On Wednesday, the US Department of Education announced a series of changes to the civil service loan forgiveness program. The PSLF allows borrowers on federal direct loans who make 120 qualifying monthly payments while working full-time for an eligible employer to have the remainder of their balance forgiven. Eligible employers include any federal, state, local or tribal government and nonprofit organizations
“Today, the Ministry of Education announces a set of actions which, over the coming months, will restore the promise of the PSLF”, reads a press release from the Ministry of Education.
“We will be offering a time-limited waiver so that student borrowers can count payments from any federal loan programs or repayment plans for remission.” This includes types of loans and payment plans that were not previously eligible. a way for borrowers to correct mistakes and make it easier for members of the military to obtain forgiveness credit while they serve. . “
The PSLF has already been criticized for not living up to its name and purpose.
In 2018, the Ministry of Education released data showing that 29,000 borrowers had requested the cancellation of their student loans under the PSLF, but only 96 were canceled. This means that over 99% of borrowers who applied were turned down.
In response, Congress authorized an extension of the program. However, a 2019 Government Accountability Office report found that about 99% of loan cancellation requests under this newly expanded program were turned down. According to the report, the Department of Education processed nearly 54,000 pardon requests, approved only 661, and spent just $ 27 million of the $ 700 million set aside by Congress for the program. expanded.
“The changes correct several flaws in the PSLF program. Some payments, for example, did not count towards the rebate because automatic payment programs rounded payments to the nearest penny instead of the nearest penny,” the teaching expert explains. superior Mark Kantrowitz. “They should have made these changes a long time ago.”
Here is what you need to know about the “redesign” of the PSLF:
The waiver has a time limit
Perhaps the biggest change announced is that the Education Department will offer a limited waiver so borrowers can count their payments, “regardless of loan type or repayment plan.”
The ministry estimates that the waiver will bring more than 550,000 borrowers closer to an average of 23 loan forgiveness payments and immediately make 22,000 borrowers eligible for cancellation.
The Department also reiterates that the waiver is strictly a “temporary opportunity”.
Borrowers who need to consolidate will need to submit an application and PSLF form by October 31, 2022 for previously ineligible payments to be counted.
Additionally, the limited PSLF waiver will only be available to borrowers. who have direct loans, federal family education loans, and Perkins loans (not private loans) and will only apply to student loans.
Military service can be considered a payment
It should be noted that the new rules will mean that a borrower’s months spent on active duty can be counted in the PSLF, even if the service member’s loans were deferred or forborne rather than in repayment.
“Too often, the military discover that the same reprieve or abstentions granted while they were serving our country did not count for the PSLF,” the ad read. “This change ensures that members of the military will not need to focus on their student loans while serving our country.”
Part of this new policy appears to be still being developed.
“Federal Student Aid will develop and implement a process to manage student loan deferral and forbearance periods for active duty members and update affected borrowers to let them know what to do. to take advantage of this change, ”the ad read. .
The PSLF is under construction
Many changes to the PSLF are expected to be rolled out in the coming months.
To keep up with the changes, the Department of Education encourages borrowers to register for an FSA ID and update their StudentAid.gov contact information.
And student loan managers will also receive this updated information over time. Borrowers can report problems with their loan officers to the FSA ombudsman.
“So many Americans who have dedicated their careers to public service have relied on the PSLF for relief, but found the odds were stacked against them thanks to a host of issues that plagued the program,” said Chuck Bell, director. advocacy programs for Consumer Reports in a statement. . “Instead of having their loans canceled after a decade of serving their communities, borrowers were left with a heap of debts and broken promises. Today’s action by the Department of Education means that our military, teachers, firefighters and other public servants are finally going to be treated fairly and can get the relief they deserve. “