The Biden administration is considering even more changes to the Public Service Loan Forgiveness (PSLF) program, a student loan forgiveness program that can wipe out the federal student loan debt for borrowers working for nonprofit or public employers. These changes could go above and beyond some of the recent temporary reforms that the Department of Education is currently rolling out. Here’s the latest.
Background On Student Loan Forgiveness For Public Service Workers
Public Service Loan Forgiveness (PSLF) is often talked about 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 governing the PSLF program, a qualifying payment must:
- Be made on Direct federal student loans. Other types of federal student loans, such as Family Federal Education Loan (FFEL) program loans and Perkins loans, don’t qualify unless they are consolidated into a federal Direct consolidation loan (and even then, payments made prior to consolidation would not count).
- Be repaid under an income-driven repayment plan or the 10-year Standard repayment plan. Payments made under other repayment plans, and periods of non-payment (such as most deferments and forbearances, with the exception of the ongoing Covid-related forbearance) don’t qualify.
- Be made in full and on time while the borrower is working as a full-time, W-2 employee for a domestic government entity or nonprofit organization (in most cases, it has to be a 501(c)(3) nonprofit).
Because of these rather complex eligibility criteria and historically poor management 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 Public Service Loan Forgiveness: The Limited PSLF Waiver
On October 6, the Biden administration announced the “Limited PSLF Waiver” program. Using emergency executive authority, the Department of Education is relaxing key rules governing the PSLF program that will, for a limited time, allow many more borrowers to qualify for student loan forgiveness under the program. Here are the key features of the Limited PSLF Waiver:
- Payments made on most FFEL loans and federal Perkins loans can count towards PSLF, provided the borrower was meeting the employment requirements and consolidates those loans through the federal Direct consolidation program.
- Any months where the borrower was in a “repayment” status can be counted towards PSLF, provided the borrower was meeting the employment requirement. That means that it does not matter what repayment plan the borrower was in, or if the borrower even made an on-time payment.
The changes to the PSLF program will have significant benefits for thousands of student loan borrowers, many of whom have already started to get their loans forgiven. But the Limited PSLF waiver does not address all of the PSLF program’s shortcomings, and it’s not permanent — the waiver will expire on October 31, 2022. That means that the PSLF program would revert back to the original rules after that date.
Education Department Considers Additional Changes To PSLF
Last week, the Department of Education held a negotiated rulemaking session on longer-term changes to the PSLF program. Negotiated rulemaking is a process by which a federal agency can change existing regulations governing certain federal programs. The federal agency typically puts forward specific proposals for regulatory reform, and then a rulemaking committee comprised of key stakeholders (in this case student loan borrowers, legal services advocates, schools, and government officials) discusses and debates the proposals. If the committee reaches a consensus, the Department moves forward and finalizes the new regulations in accordance with that consensus. If there is no consensus, the Department can move forward on its own, but can consider the comments from the rulemaking committee and could change some of its proposals.
In advance of last week’s negotiated rulemaking session on PSLF, the Education Department released several proposed improvements to PSLF that would be effective after the expiration of the limited PSLF waiver, including:
- Automating employment certifications through federal data-sharing tools, so borrowers don’t have to constantly submit paperwork signed by their employers to get payments counted towards PSLF.
- Simplifying payment counting “so that an amount paid by the borrower equal to the full scheduled payment due counts toward forgiveness, even if the payment is made in multiple installments or outside the payment window.” Prior to the waiver, borrowers often had payments rejected if they were not made in full all at once, or on time.
- Allowing certain deferments and forbearances to count towards PSLF, where the deferment or forbearance itself clearly counts as qualifying employment (such as an AmeriCorps forbearance, where the borrower would have to be working as a full-time AmeriCorps service member).
- Allowing payments made prior to Direct loan consolidation, including on non-Direct federal loans, to count towards loan forgiveness. This would codify the temporary changes currently being implemented through the temporary Limited PSLF Waiver.
- Establishing a PSLF appeal or reconsideration process for denied applications.
Members of the negotiated rulemaking committee applauded the Department’s proposals, but argued that the Department should go much further in improving the PSLF program. Advocates have argued that the definition of qualifying employment should be expanded to include certain professions that are currently excluded, like healthcare workers employed by for-profit healthcare entities, and contractors who are technically not “employees” but exclusively contract with nonprofit or government entities to provide important services. The Department resisted these suggestions as difficult or impossible to implement.
Advocates have also pushed for a more streamlined and more affordable income-driven repayment plan, which would go hand-in-hand with the PSLF program, but many negotiators on the committee were deeply disappointed with the Department’s proposal for a new repayment plan based on income.
Also absent from the Department’s proposed changes to PSLF was incremental loan forgiveness as the borrower makes progress in their public service career, rather than all-or-nothing loan forgiveness at the conclusion of 120 payments. Biden had proposed incremental public service loan forgiveness during his 2020 presidential campaign.
Next Steps For Student Loan Forgiveness For Public Service Workers
The negotiated rulemaking committee failed to reach consensus on proposed changes to PSLF. As a result, the Department of Education is now free to proceed in implementing its proposals. Department officials will need to decide which, if any, suggestions by negotiated rulemaking committee members to incorporate into the final rules. No changes would likely be effective until 2023.
In the mean, borrowers can take advantage of the Limited PSLF Waiver program — you can learn more about that program here.
Further Student Loan Reading
Student Loan Forgiveness: Education Department Clarifies Rules For Expanded New Program
Details On New Student Loan Income-Based Payment Plan: Some New Benefits, But Advocates Are Disappointed
Student Loan Forgiveness Changes: Who Qualifies, And How To Apply Under Biden’s Expansion Of Relief
First Wave Of Borrowers Gets $715 Million In Student Loan Forgiveness Under New Program Expansion