On Wednesday, the U.S. Department of Education announced a series of changes to 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
"Today, the Department of Education is announcing a set of actions that, over the coming months, will restore the promise of PSLF," reads a statement from the Department of Education.
"We will offer a time-limited waiver so that student borrowers can count payments from all federal loan programs or repayment plans toward forgiveness. This includes loan types and payment plans that were not previously eligible. We will pursue opportunities to automate PSLF eligibility, give borrowers a way to get errors corrected, and make it easier for members of the military to get credit toward forgiveness while they serve. We will pair these changes with an expanded communications campaign to make sure affected borrowers learn about these opportunities and encourage them to apply."
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.
"The changes address several flaws in the PSLF program. Some payments, for example, didn't count toward forgiveness because autopay programs rounded the payments down instead of up to the nearest penny," says higher education expert Mark Kantrowitz. "They should have made these changes long ago."
Here's what you need to know about the PSLF's "overhaul":
The waiver has a deadline
Perhaps the biggest change announced is that the Department of Education will offer a limited waiver so that borrowers can have their payments counted, "regardless of loan type or repayment plan."
The Department estimates the waiver will bring over 550,000 borrowers an average of 23 payments closer to loan forgiveness and make 22,000 borrowers immediately entitled to the cancellation.
The Department also reiterates that the waiver is strictly a "temporary opportunity."
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
Of note, 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.
"Too often, members of the military find out that those same deferments or forbearances granted while they served our country did not count toward PSLF," reads the announcement. "This change ensures that members of the military will not need to focus on their student loans while serving our country."
Some of this new policy appears to still be in development.
"Federal Student Aid will develop and implement a process to address periods of student loan deferments and forbearance for active-duty service members and will update affected borrowers to let them know what they need to do to take advantage of this change," reads the announcement.
The PSLF is a work in progress
Many of the changes to the PSLF are set to be rolled out in the coming months.
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.
"So many Americans who dedicated their careers to public service counted on PSLF for relief only to find the odds stacked against them thanks to a host of problems that have plagued the program," says Chuck Bell, advocacy programs director for Consumer Reports in a statement. "Instead of getting their loans erased after a decade of serving their communities, borrowers were left with a pile of debt and broken promises. Today's action by the Department of Education means that our military service members, teachers, firefighters and other public servants will finally be treated fairly and can get the relief they deserve."