Last month, the Biden administration announced sweeping new changes to Public Service Loan Forgiveness (PSLF), a federal student loan forgiveness program. But so far, the rollout has not been smooth.
For years, the PSLF program suffered from confusing eligibility requirements, low approval rates, and poor oversight from the Department of Education. The changes announced by the administration were aimed at filling gaps in the program and significantly expanding the pool of eligible borrowers. But more than four weeks have passed since the ministry announced on October 6 to expand the program, and many borrowers are facing conflicting information or still waiting for more details on program requirements and application procedures. .
Background: Biden Changes to Public Service Loan Remission (PSLF)
The changes announced in October, which the Department of Education calls the âPSLF Limited Waiverâ program, will temporarily relax several requirements of the PSLF program. Specifically, the waiver program will allow payments made on non-direct federal student loans – such as FFEL loans and Perkins loans – to count towards the 120 borrower payments required for loan forgiveness (these loans do not). were previously not eligible for the PSLF). The program will also allow payments made under any available repayment program, rather than just an income-based repayment plan, to qualify. Finally, under the waiver, the Department will adjust payments that were previously rejected due to technical details, such as payments that were not made on time or were not made to the full amount invoiced.
The Ministry will automatically provide a portion of the limited exemption from the PSLF. Specifically, for direct loan borrowers who have already certified their employment, Education Department staff will review borrower accounts for rejected payments and adjust a borrower’s total number of eligible payments accordingly. The ministry has already started sending emails to direct loan borrowers with preliminary estimates of how many previously rejected PSLF payments can be added to their totals.
But for many other borrowers, some form of action will be required. For example, borrowers benefiting from the FFEL program or Perkins loans may need to consolidate these loans through the Federal Direct Consolidation program to gain the benefit. And many other borrowers will need to submit the PSLF employment certification form. Borrowers must act before October 31, 2022, the expiration date of the limited PSLF exemption program.
Student loan forgiveness requests complicated by Loan service issues
Borrowers have previously reported issues with the limited PSLF waiver. The Debt Collective, a syndicate of debtors and an advocacy group for student loan borrowers, published screenshot on Twitter of borrowers who received PSLF denials from FedLoan Servicing – the only Department of Education contracted service provider that runs the PSLF program – long after the ministry’s Oct.6 announcement. And as first reported By NPR, many other borrowers have also received denials from FedLoan since Oct. 6, although they are eligible for relief under the new rules. FedLoan told NPR he is still awaiting further guidance from the Department of Education.
To complicate matters further, FedLoan recently announced that it will be pulling out of the federal student loan system after its contract expires in December. The ministry has not announced who will take over the PSLF accounts after FedLoan leaves. Meanwhile, FedLoan told NPR he “can’t move forward” until the department changes his service contract.
This puts borrowers in a bind. Historically, borrowers consolidating their federal student loans and seeking PSLF relief had to go through FedLoan as the sole PSLF contractor. But with FedLoan’s impending withdrawal from the system and the apparent inability to address the new limited PSLF waiver program, there is significant uncertainty. The Ministry of Education has not provided clear guidelines to borrowers on which service service they should choose to consolidate their loans (if direct loan consolidation is required), nor have officials provided alternate instructions for submitting the PSLF Employment Certification, which is required for most borrowers to obtain the benefits of the PSLF Limited Waiver.
Department of Education did not answer key questions on details of student loan cancellation
Meanwhile, the Department of Education has not provided clear details on certain aspects of the limited PSLF waiver program. For example:
- When borrowers consolidate multiple FFEL loans with different payment histories into one direct consolidation loan, will the Ministry credit the direct consolidation loan with the maximum number of PSLF payments based on the FFEL loan with the most payments? Some advocates have suggested the answer is ‘yes’, but the ministry has not provided borrowers with definitive information.
- Will Direct Consolidation Loans that contain Federal Parent PLUS Loans qualify for the PSLF Limited Waiver? The Ministry said Parent PLUS loans are excluded from the waiver, even though they are consolidated by October 31, 2022. But officials did not say whether the Parent PLUS loans that were already consolidated before October 6 can benefit from the exemption. Direct Consolidation Loans that contain Parent PLUS Loans may qualify for PSLF, even under the original program rules, if they are repaid under the Income-Based Repayment Plan.
- What will be the ministry’s process for counting qualifying payments or qualifying months under the limited PSLF waiver program? If the ministry uses a borrower’s repayment status as reported to Federal Student Aid (as opposed to a loan officer’s payment history), how will the ministry handle erroneous reports on loan status?
The implementation of the student loan waiver as part of the PSLF waiver may be added to the end of the student loan payment break
The ministry did not provide specific details on when implementation of the limited PSLF waiver program will be completed, or when eligible borrowers can expect to start receiving relief. FedLoan posted an important message on its website that it could be “several months” before borrower accounts reflect the new PSLF changes.
Meanwhile, the ministry said it would revamp its function as a PSLF aid tool “in the coming months” to help borrowers seeking relief from the limited PSLF exemption, “but a PSLF application via the tool may not be available in the short term â.
A few months could be important, as the current federal student loan payment hiatus is set to expire on Jan.31, 2022, forcing millions of borrowers to repay in February. If borrowers eligible for the student loan exemption under the PSLF Limited Waiver cannot apply for or receive relief by then, many may have no choice but to resume payment. of their loans, despite the right to cancellation.
Federal Student Aid COO Richard Cordray has sought to reassure borrowers in a letter released yesterday. “Please understand that complex changes of this magnitude are difficult to process and execute,” he wrote. âThey require large-scale data and processing work, which takes timeâ¦ We are working as quickly as possible to update your account and give you clear and accurate information. It may take several months. We may not be able to answer specific questions immediately as we are focused on processing over 1 million borrower accounts. But we’re going to get the changes made, and I promise you today. We ask for your patience as we move forward. Cordray also promised that the confusing information provided to borrowers, including false denials from FedLoan, is “temporary” and will be corrected in the coming months.
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