Public Service Loan Forgiveness Program changes—2 things you need to know

Miguel Cardona, U.S. Education Secretary, at the Queen Theatre on Dec. 23, 2020 in Wilmington, Delaware.
Miguel Cardona, U.S. Education Secretary

On Wednesday, October 6, 2021, the U.S. Department of Education announced a series of changes to the Public Service Loan Forgiveness Program. The Public Service Loan Forgiveness Program (PSLF) allows borrowers with federal direct loans who make 120 qualifying monthly payments while working full-time for a qualifying employer to have the remainder of their balance forgiven. Qualifying employers include any federal, state, local or tribal government and not-for-profit organizations.

The PSLF has previously been criticized for failing to live up to its name and purpose.

In 2018, the Department of Education released data that indicated 29,000 borrowers had applied to have their student loans forgiven under PSLF, but only 96 received forgiveness. That means that over 99% of borrowers who applied were rejected.

In response, Congress authorized an expansion of the program. However, a 2019 Government Accountability Office report found that approximately 99% of loan-forgiveness requests under that newly expanded program were rejected. According to the report, the Department of Education processed nearly 54,000 requests for forgiveness, approved just 661 and spent only $27 million of the $700 million Congress set aside for the expanded program.

Read that again, the Department of Education processed nearly 54,000 requests for forgiveness, approved just 661 and spent only $27 million of the $700 million Congress set aside for the expanded program. 

SHAKING MY HEAD 

Here are two major changes you should know about:

The PSLF waiver has a deadline

Borrowers who need to consolidate will have to submit an application and a PSLF form by October 31, 2022 to have previously ineligible payments counted. 

Additionally, the Limited PSLF Waiver will only be available to borrowers who have Direct Loans, Federal Family Education Loans and Perkins Loans (and not private loans) and will only apply to loans taken out by students.

Military service may be counted as payment

The new rules will mean that a borrower’s months spent on active duty can be counted toward the PSLF, even if the service member’s loans were on a deferment or forbearance rather than actively in repayment. 

To keep up with the changes, the Department of Ed encourages borrowers to register for an FSA ID and update their StudentAid.gov contact information

And student loan servicers will also be receiving this updated information over time. Borrowers can report issues with their loan servicers to the FSA Ombudsman.

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