Simplified Payment Qualifications, Reduced Barriers to Forgiveness, and a Second Chance for Denied Applicants: How the PSLF Overhaul Will Impact Borrowers

By Owen Daugherty, NASFAA Staff Reporter

On Wednesday evening, Department of Education (ED) leadership participated in a town hall detailing significant changes to the Public Service Loan Forgiveness (PSLF) program that were announced earlier in the day. 

During the town hall event Wednesday night, Education Secretary Miguel Cardona said borrowers “shouldn’t have to jump through hoops. If you give 10 years of service to the community, you should have loans forgiven."

“We're going to make sure that we fix whatever the issues are. We're going to make sure we simplify the process, and we're going to make sure we're reviewing the processes that we have to fix whatever's broken,” Cardona added.

Regulatory changes for PSLF are anticipated to come through the ongoing negotiated rulemaking process in tandem with actions taken and announced by ED through its emergency authority that aim to reimagine the program and how it operates for those working in the public service sector. 

In a fact sheet released Wednesday morning, ED detailed the changes the PSLF program is slated to undergo through a temporary waiver provided by the department, which is utilizing emergency authorities related to the coronavirus pandemic to temporarily suspend some of the program's requirements.

Specifically, the waiver will allow eligible borrowers to count payments from all federal loan programs or repayment plans toward forgiveness, including those who made payments on loans originated through the now-defunct Federal Family Education Loan (FFEL) program, borrowers who consolidated their FFEL loans into the Direct Loan program, and those who had already made 120 payments on a Direct Loan, but in an ineligible repayment plan.

Additionally, payments made by active-duty military members whose loans are deferred or in forbearance while they’re serving will now count toward forgiveness through PSLF. 

Notably, borrowers who previously had their application for forgiveness under PSLF denied will have those cases reviewed to identify and address any errors, ED noted. The department will also engage in more targeted outreach and communication with borrowers to ensure they are better informed about the program, starting this fall with emailing borrowers who have hit 120 PSLF-eligible payments during the student loan repayment pause but need to verify their employment to receive forgiveness. A web page detailing the new rules for qualifying payments and what borrowers need to do was published Wednesday.

ED said the temporary waiver will run through Oct. 31, 2022, meaning borrowers who need to consolidate will have to submit a consolidation application by then, and borrowers will need to submit a PSLF form that documents employment certification, payment counts, and processing of forgiveness, before that date to have previously ineligible payments counted. 

Both Cardona and James Kvaal, undersecretary at ED, cautioned at the town hall meeting that implementation of the changes would take time. 

“I’d like to say we're going to fix everything at once, but it will take some time,” Kvaal said. “And there probably will need to be further steps in addition to today's action.”

In pitching the announcement, ED also held a virtual round table discussion on Wednesday with four student loan borrowers who all had adverse experiences with the PSLF program. The borrowers — who were all public servants, with careers in education, the military, or public health — addressed how ED’s actions would assist in their goal of achieving the promise of debt forgiveness, either by receiving forgiveness due to their met qualifications or by setting them on a clearer pathway to forgiveness due to eligibility qualifications being clarified.

All told, the changes announced Wednesday will allow more than 550,000 public service workers to make up for lost progress toward being eligible for forgiveness under the PSLF program, ED said in the fact sheet. The department estimated of the 550,000 borrowers, the changes will on average equate to 23 additional payments, or roughly 2 years worth of payments per borrower.

Further, about 22,000 borrowers will become immediately eligible to have their debts relieved under the new policy, totaling $1.7 billion in forgiven loans, according to the fact sheet. And another 27,000 borrowers with loans totaling $2.8 billion could qualify for forgiveness if they fill out the necessary paperwork to certify additional periods of qualifying employment.

ED also said starting next year it will automatically track loan forgiveness for service members and other federal employees using data from federal agencies to eliminate the need for paperwork from these borrowers.

“We applaud these long overdue changes from the administration that will bring much needed relief to hard working public servants,” said NASFAA president and CEO Justin Draeger. “While the temporary waivers are welcome, we would like to see these policy changes made permanent and look forward to working with the department and lawmakers to create a sustainable PSLF program that supports and benefits borrowers.”

NASFAA in a recent letter to ED called on the department to take “extraordinary measures to provide public service loan forgiveness regardless of where the loans were held,” acknowledging that long-term fixes will likely require congressional action but that there are measures ED can take to provide more immediate relief to borrowers.

Democrats praised the move by the Biden administration, but the news was not as fondly received by republicans. Rep. Virginia Foxx (R-N.C.), the ranking member on the House Committee on Education and Labor, said in a statement that the American taxpayers will foot the bill for the PSLF overhaul that will bring more generous terms to the program.

“The price tag will be in the billions; combined with Biden's inflation crisis and the fact that government always overspends but rarely delivers, taxpayers should expect to be on the hook for much, much more,” she said. “Today’s announcement, Biden’s latest abuse of executive authority, is another step towards blanket student loan forgiveness and the Democrats are allowing it to happen.”

The waivers announced Wednesday by ED come after years of experts and advocates blaming the program’s strict and confusing eligibility requirements for an array of obstacles that prevent public service workers from securing forgiveness through the PSLF program. Relatively few borrowers have received forgiveness through the program since its inception due to a high denial rate and a lack of guidance and direction from both the department and student loan servicers. 

Stay tuned to Today’s News for developments on PSLF changes from ED as well as coverage of the negotiated rulemaking hearings this week.


Publication Date: 10/7/2021

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