You have likely been reading a lot about student loans in the news. The next looming date is August 31, 2022, when payments for federal student loans turn back on after a COVID-19 induced moratorium spanning more than two and half years. This deadline has been extended several times, and it’s possible it will be again. At the same time, reports are that President Biden is weighing all options around federal student loan forgiveness, so stay tuned.
A program of significance to anyone working in the public or nonprofit sector has undergone major, but temporary, changes that have resulted in 145,000 people receiving debt relief.
In the meantime, a program of significance to anyone working in the public or nonprofit sector has undergone major, but temporary changes that have resulted in 145,000 people receiving debt relief in the amount of $8.1 billion since last October.[1] The Public Service Loan Forgiveness (PSLF) program forgives most types of federal student loans for anyone who has worked in the public or nonprofit sector and made loan payments for ten years (a total of 120 payments) while employed in those positions. The 10 total years need not be consecutive. Late last year, I wrote about the problems plaguing this program as people who’d been paying since 2007 (when the program began), first became eligible for forgiveness in 2017. To summarize, it didn’t go well. People were rejected for forgiveness for a host of reasons, and very few were successful in having their loans forgiven. Most of the rejections were due to the chaos and confusion caused by an overly complicated program, and the Department of Education's general disinterest in the program's success.
Most payments, including late and partial payments, will count toward forgiveness
In October, 2021, a new director for Federal Student Aid under the Biden administration (former Ohio Attorney General Richard Cordray) announced major changes to the PSLF program, but noted that many of the changes would be temporary through October 31, 2022. At the same time, the agency would be examining opportunities for major structural changes to PSLF and to federal student loans overall (the administration is beginning to make progress on this front).
Source: U.S. Department of Education, Federal Student Aid, https://studentaid.gov/announcements-events/pslf-limited-waiver[/caption]
Importantly, the temporary PSLF would now allow past student loan payments originally deemed “uncountable” to qualify toward the total payment count. It turned out; many people were unknowingly in the wrong type of payment plan for payments to count toward forgiveness. The temporary program allows most payments, including late and partial payments, to count toward the overall 120 required payments. All of these changes will get people closer to loan forgiveness!
Importantly, the temporary PSLF would now allow past student loan payments originally deemed “uncountable” to qualify toward the total payment count.
What do I need to do to access this temporary Public Student Loan Forgiveness program?
You’ll find some helpful resources linked below along with some helpful tips.
- Confirm you work and/or worked for an eligible employer. If you work or worked in the public or nonprofit sector and have federal student loans (not private loans), it is definitely worth checking to see if your current or past employer counts as an eligible employer. You can do that here. Even if there are gaps in your employment in the public or nonprofit sectors, you should check to see if any periods of repayment are eligible. You may work in the sector in the future and getting past payments counted now can help move you closer toward forgiveness then.
- Utilize the PSLF tool. This helpful tool on the U.S. Department of Education Federal Student Aid website can walk you through the process of identifying eligible loans, eligible payments and notifying you of forms etc. that you may need to submit. You can access the tool here. It is imperative that you start on this process before the October 31, 2022 deadline in order to maximize the flexibility allowed under the temporary PSLF program. PSLF will still be around after this deadline, but the temporary flexibility allow for more types of payments to count.
- There are some helpful resources for employers, too. Employers should know if they’re an eligible employer for PSLF and use this as a recruitment tool and added employee benefit! The resource linked ahead is a little outdated, as it doesn’t recognize the temporary PSLF program, but it’s helpful in describing the program to employers and includes a template for employers to certify employment, which is an important role of employers in this process. You can access the resource here. At Community Solutions, we invited a speaker to join a staff meeting who walked through the PSLF program. That knowledge helped a few colleagues successfully track past payments under the temporary program and receive loan forgiveness!
- Connecting with loan servicers. If you are already repaying federal student loans, you are most certainly working with a loan servicer. Some of you may already be on track toward PSLF, and if that’s the case, your loan servicer should have been sending you information about the temporary program and how to maximize it. If you aren't connected to PSLF yet, you will likely need to change loan servicers, as PSLF is managed by a specific loan servicer that contracts with the U.S. Department of Education to manage PSLF eligible loans. Start this process as soon as possible to get ahead of the October 31, 2022 deadline. This helpful fact sheet is directed toward loan servicers, but I’ve found it has answered a lot of questions that I’ve had about the temporary PSLF program and what it means for people in various scenarios.
At Community Solutions, we invited a speaker to join a staff meeting who walked through the PSLF program. That knowledge helped a few colleagues successfully track past payments under the temporary program and receive loan forgiveness!
Nine million student loan borrowers are eligible for loan forgiveness
PSLF, and student loans in general remain complex. A recent report from the Student Borrower Protection Center identified more than 9 million borrowers who are eligible to pursue forgiveness under PSLF.[2] Only two percent have received forgiveness and only about 15 percent of eligible borrowers have begun to track payments toward forgiveness. Demystifying PSLF, even a little a bit, will enable more people to take the opportunity to count more payments toward loan forgiveness. Fully utilize the resources linked above and don’t hesitate to ask questions of your loan servicer and the U.S. Department of Education. Hopefully, this all leads to larger structural changes to make student loans less confusing to begin with, and allows people of all backgrounds to access higher education.
[1] https://www.wsj.com/articles/student-loan-forgiveness-for-public-service-workers-totals-8-1-billion-since-october-11656086429
[2] https://protectborrowers.org/new-analysis-more-than-9-million-public-service-workers-with-federal-student-loans-eligible-for-debt-cancellation-fewer-than-2-percent-have-received-relief-and-only-15-percent-on-track/
