Making the Most of the Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness (PSLF) Program is an important—but largely unmet—promise to provide debt relief to support teachers, nurses, firefighters, and others serving their communities. By cancelling loans after ten years of public service, PSLF removes the burden of student debt on public servants, makes it possible for many borrowers to stay in their jobs, and entices others to work in high-need fields.

The Department of Education has announced a set of actions that, over the coming months, will restore the promise of PSLF. They will offer a time-limited waiver so that student borrowers can count payments from all federal loan programs and repayment plans toward forgiveness. This includes loan types and payment plans that were not previously eligible. They will also pursue opportunities to automate PSLF eligibility, give borrowers a way to get errors corrected, and make it easier for members of the military to get credit toward forgiveness while they serve.

These changes are important steps toward a better and stronger PSLF program, one that will move away from the current situation in which too few borrowers receive forgiveness and too many do not receive credit for years of payments they made because of complicated eligibility rules, servicing errors, or other technicalities. The department is also working to identify further improvements to ensure public servants get the relief they deserve, including partnerships with employers and revising regulations. These actions are informed by the more than 48,000 comments the department received on a request for information on improving PSLF issued over the summer.

The department estimates that the limited waiver alone will help over 550,000 borrowers who had previously consolidated their loans see their progress toward PSLF grow automatically, with the average borrower receiving 23 additional payments. This includes approximately 22,000 borrowers who will be immediately eligible to have their federal student loans discharged without further action on their part, totaling $1.74 billion in forgiveness. Another 27,000 borrowers could potentially qualify for $2.82 billion in forgiveness if they certify additional periods of employment. For reference, just over 16,000 borrowers have ever received forgiveness under PSLF prior to this action. It is anticipated that many more will also receive additional credit as other changes are implemented over time, such as counting previously ineligible payments that were not affected by a loan consolidation.

The COVID-19 pandemic has placed a tremendous strain on public servants, making it even more critical that borrowers are able to access PSLF. Many public servants have been on the front lines of the pandemic. Frontline sectors like teaching and health care are already seeing burnout and employee shortages. Alleviating some of the financial strain associated with student debt can help borrowers in these sectors as they continue to navigate the fallout of this pandemic.

The Education Department has announced it will:
Implement a limited PSLF waiver to count all prior payments made by student borrowers toward PSLF, regardless of loan program. The department will be offering a temporary opportunity to give borrowers credit for prior payments they made that would not otherwise count toward PSLF. Any prior payments made while working for a qualifying employer will count as a qualifying payment, regardless of loan type or repayment plan.

This limited PSLF waiver will apply to borrowers with direct loans, those who have already consolidated into the Direct Loan Program, and those with other types of federal student loans who submit a consolidation application into the Direct Loan Program while the waiver is in effect. The waiver applies to loans taken out by students.

The waiver will run through Oct. 31, 2022. That means borrowers who need to consolidate will have to submit a consolidation application by that date. Similarly, borrowers will need to submit a PSLF form—the single application used for a review of employment certification, payment counts, and processing of forgiveness—on or before Oct. 31, 2022, to have previously ineligible payments counted. The department recommends borrowers take this action through the online PSLF Help Tool, which is available at https://StudentAid.gov/PSLF. Counting prior payments on additional types of loans will be particularly important for borrowers who have or had loans from the Federal Family Education Loan (FFEL) Program. Around 60% of borrowers who have certified employment for PSLF fall into this category. Many FFEL borrowers report receiving inaccurate information from their servicers about how to make progress toward PSLF, and a recent report by the Consumer Financial Protection Bureau revealed that some FFEL servicers have systematically misled borrowers on accessing PSLF.

Counting payments made on FFEL loans toward PSLF will correct these issues and help address the effects of the COVID-19 pandemic on student loan borrowers. Payments prior to a direct loan consolidation are also covered by this waiver, so it will benefit those who consolidated their direct loans and lost progress toward PSLF as a result. The department will start automatically adjusting payment counts for borrowers who have already consolidated their loans into the Direct Loan Program and certified some employment for PSLF, and those borrowers can expect to see these adjustments in their accounts in the coming months. Borrowers who have loans from the FFEL or Federal Perkins Loan programs will also have this waiver applied automatically, but only after they have consolidated and submitted a PSLF form and all paperwork has been processed.

Simplify what it means for a payment to qualify for PSLF. The limited PSLF waiver also addresses another concern heard from borrowers—that too many payments do not count toward PSLF due to technical requirements around borrowers’ choice of payment plan, timing, and amount of the payment. In some instances, borrowers missed out on credit toward PSLF because their payments were off by a penny or two or late by only a few days.

The department will automatically adjust PSLF payment counts for payments made on or before Oct. 31, 2021, for borrowers affected by this issue who have already certified some employment for PSLF. Borrowers who have not yet applied for PSLF forgiveness or certified employment but do so by Oct. 31, 2022, will benefit from these temporary rules as well.

Eliminate barriers for military service members to receive PSLF. The department will allow months spent on active duty to count toward PSLF, even if the service member’s loans were on a deferment or forbearance rather than in active repayment. This change addresses one major challenge service members face in accessing PSLF. Service members on active duty can qualify for student loan deferments and forbearances that help them through periods in which service inhibits their ability to make payments. But too often, members of the military find out that those same deferments or forbearances granted while they served the country did not count toward PSLF. This change ensures that members of the military will not need to focus on their student loans while serving the country. Federal Student Aid will develop and implement a process to address periods of student loan deferments and forbearance for active-duty service members and will update affected borrowers to let them know what they need to do to take advantage of this change.

Automatically help service members and other federal employees access PSLF. Military service members and other federal employees devote themselves to serving the US, and it should be as easy as possible for them to get PSLF. Next year, the department will begin automatically giving federal employees credit for PSLF by matching Department of Education data with information held by other federal agencies about service members and the federal workforce. To date, approximately 110,000 federal employees and 17,000 service members have certified some employment toward PSLF. These matches will help the department identify others who may also be eligible but cannot benefit automatically, like those with FFEL loans.

Review denied PSLF applications and identify and correct errors in PSLF processing. Errors in the review and processing of PSLF applications have been a particularly worrisome barrier to PSLF access. Many borrowers report discrepancies in their PSLF payment counts, and PHEAA, the student loan servicer responsible for processing PSLF payments, has entered into a settlement with the Massachusetts attorney general to review PSLF applications for potential errors. FSA will be transitioning PSLF accounts away from PHEAA to a new servicer.
For more information, visit www.StudentAid.gov.