Some good news for student loan holders looking to capitalize on the public service loan forgiveness (PSLF) program. The U.S. Department of Education has announced plans to overhaul the troubled program, which has been fraught with problems.

The PSLF program resides within the overwhelmingly complex arena of federal student loan repayment programs. It is difficult for many people to decipher the plethora of available options and their nuanced differences, let alone comply with a complex array of qualifications for forgiveness — even though they may be legally entitled to such forgiveness.

The Department expects one of its actions to help over 550,000 borrowers. To put this into perspective, a total of around 16,000 borrowers have been able to successfully attain forgiveness since the program’s inception. 

Though the time for the overhaul is long overdue, the time to complete any required steps is limited. Pay attention to the dates.

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What is Public Service Loan Forgiveness?

PSLF allows federal student loan borrowers employed in public service as full-time employees of government or nonprofit organizations to have the balance of their student loans forgiven after making consecutive payments for 10 years.

But borrowers have had trouble obtaining that forgiveness, in part due to stringent requirements and seemingly inconsistent application of the rules.

The program’s noble intent — to foster public service — has been marred by failure of execution. The overhaul should address a portion of the problems.

Waiver to Count All Prior Payments

Many borrowers have found that not all payments they expected to have applied to the forgiveness program have been credited. The complex program didn’t count all types of federal student loans and missed some payments for consolidated loans, plus servicers may not have appropriately qualified payments.

The waiver will count all payments an individual has already made while working for a qualifying employer and those made through October 31, 2022. Borrowers who have already had some payments certified under PSLF will have the adjustments made automatically.

Those who have not yet applied for PSLF will need to do so before the end of the waiver period next October.

The Department expects 22,000 borrowers will have their remaining loan balances discharged without any action from the borrower. An additional 27,000 could have their remaining loans discharged by applying for PSLF. This waiver alone should help more than 550,000 borrowers achieve loan forgiveness.

Simplified Payment Qualifications

The waiver also addresses technical problems of payment qualification. Some borrowers’ payments have not counted because they were a couple of days late or off by a few cents, among other technical problems.

The Department will automatically make these adjustments for those who have had payments credited for PSLF; those who not yet applied will enjoy the same simplified qualifications for the remainder of the waiver period.

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Elimination of Military Barriers

Military service members on active duty will be credited for that time even if they are on deferment or forbearance. This allows them to achieve PSLF forgiveness faster, even if they are in a situation where making payments would be difficult.

Additionally, the Department plans to make PSLF forgiveness automatic for service members and other federal employees by matching available records. This portion of the program is slated to begin in 2022.

Simplification of Application Process

The Department plans this revision for next year as well. It is looking at simplification of both the original application as well as ongoing certification. This is certainly a welcome change.

The Bottom Line

The current program overhaul is being done through the Department’s executive actions. These are temporary changes running the duration of the waiver period. The Department plans to make long-term changes through rulemaking.

Borrowers eligible for additional credit shouldn’t wait for permanent changes, but should act now to take advantage of the opportunity while the waiver is in effect. These enhancements mean those whose loans didn’t qualify for PSLF in the past now have a window of opportunity to attain forgiveness.

The program remains overly complex and places a large burden on borrowers to substantiate their qualification under the program. These changes provide some much needed relief, but there is still a long way to go to make the program fair and simple. This is an important first step. 

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