The Public Service Loan Forgiveness (PSLF) program has always sounded simple: work in the public sector, pay your loans for 10 years, get the rest forgiven tax free. But every borrower who has interacted with the program knows that it’s anything but simple. The labyrinth of underlying requirements has led to its notoriety for rejecting upwards of 98 percent of applicants, making actual forgiveness seem like a pipe dream for borrowers.
All that is about to change. The Department of Education has recently announced sweeping changes to the program that will make it easier to qualify and easier to achieve forgiveness.
Limited time PSLF expansion
For a limited time only through Oct. 31, the Department of Education is offering a Limited PSLF Waiver to count previous payments that were ineligible because of loan types or repayment plans. This will help thousands of borrowers who were denied forgiveness in the past and could now be eligible to have their entire loan balance wiped away.
More loan types qualify. The change will apply to Direct loans (previously the only type that counted for PSLF), FFEL loans, and Perkins loans, even if they were already consolidated into Direct loans in the past. This does not apply to previous payments made on Parent PLUS loans, but those loans can still be consolidated into Direct loans to qualify going forward.
All repayment plans qualify. All repayment plans will also now qualify for PSLF under the waiver. Previously, borrowers were required to enroll in and annually recertify an Income-Driven Repayment (IDR) plan to be eligible. For many borrowers, this is still the best way to lower monthly payments and maximize forgiveness. But now all plans including Graduated, Extended, and all Standard plans will count towards PSLF as well.
Additional expansions. Previously, payments only counted towards PSLF if they were the exact dollar amount owed and paid on the exact date owed. This is no longer the case. If you made an “overpayment” or “underpayment” and on a different date, these can now count towards PSLF. This will be applied automatically where employment has been certified. Active duty military service will count towards PSLF and will be counted automatically. And a review process will begin for all previously rejected PSLF applications. Where errors are found, they will be corrected automatically.
No employment requirement at time of forgiveness. Lastly, the Department of Education has removed the requirement that borrowers need to still be working in public service full time at the time they receive forgiveness. Previously, borrowers could be denied even after they had made the required 120 payments because they no longer worked full time. This means that borrowers who have since retired or left the workforce during the pandemic can still access forgiveness.
Some requirements are staying the same for now. In order to receive forgiveness in this program, borrowers still need to make a full 120 monthly payments (10 years) while working at a qualifying employer, like the government, a public school, or a nonprofit organization. It still applies only to payments made after Oct.1, 2007, when the PSLF program was created.
How to access expanded forgiveness
This expansion has a strict deadline of Oct. 31, 2022, so borrowers should take action now to make sure they can access the benefits.
For all borrowers working in public service, the most important thing you can do right now is to certify all of your current and previous employment since 2007. You can do this by submitting an employment certification form: both you and your employer sign this form to verify the dates of your employment there. The Department of Education uses this as the basis to count qualifying payments, and in order to count your payments before the deadline, you’ll need one of these forms for each qualifying employer you’ve worked at while making payments on your loans. Summer, the AFT’s online student loan management tool, can help you do this.
If you currently have FFEL and Perkins loans, you must have consolidated your loans into a Direct loan before October 2022 to make sure they qualify. You can do that through Summer’s online tool as well. You’ll also need to certify all of your previous employment.
If you had FFEL and Perkins loans that have already been consolidated into a Direct loan, all you need to do is certify all previous employment to make sure it counts. If you’ve already done that, your count of qualifying payments should be updated automatically.
If you were previously denied for PSLF because of your repayment plan or payment due date, this should be automatically updated. Keep an eye out for communications from FedLoan Servicing and the Department of Education during their reconsideration and review process over the coming months.
And lastly, if the new rules mean that you’ve made 120 qualifying monthly payments and are ready for forgiveness, congratulations! You can complete one final certification through the forgiveness application. Contact Summer for assistance
Long term changes
For longer term proposals, the Department of Education has suggested solutions that will now come under the scrutiny of the rulemaking process. These updates may not be implemented for a year or more, if at all. Here’s what they’ve suggested for PSLF moving forward.
Redefining employment requirements. Currently, only full time employees in governmental organizations and some nonprofits qualify for PSLF. New rules might expand the definition of full time, and include other organizations that serve the public good outside of specifically registered 501(c)(3)s.
Automatic verification. Rather than require borrowers to turn in forms certifying their employment, the Department of Education may be able to automatically verify employment by cross-referencing the government’s own records.
An appeal process. The PSLF approval process is notoriously difficult and error-prone, so a formal PSLF reconsideration process has also been proposed. This would give borrowers a way to appeal if their applications are wrongfully denied.
Expanding payment eligibility. Similar to the temporary changes above, this would mean that certain forbearances and deferments would count toward forgiveness, and that late or early month payments could count as well.
Consolidation requirement. While consolidation is required for some loan types to access PSLF, it can also reset the clock on the 10 years to forgiveness. The Department of Education is “considering” whether to change this feature that has stood in the way of many borrowers receiving forgiveness.
More information will continue to be announced in the coming weeks and months, including changes to streamline the application process. The long-term structural proposals will take longer to be approved and implemented and will probably undergo changes in the rulemaking process. The good news is that things are moving in the right direction to make student loan forgiveness easier and more accessible to borrowers.
The AFT is holding a series of student debt clinics in October to help borrowers understand and take advantage of the new rules. Find an AFT clinic here.