More than half a million borrowers – nurses, teachers, government workers, firefighters, workers for nonprofits, and other public servants – might benefit from recently announced changes in the Public Service Loan Forgiveness Program (PSLF) by the Department of Education.
In the coming months, the Department of Education will offer a limited-time waiver to student borrowers to count payments from the Federal Family Education Loan (FFEL) Program or repayment plans toward forgiveness. The changes also include payment plans and loan types not previously eligible for loan forgiveness.
These changes to the program will immediately provide loan cancellation to an estimated 22,000 workers at a price tag of $1.7 billion and move 500,000 closer to debt relief. However, borrowers will have to take a series of steps by Oct. 31, 2022, to begin the process.
What is the PSLF Program?
The Public Service Loan Forgiveness (PSLF) Program began in 2007 and allows nonprofit and municipal workers and various federal and state government employees who have student loan debt to have any remaining balances on federal Direct Loans forgiven, tax-free. But only after making 120 qualifying monthly payments, under a qualifying repayment plan, working full-time for a qualifying public service employer.
The program was set up to help public service workers better manage student loan debt while working.
What are the proposed changes?
The changes to the PSLF program include the following temporary waivers. The limited PSLF waiver will be available to student borrowers who have Direct Loans, Perkins Loans, and Federal Family Education Loans.
- Borrowers of Direct Loans will be offered a temporary credit for prior payments made while working for a qualifying employer, regardless of loan type or repayment plan.
- Payments made under the Federal Perkins Loan Program (Perkins Loans) and Federal Family Loan Program (FFELP) will count toward loan forgiveness. However, borrowers must consolidate these loans into one Federal Direct Consolidation Loan.
- Payments made in any repayment plan, not just income-driven and standard repayment plans, will count toward loan forgiveness. This includes graduated and extended repayment plans.
All late payments will now count toward loan forgiveness.
- All partial payments will count toward loan forgiveness.
To qualify for these changes, you must file a PSLF form by Oct. 31, 2022.
What other changes will be made in PSLF?
Other than listed above, the Department of Education will also make the following changes to the program:
- U.S. armed forces personnel who paused student loan payments while on active duty will now have all deferments, and forbearances count toward loan forgiveness.
- Any borrower who may have had loan forgiveness denied will have their application reconsidered by a formal appeals process.
- The program will review Denied PSLF applications to identify and correct any errors in PSLF processing.
- The program hopes to simplify the application process.
- The PSLF program also wants to Improve communication with PSLF-eligible borrowers.
Who is eligible for PSLF Changes?
Although the changes to the PSLF Program are far-reaching, not all borrowers or all loans qualify. To find out if you’re eligible, read on. You might also check out the PSLF Help Tool, making it easy to see if you qualify.
FFEL or Perkins Loans Borrowers
Millions of students are still paying on Federal Family Education Loans (FFEL), which are indirect loans provided by banks and other accredited institutions, and first issued when the PSLF program started. To take advantage of the changes to the program, borrowers with either FFEL or Perkins Loans will have to consolidate their student debt into a Direct Consolidation Loan, which they can do through October 2022. However, loans taken out by parents through the ParentPLUS program are not eligible. Visit StudentAid.gov/Manage-Loans/Consolidation to find out more about loan consolidation.
Direct Loans with PSLF-certified employment
Suppose you’ve previously applied for PSLF and had some of your employment certified. In that case, the Education Department will determine if any additional payments should be awarded to you without the need to take further action. Also, if you think you may have qualifying employment that hasn’t been certified, PSLF recommends you certify your employment using the PSLF Help Tool.
If you haven’t applied for PSLF
If you have Direct Loans but haven’t applied for PSLF, you’ll need to submit a form to take advantage of all the changes to the program. You can do this through the PSLF Help Tool. Keep in mind that it might take weeks to have your application processed, so don’t wait until the Oct. 31, 2022 deadline to apply.
If you were denied for PSLF in the past
If in the past, the Education Department said your employer was not eligible through PSLF, you’ll need to submit a new form through the PSLF Help Tool. However, this waiver doesn’t affect qualifying employer rules. That means that your employer must still be a 501(c)(3) organization, a governmental organization, or a nonprofit that provides a public service.
If you made ineligible payments
Under the new changes, any payments that you made that were previously ineligible will not be counted toward the required 120 if you apply for loan forgiveness by Oct. 31, 2022. You must have worked in an eligible job during this time.
Not sure which federal loans you have?
If you’re unsure what kind of federal student loan you have, you can start by logging into your account at StudentAid.gov/aid-summary/. In the Loan Breakdown section, you’ll see a list of all the loans you have borrowed and whether or not they qualify for the new changes to PSLF.
How to apply for student loan forgiveness
With these new temporary relief measures in place, the Department of Education made it much easier to meet eligibility requirements and apply for student loan forgiveness. Here how:
- Make sure your information is correct. You’ll also want to ensure your account information is up-to-date by logging into your account at StudentAid.gov/settings. If you haven’t previously registered with the FSA, you can visit StudentAid.gov/create-account and create an account.
- Consolidate Perkins and FFEL student loans. You must have federal Direct or Direct Consolidation loans to qualify for PSLF. If you have Perkins or FFEL loans, go to the Federal Student Aid (FSA) website and consolidate your federal loans to meet eligibility requirements.
- You must work full-time for a qualifying employer. Even with the changes to the program, you still must work full-time for a qualifying employer. To determine your eligibility, you’ll need your most recent W-2 or your employer’s Federal Employer Identification Number (EIN).
- Fill out the PSLF Form. It takes less than 30 minutes to apply on the FSA website.
The good news is that if your application is approved, any remaining balance of your federal student loan debt will be forgiven after you make the 120 qualifying payments.
Has the new program actually worked for anyone yet?
Yes. In fact, more than 16,000 people have already received loan forgiveness through the new PSLF program according to the U.S. Department of Education. Over the next several weeks, PSLF will have more information for borrowers.
But for now, log on StudentAid.gov/PSLFWaiver to get all of the current announcements. You can also read the Fact Sheet: Public Service Loan Forgiveness (PSLF) Program Overhaul | U.S. Department of Education.