Top Department of Education (ED) officials on Tuesday provided an update on one-time account adjustments to address servicer errors that resulted in incorrect payment counts toward time-based loan forgiveness under income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), as well as PSLF regulatory changes ED expects to release by November 1.
Education Secretary Miguel Cardona and Under Secretary James Kvaal reiterated that although the limited PSLF waiver period will not be extended past next week’s expiration, ED will use the rulemaking process to implement longer-term changes to the program, which Cardona said would ensure that borrowers in public service jobs could more easily access the promised benefit of forgiveness.
“The idea was simple,” Cardona said of the creation of PSLF. “Qualifying for forgiveness was not — the system was full of trap doors.”
As a part of Tuesday’s announcement, ED clarified that updated payment counts, as part of a one-time account adjustment announced in April, credited toward IDR forgiveness also count toward PSLF for “any months in which a borrower has certified qualifying employment on loans borrowed as a student.” According to ED, the credit will be automatically applied to borrowers with eligible Direct and department-managed Federal Family Education Loans (FFEL), and they do not need to apply. However, if a borrower does not have eligible loans they will need to apply for consolidation no later than May 1, 2023, to ensure they benefit from this one-time account adjustment.
Cardona explained that instead of offering an extension of the waiver, like NASFAA and a number of other higher education groups advocated for, ED would bring about more long-term changes to the program.
“Now, as we emerge from the pandemic and the waiver period ends, we’re focused on making this program work for the long haul,'' Cardona said. Rather than extending the waiver, he said, “today we are announcing permanent changes to reduce the red tape and the confusing rules that riddled the PSLF program in the past.”
According to ED, many of the limited PSLF waiver’s benefits will be available after new regulations become effective next July, but officials still encouraged borrowers to apply as quickly as possible since the new regulations will not include all of the benefits provided by the current waivers, such as the ability to count service qualifying toward Teacher Loan Forgiveness toward PSLF as well, and the ability to receive forgiveness even if the borrower is no longer working at a qualifying employer at the time forgiveness is granted.
ED’s permanent updates to the PSLF program will come through final regulations that were developed during the negotiated rulemaking process last year and according to the department will be published by November 1. According to ED these impending regulations will eliminate many unnecessary barriers to obtaining forgiveness.
Tuesday’s announcement also included an update to awarding forgiveness for borrowers enrolled in IDR plans who have had their payment counts adjusted due to ED’s one-time fix to address past servicer failures to correctly count payments toward forgiveness. Next month, ED will begin forgiving loans for borrowers that have reached the required monthly payments as a result of the payment count adjustment.
Borrowers who reach 120 payments for PSLF due to the inclusion of periods in deferment or forbearance as a result of the payment recount will also receive forgiveness if the 120th payment occurred before November 2022.
Additionally, borrowers who receive additional credit for IDR or PSLF through the one-time account adjustment but who do not reach the required monthly payments for forgiveness under the programs will have those changes reflected in their accounts in July 2023.
“To receive this credit toward IDR, however, a borrower must have Direct Loans or FFEL loans managed by the department,” ED explained. “Borrowers who have other types of federal loans have to consolidate into the Direct Loan program to receive the credit.”
“Today’s announcements are big steps, but they won't be the end of the story. We’re going to keep working to improve this program,” Kvaal said. “People who spend their careers teaching in our schools, helping the most vulnerable and serving our country, they deserve an easy, simple, and transparent path to PSLF, that’s what these new regulations are about.”
Publication Date: 10/26/2022