Sometimes even the best ideas need a little tweaking. Such is the case with the federal Public Service Loan Forgiveness (PSLF) program. The intent of this program was to motivate public service for college graduates by promising to forgive federal student loans after a certain period of payment. While the intent was good, the execution was bad, and most borrowers found themselves unable to meet the criteria to qualify for actual forgiveness. In response to these concerns, the Department of Education announced what it calls “transformational changes” to this program. Let’s take a look at what this could mean:
What Were PSLF Requirements?
The PSLF Program forgives the remaining balance on your federal Direct Student Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan, while working full-time for a qualifying employer. To be eligible, you must:
- Be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization (federal service includes U.S. military service). Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program. Teachers, nurses, firefighters and others may qualify, depending on their employer.
- Work full-time for that agency or organization.
- Have Direct Loans (or consolidate other federal student loans into a Direct Loan).
- Repay loans under an income-driven repayment plan.
- Make 120 qualifying payments.
Applicants are required to submit an annual Certification and Application form, which is reviewed to let the student know if they are making qualifying payments.
What Are PSLF Changes?
- PSLF waiver: For a limited time only, borrowers may receive credit for past payments made on loans that would otherwise not qualify for PSLF. Under the new rules, “any prior payment made will count as a qualifying payment, regardless of loan type, repayment plan, or whether the payment was made in full or on time. All you need is qualifying employment.” To qualify, you must submit a PSLF form to your loan servicer by October 31, 2022. Students with any FFEL (Federal Family Education Loan) Program loans and Perkins Loans must also complete a Direct Consolidation Loan by that time and submit the PSLF form. Payments on PLUS loans do not count towards this program.
- COVID payment suspension: During COVID, student loan payment requirements were suspended. If you have a Direct Loan and work full-time for a qualifying employer during the payment suspension period, you will receive credit for that time as though you made on-time monthly payments in the correct amount while on a qualifying repayment plan. To see these qualifying payments reflected in your account, you must submit a PSLF form certifying your employment for the same period of time as the suspension.
- Military: Active duty service members will be able to count deferments and forbearances toward their PSLF. The Department will implement data matches next year to automatically give these borrowers credit toward PSLF without an application.
- Denied Claims: ED will review denied PSLF applications for errors and give borrowers the ability to have their PSLF determinations reconsidered. These actions will help identify and address servicing errors or other issues that have prevented borrowers from getting the PSLF credit they deserve.
For more information, visit StudentAid.gov/PSLFWaiver. Make sure ED has accurate contact information on file by updating your StudentAid.gov contact information.
ED estimates these changes will put over 550,000 public service workers closer to loan forgiveness. This includes approximately 22,000 borrowers who will be immediately eligible to have their federal student loans discharged without further action on their part. The Department is also working to simplify the application process, and is exploring additional steps, such as partnerships with employers, to continue to make this process easier for borrowers.
CFAA is here to help with every step of the financial aid process, from completing the FAFSA and completing the CSS Profile to working through the student loan process. Set up a CFAA new client free strategy session to learn more about finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my weekly JustAskJodi emails and check out my monthly CFAA e-newsletter.