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Program Changes Make Public Service Loan Forgiveness More Achievable

Posted on Jul 8, 2024 3:23:21 PM | By Hannah Achtor, Manager—Quality Assurance, Compliance, and Training at Ascendium Education Solutions
A first responder stands outside behind an emergency vehicle with her coworkers, smiling and excited to be receiving Public Service Loan Forgiveness.

Public Service Loan Forgiveness (PSLF) was created under the College Cost Reduction Act of 2007 to provide loan forgiveness to those who make a substantial career commitment to public service. Prior to the implementation of PSLF, there were concerns about a shortage of workers for key positions in the public sector. Today, those concerns seem prophetic in the midst of a tight labor market. Some of the most qualified people are burdened by student loan debt and could end up seeking jobs in the private sector where salaries are typically higher. PSLF was designed to address this problem and help the public sector recruit and retain top talent, but recent challenges often keep borrowers from seeing the program’s benefits.

Obstacles to PSLF Success

The PSLF program has encountered many roadblocks in the past, hindering it from benefiting everyone it was intended to help. One of the biggest obstacles has been a lack of awareness. Over 25% of the American labor force is employed in the public service sector, but it’s estimated that less than 20% of eligible student loan borrowers apply for loan forgiveness programs, including PSLF (Source: educationdata.org). Even with PSLF in the news often in the last few years, many borrowers still don’t realize it may apply to them.

Another challenge is the various requirements of the program borrowers must meet to achieve forgiveness. Often, borrowers only understand and complete one or two of the needed components without meeting the full requirements. When the first borrowers became eligible for forgiveness in 2017, over 99% of applications were denied (Source: gao.gov).

Temporary PSLF Measures

The U.S. Department of Education (ED) has implemented several temporary changes in an attempt to make PSLF more achievable. One of ED’s early initiatives was the Public Service Loan Forgiveness Limited Waiver, which expired Oct. 31, 2022 (Source: studentaid.gov). While the limited waiver helped 662,000 borrowers achieve forgiveness on their student loans, it created additional problems in the form of a months-long application backlog for the student loan servicer in charge of PSLF processing at the time.

Another common reason for PSLF rejections in the past was that borrowers did not realize only certain repayment plans are eligible when working towards the 120 qualifying monthly payments required for PSLF. To correct this issue, ED announced a One Time Payment Count Adjustment. This measure allowed all time spent in a repayment status, including some periods in a deferment or forbearance status, to qualify as eligible payments towards borrowers’ payment counts for both PSLF and Income Driven Repayment. These adjustments have continued into 2024 and are automatically applied to Direct loans and other ED-held federal loans.

Permanent Solutions for the Future

The next steps for keeping PSLF rejection rates from climbing again involve implementing permanent program improvements.

  • Going forward, there will no longer be a single designated PSLF servicer. On May 1, 2024, application processing was paused. During this pause, the PSLF program administrators are making the change to move the PSLF process to studentaid.gov. This change is meant to benefit borrowers by streamlining the process and allowing them to fully manage their federal student loans in one place (Source: studentaid.gov). Borrowers may still submit PSLF applications during the pause; however, there will be no processed applications or updated payment counts until the pause is over (Source: studentaid.gov). The pause is anticipated to last until the end of July 2024.
  • The definition of what makes a PSLF qualifying payment has been expanded.
  • Borrowers can now pay ahead up to a year at a time.
  • Late payments, partial payments that add up to a full monthly payment, and some specific types of deferment and forbearance will count as qualifying payments.
  • “Full-time employment” now includes employees who work at least 30 hours per week or who meet their employer’s definition of full time.
  • Direct loan borrowers seeking consolidation no longer have to start over when working towards PSLF on their new Direct Consolidation loan. Instead, they receive credit for past payments made using a weighted average of those payments.

Looking Ahead with Attigo

Student loan debt has become an obstacle for many borrowers standing in the way of financial security and being able to achieve basic goals such as buying a house or saving for retirement. The good news is that one in four Americans are estimated to work for a qualifying employer, making PSLF an option for a lot of borrowers. They just need to be aware of the program and the requirements needed to successfully achieve forgiveness. This is where Attigo can help. Join our free SmartSessions training Building Awareness of the Public Service Loan Forgiveness Program on July 25 to learn everything you need to know about this life-changing program. Then, see how our student loan support services for alums and employees can help them navigate PSLF from start to finish.

  • Personalized counseling. Our inbound helpline connects students and alums with success coaches who provide personalized information for their unique journey, including how to navigate PSLF.
  • PSLF enrollment. Sophisticated technology provided by Savi allows students and alums to enroll in PSLF with a 98% success rate when submitting paperwork.

Learn more about our solutions and how Attigo by Ascendium can help you create the best student loan support model for your school.

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