiver.
  • Call the Student Loan Support Center at (800) 557-7394 and ask about consolidation.
  • Suggest your friend sign up for the Student Loan Planner weekly newsletter update. One borrower thanked us for helping her get $180,000 forgiven that she would not have received if she wasn't subscribed.
  • Share the Student Loan Planner podcast with a friend (we're on every podcast platform).
  • Get a PSLF waiver analysis from the team that's done more plans than anyone else in the country.

Some of my latter points might sound self-interested, but the reality is that we're helping borrowers navigate a complicated PSLF waiver program and increase the approval rate. We have enough business, and if you want our paid help or just want to take advantage of free resources, I'm thrilled either way.

We ultimately know how many borrowers will get left behind if the PSLF waiver fails, and I want the maximum number of borrowers to receive the relief they so desperately hope for and deserve.

Not sure what to do with your student loans?

Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).

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Comments

  1. Debbie M March 10, 2022 at 2:18 PM
    Reply

    My husband submitted a request for review under this waiver last year as soon as it was announced and has still not heard anything. Do we know what is the average turnaround time is at the moment? Although I appreciate they are busy – he can’t even get any info on the status of his application for forgiveness. FedLoan tells him to speak to the department of education and department of education tells him to speak to fedloan. What happens if come October he still hasn’t been approved for forgiveness? Is there a protocol for people who may have slipped through the clerical cracks? That’s my biggest worry (considering the mess they just made on his recertification for IBR due to their clerical error)!

    • Abel at Student Loan Planner March 17, 2022 at 1:20 AM
      Reply

      Hi Debbie, make sure he submitted an ECF via the PSLF help tool so it’s shown within studentaid.gov – online PSLF Help Tool here and maybe have him submit once more to be safe. As long as they’ve confirmed receipt, they’re locked and loaded for the PSLF waiver to be applicable to him.

  2. Rosemary March 10, 2022 at 11:41 PM
    Reply

    I wait for your email weekly. You’ve been a constant source of information, not only on student loans, but on life and our world in general. Thank you for sharing your wealth of knowledge. You are one of the helpers.

    Roe
    Scranton, Pa

    • Abel at Student Loan Planner March 17, 2022 at 1:15 AM
      Reply

      Thank you for your note, Roe! Travis and team do their best in sharing what they know.

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