5 New Updates to Expanded PSLF Program

Editor’s note: The limited PSLF waiver expired on October 31, 2022. However, the IDR Waiver 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.

The Department of Education has provided updated information on who may qualify for student loan forgiveness through the Biden administration’s temporary expansion of the Public Service Loan Forgiveness (PSLF) program. Here’s the latest.

Background: New rules for the Public Service Loan Forgiveness (PSLF) program

In October, the Department of Education announced that it would be changing key rules governing the troubled Public Service Loan Forgiveness (PSLF) program. Since it was created, PSLF has been plagued by denial rates as high as 99% due to a combination of complicated eligibility criteria and poor management and oversight by the Department of Education and its contracted loan servicers.

The temporary new reforms that are now being rolled out by the Biden administration are designed to address some of PSLF’s shortcomings. The program, which the Department is calling the “Limited PSLF Waiver,” will ease the restrictions regarding the type of federal student loans and repayment plans that qualify.

Through October 31, 2022, payments made on FFEL loans and Perkins loans (which were excluded from PSLF under the original rules of the program), and payments made under any repayment plan, will now count towards the 120 payments that are required for loan forgiveness under PSLF. The Department will also count untimely or incomplete payments.

Some aspects of the program — such as the rules governing qualifying employment, and the rule that periods of non-payment (including deferment, forbearance, and default) don’t count — are unchanged.

While some of the relief under the PSLF Waiver program will be provided automatically, other borrowers will need to take affirmative steps to qualify. In particular, FFEL and Perkins loan borrowers may need to consolidate their loans through the federal Direct consolidation loan program, and formally certify their public service employment (consolidation can sometimes have some downsides, so it is important for borrowers to understand the potential implications before proceeding). These borrowers would need to act before October 31, 2022.

The Department left many questions unanswered about the Limited PSLF Waiver program when it initially announced the new relief. Now, the Department has provided updated guidance regarding several key details.

1. How the Department will count payments

Before the Limited PSLF Waiver, one of the major problems with the PSLF program was that the Department and its contracted loan servicers often rejected past payments on the basis that they were not made on time, not made in full, or not made at all — even when that was not the case. This can be explained, in part, because of prior servicer transfers, and it was sometimes not immediately apparent whether payments made years ago had in fact been made properly.

Under the PSLF Waiver, however, the Department has now clarified that it will not rely on actual payment records from prior loan servicers. Instead, the Department will simply use a borrower’s “In Repayment” status as reported to Federal Student Aid.

This is information that is already available to the Department and to borrowers via StudentAid.gov. This will dramatically simplify the PSLF payment-counting process and eliminate the need to scrutinize individual payment histories.

2. Borrowers with different, overlapping payment histories

Because federal loans are disbursed at different times, some individual loans may have distinct repayment histories, which may overlap with qualifying employment in conflicting ways. For example, what happens if a borrower consolidates two different FFEL loans into a Direct consolidation loan, but one FFEL loan has a smaller number of potentially qualifying PSLF payments than the second one?

The Department has clarified that in such a situation, it will apply the larger number of qualifying payments for the Direct consolidation loan. So, in this example, if one FFEL loan has 20 months of repayment that would qualify under the PSLF waiver, and another FFEL loan has 50 months of repayment that would qualify, the new Direct consolidation loan would reflect 50 qualifying PSLF payments.

3. Parent PLUS borrowers

Under the original PSLF rules, Parent PLUS Loans do not qualify. But Direct Consolidation Loans that paid off Parent PLUS Loans can qualify for PSLF, if that Direct Consolidation Loan is repaid under the Income-Contingent Repayment (ICR) plan. The borrower must also meet the public service employment requirements.

The Department of Education’s initial comments when it announced the Limited PSLF Waiver program indicated that Parent PLUS Loans would still be excluded. But subsequent, new guidance suggests the treatment of Parent PLUS Loans will be more nuanced.

The Department is now suggesting that a Direct Consolidation Loan that repaid both a Parent PLUS Loan and a non-Parent PLUS Loan (such as a FFEL Stafford Loan) could benefit from the PSLF waiver. Also, that the department would credit the Direct Consolidation Loan with PSLF payments associated with the FFEL loan repayment history, notwithstanding the inclusion of the Parent PLUS Loan in the consolidation.

However, the Department of Education hasn't clarified specifically whether a Direct Consolidation Loan that contains only Parent PLUS Loans can potentially benefit from the PSLF Waiver.

4. FedLoan Servicing’s role

The Department of Education has also confirmed that FedLoan Servicing will continue to administer the PSLF program, at least in the short term. FedLoan is the servicer contracted by the Department to manage the PSLF program. However, the agency recently announced it would not be renewing its servicing contract and would be exiting the Department’s’ federal student loan servicing system by the end of this year.

Since then, the Department agreed to extend FedLoan’s contract for another year, to the end of 2022. Borrowers who have loans with FedLoan will still have their loans transferred to another servicer, but the contract extension allows FedLoan to continue administering the PSLF program through much of the Limited PSLF Waiver period.

5. Updated PSLF Help Tool

The PSLF Help Tool was designed to help borrowers navigate the PSLF program, confirm qualifying employment, and submit the required employment certification forms. But the system was designed only to benefit Direct Loan borrowers.

The Department recently announced that the PSLF Help Tool has now been “modified to align with the conditions under COVID-19 relief measures and the limited PSLF waiver through Oct. 31, 2022.” So FFEL and Perkins loan borrowers who believe they may qualify for relief under the Limited PSLF Waiver can now use the PSLF Help Tool to assist in determining eligibility.