The Biden administration is considering other changes to the Public Service Loan Forgiveness (PSLF) program, a student loan forgiveness program that can wipe out federal student loan debt for borrowers working for nonprofit or public employers. These changes could go beyond some of the recent temporary reforms the Department of Education is currently introducing. Here’s the latest.
Background information on student loan disbursements for government employees
Public Service Loan Forgiveness (PSLF) is often referred to as a 10-year program, but technically it requires 120 “qualifying payments,” each of which must meet very specific (and often confusing) eligibility criteria. Under the original rules of the PSLF program, a qualifying payment must:
- get hit on Direct federal student loans. Other types of federal student loans, such as B. Family Federal Education Loan (FFEL) program loans and Perkins loans do not qualify unless they are consolidated into a federal loan for direct consolidation (and even then, payments made prior to consolidation would not count). .
- be repaid under one income-related repayment plan or the 10-year standard repayment schedule. Payments under other repayment schedules and periods of non-payment (like most deferrals and deferrals, with the exception of the ongoing Covid-related deferral) are not eligible.
- Done fully and on time while the borrower is work as a full-time W-2 employee for a domestic government agency or nonprofit organization (in most cases, it must be a 501(c)(3) nonprofit organization).
Because of these rather complex eligibility criteria and the historically poor administration of the program by the Department of Education and its contracted loan servicers, PSLF has been plagued by very low approval rates for years.
Temporary Changes to Government Loan Forgiveness: The Limited PSLF Waiver
On October 6, the Biden administration announced the Limited PSLF Waiver program. The Department of Education, using emergency executive power, is relaxing key rules of the PSLF program, allowing for a limited time many more borrowers to qualify for student loan forgiveness under the program. Here are the key features of the Limited PSLF Waiver:
- Payments on most FFEL loans and Perkins state loans are eligible for PSLF credit provided the borrower meets employment requirements and consolidates those loans through the state direct consolidation program.
- Any months that the borrower was in a “paying status” may count towards PSLF provided the borrower met the employment requirements. That means it doesn’t matter what repayment schedule the borrower was on or if the borrower made a timely payment at all.
The changes to the PSLF program will have significant benefits for thousands of student loan borrowers, many of whom have already begun having their loans forgiven. However, the limited PSLF waiver does not address all deficiencies of the PSLF program and is not permanent – the waiver expires on October 31, 2022. This means that after this date the PSLF program would revert to the original rules.
The Department of Education is considering further changes to PSLF
Last week, the Department of Education held a negotiated rulemaking meeting on longer-term changes to the PSLF program. Negotiated rulemaking is a process by which a federal agency can change existing regulations for specific federal programs. The federal agency typically makes specific proposals for regulatory reform, and then a rulemaking committee made up of key stakeholders (in this case, student loan borrowers, attorneys, schools, and government officials) discusses and debates the proposals. If the committee reaches a consensus, the ministry will go ahead and finalize the new regulations in accordance with that consensus. If there is no consensus, the Department can go ahead on its own, but take into account the Rulemaking Committee’s comments and amend some of its suggestions.
Ahead of last week’s negotiated rulemaking meeting on PSLF, the Department of Education released several proposed improvements to PSLF that would take effect after the PSLF limited waiver expired, including:
- Automate employment certificates through federal data-sharing tools so borrowers don’t have to constantly submit documents signed by their employers for payments to count towards PSLF.
- Simplifying the counting of payments “so that an amount paid by the borrower counts towards the total scheduled payment due for forgiveness, even if the payment is made in multiple installments or outside of the payment window.” if they are not paid in full at once or on time.
- Permit certain deferrals and deferrals to count towards PSLF when the deferral or deferral itself clearly qualifies as qualifying employment (e.g., a deferral from AmeriCorps that would require the borrower to work as a full-time service member of AmeriCorps).
- Permit payments made prior to direct loan consolidation, including non-direct federal loans, to count toward loan forgiveness. This would codify the temporary changes currently being implemented through the temporary Limited PSLF Waiver.
- Set up a PSLF appeal or review process for rejected applications.
Members of the negotiated rulemaking committee welcomed the Department’s proposals but argued that the Department should go much further in improving the PSLF program. Proponents have argued that the definition of skilled employment should be broadened to include certain occupations currently excluded, such as performing essential services. The ministry opposed these proposals as difficult or impossible to implement.
Advocates have also pushed for a tighter and more affordable income-based repayment plan that would go hand-in-hand with the PSLF scheme, but many negotiators on the committee were deeply disappointed by the ministry’s proposal for a new income-based repayment plan.
Also not included in the Department’s proposed changes to PSLF was a gradual loan forgiveness as the borrower advances in their public service career, rather than an all-or-nothing loan forgiveness after completing 120 payments. Biden had proposed a phased waiver of public sector loans during his 2020 presidential campaign.
Next Steps for Student Loan Forgiveness for Government Workers
The negotiated rulemaking committee failed to reach consensus on the proposed changes to PSLF. As a result, the Ministry of Education can now proceed to implement its proposals. Department officials must decide which of the rulemaking negotiating committee members’ suggestions to include in the final rules. No changes are expected to come into force until 2023.
In the meantime, borrowers can take advantage of the Limited PSLF Waiver Program – you can learn more about this program here.
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