Public Service Loan Forgiveness Gets a Temporary Overhaul

We’re happy to share some good news for student loan borrowers just released by the Department of Education. The Department, much maligned over the small fraction of applications approved for the Public Service Loan Forgiveness (PSLF) program, announced some temporary changes to the program, including what they’re calling a Limited PSLF Waiver, that will open up or accelerate eligibility for forgiveness for many borrowers working in public service. The Public Service Loan Forgiveness program has offered the possibility of loan forgiveness to borrowers who have made 120 eligible payments on eligible loans while working for an eligible employer. While relatively straightforward on its surface, the details of the PSLF program have stymied borrowers so that only 2% of applicants for forgiveness have been approved. What qualifies as eligible payments, loans, and employers is complicated and opaque to borrowers who have received very little guidance from their loan servicers. The flexibilities just announced, however, remove some of the barriers to forgiveness that borrowers have faced. The Limited PSLF Waiver includes:

• While previously applicable only to Direct Loan payments, payments made on older FFEL or Perkins Loans will count toward forgiveness, as long as those ineligible loans are consolidated into the Direct Loan program and PSLF application submitted by October 31, 2022.
• While previously applicable only to income-dependent or standard payments, payments made under any repayment plan prior to October 31, 2021 will count toward forgiveness, as long as the PSLF application is submitted by October 31, 2022.
• While previously applicable only to full, on-time payments, payments slightly short or a few days late will count toward forgiveness, as long as the PSLF application is submitted by October 31, 2022.
• Payments deferred by military service members while serving on active duty will count toward forgiveness.

Read the Department of Education’s Public Service Loan Forgiveness fact sheet for further details on the overhaul. The Department of Education will begin to automatically review previously processed PSLF applications over the coming months to give borrowers credit for eligible payments under the new Limited PSLF Waiver and expect over 550,000 borrowers to gain additional progress toward forgiveness, with some having loans forgiven immediately. While this recent announcement is certainly good news for borrowers hoping to qualify for Public Service Loan Forgiveness, borrowers should remember that the goal of repayment is, for most, to get their loans paid off at the minimum total cost to them. For some borrowers, that will mean taking advantage of the Limited PSLF Waiver to accelerate forgiveness. For other borrowers, their least cost option will be pre-paying loans to minimize total interest paid. Students should utilize the Department of Education’s Loan Simulator to estimate the costs of various repayment options before banking on forgiveness as their best option.