The $145 Billion Student Loan Forgiveness Benefit Public Servants Don’t Know About

The old saying, “if something is too good to be true, it probably is” does not apply to the PSLF waiver. Already, more than $8 billion has been forgiven during the Public Service Loan Forgiveness waiver, and billions more will be forgiven before it expires October 31, 2022.

Editor’s note: Changes to prior PSLF payment eligibility through the PSLF Waiver and IDR Adjustment have positively impacted many borrowers. Even though the PSLF Waiver is expired, the IDR Adjustment offers many of the same benefits. The IDR Waiver, or IDR Adjustment, is a one-time account adjustment to give credit for qualifying payments to borrowers on income-driven repayment plans and under PSLF.

In December 2019, before the pandemic, only $99 million had been forgiven. That’s a massive surge in approved loan discharges.

Here’s the problem, though. At least $145 billion of student debt could be immediately forgiven thanks to the PSLF waiver, but only $8 billion has actually been forgiven so far. The reason? Public servants just don’t know about the opportunity.

We’ll talk about the professions with the most to gain from the PSLF waiver, the next steps to take so you can qualify, and how to increase awareness of this temporary program among friends and colleagues.

What is the PSLF waiver?

The PSLF waiver is a temporary government program intended to help more public servants get their student loans forgiven faster. It expires October 31, 2022, so there is urgency to apply as fast as possible if you could qualify.

The normal PSLF rules

The normal Public Service Loan Forgiveness (PSLF) program requires three things to get your student loans forgiven 100% tax-free:

1. Work for a non-profit or government employer full time for at least 10 years (and certify this employment).
2. Make payments during that employment on an income driven repayment plan.
3. The loans you’re making payments on need to be Direct student loans owned by the Department of Education, not a private entity.

Many borrowers achieved the first requirement, found out about PSLF, and applied.

But many did not make payments on an income driven plan during their time of employment.

Before 2010, Direct Student Loans were not the norm. An old program called the FFEL program is how most borrowers accessed student loans, and that type of debt could not qualify unless it was converted into a Direct loan through consolidation.

So, the approval rate for the first batch of PSLF applicants was abysmal.

How the PSLF waiver “fix” works

In October 2021, President Biden issued an executive action to try and fix that, which is known as the PSLF waiver.

The PSLF waiver eliminates the restrictions of part 2 and part 3 above.

In plain English, during the PSLF waiver, ALL payments and many types of forbearance and deferment qualify towards the 10 years’ credit you need to get forgiveness.

Additionally, ALL kinds of loans can be discharged. Since some of these loans are FFEL loans owned by private investors, they might need to be converted into Direct loans first through a consolidation.

So effectively, during the PSLF waiver, any public servant who has held student loans for at least 10 years probably qualifies to have the entire balance forgiven if they 1) consolidate at studentaid.gov, and 2) apply through the PSLF help tool.

Why have so few public servants received forgiveness under the PSLF waiver?

Imagine being a busy professional in your 30s, 40s or 50s burdened by the demands of a short-staffed pandemic economy, possibly also juggling raising kids.

Pretend you also have student loans. You probably came to terms with how to manage them years ago. That could mean paying on one of the many repayment plan options, being in and out of forbearance or deferment, consolidating to a low interest rate back when the government allowed that, or putting off your student debt during the pandemic pause to focus on other areas of your personal balance sheet.

To know you could get your student loans forgiven under the PSLF waiver would mean paying attention to emails from the Federal Student Aid office. Most people do not read all their emails.

The federal student loan program is also incredibly bureaucratic and confusing.

If you’re happy with your student loan plan (or at least not bothered enough to constantly research new options), you are going to stick to the status quo of whatever you’ve been doing.

And the status quo makes getting forgiveness under the PSLF waiver highly unlikely, because you must ACTIVELY apply for it AND possibly consolidate first. It’s a complicated process.

What professions could get the most forgiven under the PSLF waiver?

According to research by Diego Briones, Nathaniel Ruby, and Sarah Turner, six public sector occupations alone could receive at least $80 billion of student debt forgiven immediately.

We’ll highlight the approximate amount of debt borrowers in each profession could see forgiven immediately under this temporary program, rounded to the nearest billion:

• Teachers: $33 billion.
• Managers and non-profit professionals: $19 billion.
• Social Workers: $9 billion.
• Nurses: $8 billion.
• Physicians: $7 billion.
• Fire, Police, and EMS: $5 billion.

Teachers, firefighters, and police officers could see more than half of their student debt forgiven under the PSLF waiver.

Social workers, non-profit professionals, nurses, and physicians could see between one quarter and one third of all of their student debt wiped away.

Yet a fraction of the borrowers in these professions even know.

How to apply for the PSLF waiver

We’ve made a video on how to apply as well as a detailed article on the application process.

Note that you do NOT need to have 120 months of employment credit to apply. You can potentially get years of extra credit added even if you do not yet qualify for total forgiveness.

Apply with the PSLF help tool

Most borrowers will also want to consolidate their student loans on studentaid.gov. This step allows ineligible loans to qualify, and you can also get additional credit applied to the new consolidation loan if some of your loans have more credit than others.

You must complete the application process by October 31, 2022.

How to identify and help others who could qualify for the PSLF waiver

To help you identify colleagues and friends who might benefit from the PSLF waiver, I wanted to share some demographics we see commonly among current and former public sector employee borrowers who get the biggest benefit.

Note that NONE of these characteristics are required to get benefits under the PSLF waiver. If you’re a public servant that has student loans and ANY of the following characteristics apply to you, you probably need to apply. And if you owe a large amount, you might want to get a plan with our team.

These are just a sampling of the characteristics we see among borrowers receiving the largest benefits:

• Over age 26.
• Multiple degrees.
• Long periods of non-payment.
• Borrowed before 2010.
• Multiple different loans.
• Balance above $50,000.
• Account is at a servicer not named FedLoan or MOHELA.
• Signed up late for Income Based Repayment.
• Gaps between degrees where a borrower worked full-time.
• Parents who have debt in their own name and in the name of their child.
• Graduate degree.
• Part of a profession with a high proportion of public sector employment (teaching, nursing, medicine, etc.).

Share the PSLF waiver with every public servant you know

Time is running out as you must apply for the PSLF waiver by October 31, 2022, to qualify.

And with at least $145 billion in eligible debt, we’d strongly suggest applying for yourself and then telling a friend to get as many people forgiveness as possible.

Unfortunately, the first fix to PSLF called TEPSLF did a poor job.

The PSLF waiver will bring relief to many more borrowers, but it will leave the majority behind.

It is certainly ironic that the “fix to the fix” of the PSLF program is failing to get the job done.

Clearly, congressional action and consensus is needed to help borrowers make sense of a nightmare student loan system.

But that day could be a long way off, and once the pandemic national health emergency is over, the President will no longer have the authority to unilaterally waive the normal rules of the PSLF program. He currently has this authority due to the HEROES Act of 2003, which requires a declared national emergency.

So please share the PSLF waiver with every public servant you know, and if you need an expert one on one consultation with one out Student Loan Planner consultants to make sense of this opportunity, book a consult through the button below.