Borrowers on track for Public Service Loan Forgiveness (PSLF), a federal student loan forgiveness program for people devoted to careers in nonprofit and public organizations, will continue to see significant changes this year. Here’s the latest.
Public Service Loan Forgiveness (PSLF) Servicer Changes: New Details
For years, the PSLF program has been administered by FedLoan Servicing, the Direct loan servicing wing of the Pennsylvania Higher Education Assistance Agency (PHEAA). Last year, FedLoan announced that it would not be renewing its contract with the Department of Education, which was set to expire in December. This would mean that the 8.5 million student loan borrower accounts handled by FedLoan Servicing would need to be transferred to a new loan servicer, including all borrowers currently on track for PSLF.
At nearly the last minute, PHEAA and the Department reached an agreement to extend FedLoan’s contract for another year, delaying the looming loan servicing transfers. But the Department still needed to find a new loan servicer to take over FedLoan accounts and administer the PSLF program going forward once the contract extension expires.
Just before Christmas, the Department quietly announced that a new loan servicer — MOHELA — has been chosen as the replacement servicer for administering the PSLF program. Borrowers on track for PSLF will have their accounts transferred from FedLoan to MOHELA later in 2022.
Other borrowers whose federal student loans are serviced by FedLoan Servicing but are not on track for PSLF will have their loans transferred to other Education Department loan servicers such as Aidvantage, Edfinancial, and Nelnet
Student Loan Payment Pause Now Set To End In May 2022
Last month, the Biden administration made a last-minute decision to extend the ongoing student loan payment pause again. The pause, which suspends all payments as well as interest on government-held federal student loans, was set to end at the end of January.
The latest extension of the payment pause will continue until May 1, 2022. The suspended months will continue to count towards federal student loan forgiveness programs, including Public Service Loan Forgiveness, as if payments were being made. But once the payment pause expires, borrowers will have to resume repayment, and the PSLF program has specific requirements regarding qualifying repayment plans.
Limited PSLF Waiver Set To Expire In October 2022
Under sweeping new reforms announced by the Biden administration in October (called the “Limited PSLF Waiver”), the Department of Education is transforming the PSLF program by relaxing some of the key program criteria that has historically limited student loan forgiveness relief to only certain categories of federal student loans and specific kinds of repayment plans. The changes will allow thousands of additional borrowers to qualify for PSLF relief, and in fact, over $2.4 billion in student loan forgiveness has already been awarded to nearly 40,000 borrowers.
But the changes to PSLF are temporary, and are set to expire on October 31, 2022. Many borrowers will have to take action before that deadline, such as certifying past and current employment or consolidating non-Direct federal student loans through the federal Direct consolidation program, in order to qualify. And after the October deadline passes, the PSLF program will revert to the original program rules, unless the temporary changes are extended by the Biden administraiton (and so far, there is no indication that they will be).
Additional Changes To PSLF Regulations May Be Finalized This Year
While the Biden administration has made many new changes to PSLF through presidential executive action, the Education Department is also in the process of overhauling regulations governing PSLF to more permanently alter the program. Last month, the Department held a negotiated rulemaking session to discuss several proposed changes including automating employment certifications, broadening the definition of a qualifying payment, allowing certain types of deferment and forbearance to count, and expanding the categories of qualifying employment. Rulemaking committee members also discussed making some elements of the Limited PSLF Waiver permanent, such as allowing payments made prior to federal Direct loan consolidation to be counted towards PSLF.
The Department’s negotiated rulemaking committee failed to reach a consensus on proposed changes to PSLF during last month’s session, so it is unclear which changes Department officials will choose to include in new regulations. More information on the final proposed regulations will likely be released later in 2022, with implementation targeted for mid-2023.
Further Student Loan Reading
Student Loan Forgiveness: Biden Administration Considers More Changes To Program For Public Service Workers
3 Big Takeaways From Biden’s Surprise Extension Of Student Loan Relief
$2.4 Billion In Student Loan Forgiveness For 38,000 Borrowers Is In The Pipeline, Says Education Department
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