The Public Service Loan Forgiveness (PSLF) program was created to provide federal student loan debt forgiveness for borrowers serving their communities in jobs essential to our country’s success (e.g., firefighters, military servicemembers, teachers, nurses, etc.). After 10 years of student loan payments while being employed with a qualified employer, student loan amounts forgiven under PSLF aren’t considered income for tax purposes. But the program has been fraught with confusion since its inception in 2007. In October 2021, the U.S. Department of Education (ED) announced it will simplify the program, making it easier for eligible participants to obtain loan forgiveness. This post explores the proposed actions.
For a limited time, ED will waive existing program rules so federal student loan borrowers may count payments made through any repayment plan and from all federal loan programs toward PSLF, including the Federal Family Education Loan (FFEL) Program. ED is also pursuing opportunities to:
- Automate PSLF eligibility.
- Give borrowers a way to get errors corrected.
- Make it easier for military servicemembers to get credit toward forgiveness while they serve.
ED is pairing these changes with an expanded communications campaign to encourage borrowers to apply. The actions were informed by the 48,000 comments ED received through a request for information on how to improve PSLF. ED estimates:
- 22,000 borrowers will be immediately eligible for loan forgiveness totaling $1.7 billion.
- 27,000 borrowers with loans totaling $2.8 billion could qualify for loan forgiveness if they complete the recertification paperwork on additional qualifying periods of employment.
- 550,000 borrowers will, on average, get 23 additional payments or nearly two years’ worth of payments added toward being eligible for forgiveness.
The following are the most notable changes as reported in ED’s fact sheet.
Qualifying Payments Will be Simplified through a Limited PSLF Waiver
The limited waiver addresses a concern by borrowers that too many payments do not count toward PSLF due to technical requirements around borrowers’ choice of payment plan, timing or amount of the payment. The waiver will run through Oct. 31, 2022 and apply to student borrowers (not parent borrowers) with:
- Direct loans.
- Loans already consolidated into the Direct loan program.
- Other types of federal loans (FFEL or Perkins) who submit a consolidation application.
ED will start 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 not yet applied for PSLF or certified employment but do so by Oct. 31, 2022 will benefit from these temporary rules as well.
Barriers Eliminated for Military Servicemembers
ED will allow months spent on active duty to count toward PSLF, even if the servicemember’s loans were in deferment or forbearance rather than in active repayment. FSA will develop a process to address periods of student loan deferments and forbearance for active duty servicemembers and will update affected borrowers to let them know what to do to take advantage of this change.
Automating PSLF for Servicemembers and Other Federal Employees
Next year, ED will begin automatically giving federal employees credit for PSLF by matching ED data with information held by other federal agencies on servicemembers and the federal workforce. These matches will help ED identify others who may also be eligible for PSLF but cannot benefit automatically, like those with FFEL loans.
Review Denied PSLF Applications and Identify and Correct Errors in PSLF Processing
ED will complete a review of all denied PSLF applications and processing practices to identify and address errors. This will include an internal data review of denied PSLF applications and an independent external review of PSLF processing. Borrowers who believe there have been errors in processing their PSLF applications after ED conducts this review will be able to use an interim reconsideration process to receive a second individual review next year. A permanent reconsideration process is under consideration.
More on What Borrowers Need to Know
ED will roll out the PSLF improvements over the coming months. For more information, borrowers should read Public Service Loan Forgiveness Limited Waiver Opportunity. Also, ED’s fact sheet addresses individual borrower situations and outlines steps to take.