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Borrowers who had given up hope of having their student loans forgiven under the Public Service Loan Forgiveness (PSLF) Program may have a reason to be hopeful again. The Department of Education recently announced changes that will make PSLF more accessible to qualifying borrowers.
By the Department of Education's own assessment, the PSLF program hasn't fulfilled its promise. Complicated eligibility criteria, loan servicing errors and other issues have gotten in the way of loan forgiveness for thousands of borrowers. In fact, only 2% of applications for loan forgiveness from November 2020 to April 2021 were approved, according to the Department of Education.
Under the new rules, approximately 22,000 borrowers will be eligible to have their federal student loans automatically discharged immediately, amounting to $1.74 billion in forgiveness. Another 530,000 borrowers who previously consolidated their federal loans under the Federal Direct Loan Program could see accelerated progress towards PSLF.
Read on to learn more about these changes and how they could impact you.
How the Public Service Loan Forgiveness Program Works
The Public Service Loan Forgiveness (PSLF) Program helps individuals who work in the public sector alleviate the burden of student loan debt. If you meet the eligibility criteria, you could qualify to have a portion of your student loans forgiven.
PSLF is available to full-time employees of federal, state, local, not-for-profit and tribal government organizations. Qualifying entities include public schools, colleges, universities, child and family service agencies, transportation, water and housing authorities.
Members of the armed forces and full-time Peace Corps and AmeriCorps members also meet the employment criteria for PSLF.
Under the traditional rules, borrowers with full-time qualifying employment of 30 hours or more were also required to meet these criteria:
- Have loans that were extended under the Federal Direct Loan Program
- Be enrolled in an income-driven repayment plan
- Make 120 on-time qualifying payments on a direct loan or direct consolidation loan while employed full time by a qualifying employer
Under these rules, however, payments made while a borrower was enrolled in school or during forbearance, deferment or the six-month grace period after leaving school didn't count.
Changes to the PSLF Program
Under the new changes, announced in October, the Department of Education is offering a time-limited waiver that allows borrowers to count all prior federal loan and repayment plan payments toward loan forgiveness. Any payments previously disqualified will now count as part of the 120 payments needed for loan forgiveness, with two primary conditions of eligibility:
- You must have worked full time for a qualifying employer or employers when the payments were made.
- If you have any loans that are not direct loans or direct consolidated loans (such as Perkins Loans and Federal Family Education Loans), you must consolidate those loans into the Federal Direct Loan Program.
You can get credit for loan payments made after October 1, 2007, when the PSLF program started. The waiver is only available to students who took out loans; Parent PLUS loan borrowers are not eligible.
The waiver deadline is October 31, 2022. Borrowers must submit a PSLF form by that date to get credit for previously ineligible payments. Those who need to consolidate their loans into the Direct Loan Program also need to apply by this date.
In addition to the temporary waiver, the program is instituting the following permanent changes to the program:
- The Education Department plans to review previously denied PSLF applications and work to rectify processing errors.
- Military service members will now get credit for months spent on active duty, even if their loans were in deferment or forbearance during that time.
- The Education Department will expand outreach to eligible borrowers and implement changes to streamline the application process.
The Department of Education says the changes will take effect in the coming months. You can find out which types of loans you have and stay up to date by logging in to your Federal Student Aid account at StudentAid.gov.
Next Steps: How to Apply for Public Service Loan Forgiveness
- Complete the Public Service Loan Forgiveness Certification and Application. Be sure your employer completes the Employment Certification portion of the application. If there are several qualifying employers, you will need a separate application for each unless you've submitted Employment Certification Forms annually.
- Fax or mail the completed application(s) to FedLoan Servicing. You can also upload your PSLF form if FedLoan Servicing is currently servicing your loans. The fax number is 717-720-1628. The mailing address is:
U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184
- FedLoan Servicing will notify you of your application status.
While awaiting a response, continue to make loan payments to remain in good standing and avoid hurting your credit score. You should also stay at your current job or only seek employment with a qualifying employer if you're looking to switch jobs soon.
What to Do if Your PSLF Application Is Denied
If your application is denied, you may have other options. Consider switching repayment plans if you have a federal loan to get a more affordable monthly payment. Consolidation is also an option for both federal and private student loans. Be mindful that consolidating federal student loans into a private loan means you won't have access to federal perks, like income-driven repayment plans or potential PSLF down the road.
Whether or not you qualify for PSLF, paying your student loans on time helps strengthen your credit history and overall financial health. If you're not sure where your credit stands, you can check your score for free with Experian.