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WASHINGTON DC — A waiver temporarily expanding eligibility for the Public Service Loan Forgiveness Program expires today, but the Biden administration said Tuesday it is taking steps to make it easier for qualified borrowers to receive debt relief in the future.
Many Democrats have called on the Biden administration to extend the PSLF waiver, which targets public sector workers. More than 236,000 borrowers were approved for more than $14 billion in forgiveness over the past year thanks to the waiver, but more people were expected to qualify.
Instead of extending the waiver, the Biden administration is making some permanent changes to the program that will take effect in July 2023. These moves are separate from President Joe Biden’s student loan forgiveness plan, which will cancel up to $ 20,000 in student. loans for low and medium income borrowers. That program is currently on hold while a federal appeals court considers a legal challenge to the program.
“Now, as we emerge from the pandemic and the waiver period ends, we are focused on making this program work in the long term,” Education Secretary Miguel Cardona said in a call with reporters Tuesday about PSLF .
The PSLF program cancels all federal student loan debt for eligible government and nonprofit workers after making 120 qualifying monthly payments, lasting at least 10 years. The amount of student debt relief is not capped, so PSLF could offer a more generous benefit than Biden’s one-time forgiveness program to those who qualify. It is possible that some borrowers qualify for both relief programs.
But the PSLF program has been riddled with problems. Before Biden announced the temporary changes to the program, many borrowers reached 10 years of repayment believing they qualified for cancellation of their remaining debt, but instead discovered they had the wrong type of loan or were paying into a plan of wrong reimbursement. . In 2019, the US Government Accountability Office found that approximately 99% of PSLF applications were rejected.
The administration is still encouraging eligible borrowers to apply for PSLF waivers before October 31 to receive debt relief. While many of the benefits of the waiver will exist after July 2023, borrowers who no longer work in a qualified employer or who have benefited from teacher loan forgiveness, in particular, still need to apply before on October 31.
The permanent changes will take effect in July
The Department of Education will officially change some of the rules of the PSLF program through updated federal regulations, which will take effect in July.
The changes allow borrowers to receive credit toward PSLF on payments that are made late, in installments or in a lump sum. The previous rules only counted a payment as eligible if it was made in full within 15 days of its due date.
Under the new rules, time spent in certain deferment or forbearance periods counts toward PSLF. These periods include deferments for cancer treatment, military service, financial problems and time served in AmeriCorps and the National Guard.
The new rules also simplify the criteria for meeting the requirement that a lender be a full-time employee in a public sector job. The new standard will consider full-time employment at 30 hours per week. In particular, the change will help adjunct faculty in public colleges qualify for the program.
Under the revised regulations, borrowers will receive some credit for past due payments when they consolidate older loans into Federal Direct Loans to qualify for the program. Borrowers first lost all progress toward forgiveness when they consolidated. After July, they will receive a weighted average of existing qualifying payments toward PSLF.
Automatic account updates will begin in November
The Biden administration also announced Tuesday that it will begin implementing a policy change announced in April related to accounts payable and will automatically update borrowers’ accounts.
The one-time updates begin in November and are expected to bring many borrowers — even those who are not public sector workers — closer to forgiveness.
Some borrowers will see their past payments counted, correcting past errors in the payment account towards forgiveness.
The one-time recommendation applies to borrowers who are enrolled in what is known as the income repayment program, or IDR. The program, which offers four types of repayment plans, allows borrowers to avoid loan default by lowering their monthly payments based on their income and family size. IDR also promises the forgiveness of the loan after 20 to 25 years of payments are made, according to the specific plan.
The recount may also be an additional credit toward PSLF if the borrower has certified qualified employment. Borrowers must be enrolled in an IDR plan to qualify for PSLF.
For those borrowers who do not currently have a qualified Federal Direct Loan, they must apply for consolidation by May 1, 2023, to get all the benefits of the one-time account adjustment.
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