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Big Changes to Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness (PSLF) Program was established by the Department of Education to provide debt relief to folks who are employed full-time by government organizations at any level (read: teachers, firefighters, police officers, military personnel, AmeriCorps or Peace Corps members) and not-for-profit organizations.

Unfortunately, the requirements tied to PSLF have made it difficult for debt relief to actualize. I’m sure you’ve seen the headlines of low acceptance rates –– only 2% were accepted of those who applied November 9, 2020 to April 30, 2021 for example.

Today, the Dept of Education announced some big changes to the PSLF program. We break them down for you here.

The old PSLF requirements:

  • Working in a public-sector job.
  • Making 120 on-time student loan payments.
  • Participating in a qualified repayment plan.
  • Having a specific type of loan, known as federal Direct Loans.

What is changing for PSLF

  • Late and slightly off payments will now count toward loan forgiveness

    Previously, monthly loan payments were not counted because they were received late or slightly different from the amount required. Now, the Department of Education says, past-due payments and those that were slightly off from the amount due will be counted.

  • Payments from all federal programs will count temporarily
    The Department is offering a temporary opportunity to count payments from all federal loan programs or repayment plans toward forgiveness. This includes loan types and payment plans that were not previously eligible. The Department recommends borrowers take this action through the online PSLF Help Tool, which is available at StudentAid.gov/PSLF. (source: Dept of Ed)

  • Different repayment plans will also temporarily count toward forgiveness
    The PSLF program requires that a borrower be enrolled in one of a few specific repayment plans, including the Income-Based Repayment Plan (IBR) and the Pay As You Earn Repayment Plan (PAYE). But because of complaints from borrowers about loan servicing companies misinforming them or automatically switching them to disqualified plans, the department says these past ineligible payments will now count toward forgiveness, at least temporarily. (source: NPR)

  • They will make it easier for military service members to receive PSLF

    The Department will allow months spent on active duty to count toward PSLF, even if the service member’s loans were on a deferment or forbearance rather than in active repayment. Next year, the Department will begin automatically giving federal employees credit for PSLF by matching Department of Education data with information held by other federal agencies about service members and the federal workforce. (source: Dept of Ed)

  • Review denied applications and correct errors in PSLF processing

    Errors in the review and processing of PSLF applications have been a barrier to PSLF access. Many borrowers report discrepancies in their PSLF payment counts, and PHEAA, the student loan servicer responsible for processing PSLF payments. They will be has entered into a settlement with the Massachusetts Attorney General to review PSLF applications for potential errors. FSA will be transitioning PSLF accounts away from PHEAA to a new servicer. (source: Dept of Ed)

These PSLF changes are estimated to help over 550K borrowers

The Department estimates that the limited waiver alone will help over 550,000 borrowers who had previously consolidated their loans see their progress toward PSLF grow automatically, with the average borrower receiving 23 additional payments. This includes approximately 22,000 borrowers who will be immediately eligible to have their federal student loans discharged without further action on their part, totaling $1.74 billion in forgiveness. Another 27,000 borrowers could potentially qualify for $2.82 billion in forgiveness if they certify additional periods of employment.

For reference, just over 16,000 borrowers have ever received forgiveness under PSLF prior to this action. (source: Dept of Education)

What does this mean for you?

You need to apply for forgiveness by October 31, 2022 to take advantage of the waiver.
That means borrowers who need to consolidate will have to submit a consolidation application by Oct 31, 2022. Similarly, borrowers will need to submit a PSLF form—the single application used for a review of employment certification, payment counts, and processing of forgiveness—on or before October 31, 2022 to have previously ineligible payments counted. The Department recommends borrowers take this action through the online PSLF Help Tool, which is available at StudentAid.gov/PSLF.

The Snowball team is focused on keeping you informed and helping you make the right decisions for your student loans. Sign up here for our Student Debt Report –– we’ll send you an email whenever there are significant changes in policy.

Sources:
https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul
https://www.npr.org/2021/10/06/1043332307/public-service-loan-forgiveness-education-department-overhaul
https://studentaid.gov/data-center/student/loan-forgiveness/pslf-data

Image credit: designer491 / Getty Images/iStockphoto

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