The Public Service Loan Forgiveness (PSLF) program is designed to wipe off student debt for public employees after 120 qualified monthly payments, however it has been rejected by 98 percent of applicants due to defects in the scheme.
On Wednesday, the Education Department announced important changes to the program that would help thousands of debtors get the debt relief they deserve.
According to the department’s press release, borrowers will be able to include payments from any federal loan program or repayment plan toward loan forgiveness through PSLF for a limited period, through October 31, 2022. This includes programs and plans that were not previously eligible.
According to the government, this waiver will automatically move 550,000 borrowers closer to student debt relief, including 22,000 borrowers who will be eligible for relief without having to take any action, totalling $1.74 billion in forgiveness. If they prove additional periods of employment, another 27,000 borrowers might be eligible for $2.82 billion in debt forgiveness.
“Borrowers who dedicate ten years of their careers to public service should be able to count on Public Service Loan Forgiveness. To now, the system has failed to deliver on that promise, but for many borrowers who have served their communities and country, that is about to change “In a statement, Education Secretary Miguel Cardona stated.
“Teachers, nurses, first responders, service personnel, and a slew of other public servants have rallied to our aid, particularly in the face of the pandemic’s obstacles. The Biden Administration is demonstrating today that we have their backs as well.”
According to a fact sheet, the Education Department will also make the following important modifications to PSLF:
- Make it easier for payments to qualify for the program, ensuring borrowers do not miss out on credit because of a late payment or wrong amount;
- Allow months spent on active duty for service members to count toward payments, even if the loans were on deferment or forbearance;
- Automatically give service members credit for PSLF without them having to submit paperwork themselves;
- Review all denied PSLF applications to identify and address errors, and borrowers who believe there was a mistake in processing their applications can receive another review next year;
- Improve outreach to PSLF-eligible borrowers;
- Simplify the application process, like exploring allowing employers to sign certification forms for their employees;
- And make long-term improvements to the program through the rulemaking process.
The Education Department aims to implement these adjustments in the coming months, bringing President Joe Biden’s total student-debt cancellation to over $11.5 billion for over 580,000 borrowers.
Biden ran on reforming the PSLF, and his actions on Wednesday demonstrate that he is following through on that commitment. And, as Insider noted earlier this month, if the program stays on track, it will see slight gains but will still only approve 20% of borrowers for forgiveness by 2026 — this revision will likely put debtors on a much better path.
Along with these improvements, the department is working to make modifications to not only PSLF but a number of other loan forgiveness programs, and talks on what those changes should look like started this week. Over 45,000 borrowers had submitted suggestions on how PSLF may be improved to the Federal Register.