Public Service Loan Forgiveness Gets an Overhaul

Oct 08, 2021

The Department of Education just announced an overhaul of the Public Service Loan Forgiveness (PSLF) program with the goal of making the program live up to its stated intention: relieving the student loan debt burden of public servants. As part of the announcement, the department released a fact sheet to provide further details on the changes to the PSLF program. Below is a summary of the changes it will be implementing:

Limited PSLF waiver to count all prior payments made by borrowers toward PSLF, regardless of loan program
Borrowers will be provided with a temporary opportunity to get credit for prior payments that otherwise would not count toward PSLF, including any payments made while the borrower was in the wrong repayment plan or if the borrower had loans consolidated into the Direct Loan program. Previously, any borrowers with loans through the Federal Family Education Loan (FFEL) program were not eligible for PSLF unless they consolidated them into the Direct Loan program. Yet, if a borrower consolidated their FFEL loans into the Direct Loan program, any payments made toward their loan prior to consolidation did not count toward the qualifying payments for PSLF. According to the Department, this discrepancy affected around 60% of borrowers who certified their employment for PSLF.

Borrowers can request a waiver through October 31, 2022, to have previously ineligible payments counted towards their PSLF eligibility. The department plans to begin automatically adjusting payment counts for borrowers who have already consolidated their loans into the Direct Loan program and certified some employment for PSLF. Borrowers who have loans from the FFEL or Federal Perkins Loan programs also will have this waiver applied automatically, but only after they have: (1) consolidated their loans into the Direct Loan program; (2) submitted a PSLF form; and (3) had all required paperwork processed.

Automatic adjustment of PSLF payment counts
Borrowers have been struggling to comply with the PSLF technical requirements related to their choice of payment plan, timing of payments, and amount of payment. The new plan is to automatically adjust PSLF payment counts for payments made on or before October 31, 2021, for borrowers affected by this issue who have already certified some employment for PSLF. Borrowers who have not applied for PSLF forgiveness or certified employment but who do so by October 31, 2022, can also benefit from this temporary relief.

Relief for military service members and federal employees
Any months spent on active duty will now count toward PSLF, even if a service member’s loans were on a deferment or forbearance instead of active repayment. Starting next year, service members and other federal employees will get credit for PSLF by matching Department of Education data with other federal databases that have information about service members and the federal workforce. These matches will help identify borrowers who may also be eligible for PSLF but cannot benefit automatically, like those with FFEL loans.

Review of denied PSLF applications
All denied PSLF applications will be reviewed to identify and address any errors that may have occurred as a result of a student loan servicing issue. PSLF accounts are also in the process of being transitioned to a new student loan servicer after the current servicer PHEAA announced it was exiting the student loan servicing market.

Other changes
Beyond the changes listed above, an extensive outreach campaign is planned to ensure potentially eligible borrowers are aware of the improvements to PSLF and the tools available to them. Additionally, the PSLF application process will be simplified over the coming year and will include improvements to the database for qualifying employers and an option to sign PSLF applications electronically.

The Department of Education is exploring additional opportunities to make long-term transformations to the PSLF program through the negotiated rulemaking process currently underway. The negotiators on the negotiated rulemaking committee are expected to discuss what changes are needed to the PSLF program during their meetings this month, as well as in November and December. Following the completion of the negotiated rulemaking committee’s process, the department will issue a proposed rule incorporating the negotiators’ proposed changes, which will include an opportunity for the public to provide comments before the rule is finalized, which will likely be next year. We will continue to monitor this process and provide relevant updates as needed.

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