Public Service Loan Forgiveness Is Getting a Reboot. Here Are the Details
A segment of student loan borrowers recently received some good news thanks to a major overhaul to the Public Service Student Loan Forgiveness program.
The Department of Education announced this month that up to 550,000 borrowers will see “accelerated forgiveness” of their loans, and that would mean immediate loan forgiveness for tens of thousands.
But if the past is any indication with this long-struggling government program, borrowers might want to take a wait-and-see approach.
The program, also known as the PSLF, was created in 2007 by former president George W. Bush to help public service workers – healthcare, education, social services and so on – get out of student loan debt quicker as long as they followed some strict, and often confusing, guidelines.
In the past, the program had four requirements to qualify:
- A full-time job in the public sector.
- A specific type of federal loan.
- A specific type of repayment plan.
- 120 on-time, non consecutive payments.
In theory, if you met those four guidelines, you could qualify. But if only it were truly that simple.
The program has been plagued by poor communication and conflicting information from the Department of Education and student loan servicers. According to the Education Data Initiative, only 2% of applications have been approved since the program’s inception, and 43% of current applications remain unprocessed.
For those who were approved, many paid off their loans for years, thinking they were making many of the 120 payments to qualify, only to find out later that they had the wrong type of loan or repayment plan.
Recognizing the problems with the PSLF and the hardships many borrowers faced during the pandemic, the Department of Education announced “transformational changes” that they say will put 550,000 public service workers closer to loan forgiveness.
4 FAQs About the Public Service Loan Forgiveness Overhaul
1. How Has the PSLF Changed?
FFEL Loans Now Qualify
Federal Family Education Loans (also known as FFEL) now qualify for the program. Anyone with these types of loans can have past and current payments count toward the 120-payment threshold, assuming the borrower meets other eligibility requirements (of course) and applies by October 31, 2022.
Many Disqualified Payments Now Count
Imagine paying 7 cents more than the required amount of your monthly bill. In the past, that payment wouldn’t count toward your 120 because it wasn’t exact. That odd requirement has been removed. Late payments will now also count as well.
Prior Non-Qualifying Repayment Plans Will Now Qualify (Temporarily)
In the past, the PSLF only accepted a few specific payment plans, like the Pay As You Earn Repayment Plan (PAYE) and Income-Based Repayment Plan (IBR). Loan servicing companies, however, were fraught with misinformation to borrowers, even putting them on disqualified plans in some cases. Those payments, now, will count toward forgiveness.
2. Who Will This Help?
The DOE says the policy will allow 22,000 borrowers with consolidated and previously ineligible loans to become immediately eligible for $1.7 billion in forgiveness. In addition, 27,000 borrowers will simply need to certify employment to become eligible for $2.8 billion in forgiveness.
They also add that more than 550,000 previously consolidated borrowers will have more qualifying payments. In total, the average borrower will have two years cut off their repayment toward forgiveness.
According to some borrowers, the DOE is already making good on their promise. Thousands of emails were recently sent to teachers, nurses and other public servants letting them know their debt could be wiped out long before expected.
Lee Dossett, a physician in Kentucky, was one recipient of loan forgiveness in January 2022. “I reapplied for the public service loan forgiveness (10 years at nonprofit) since they loosened the rules,” he said on Twitter. “They denied at first, but I just got notice that all my med school loans are forgiven. In shock.”
3. How Do I Know if I Qualify?
Whether you qualify for forgiveness will rely on the types of loans you have. As previously mentioned, FFEL loans will qualify, as well as Perkins and Direct loans – which were previously eligible.
To help figure all this out, create an account at The Federal Student Aid Office, which will create your FSA ID. Within that portal, you should be able to identify your loan types.
You can also use the PSLF help tool to determine whether you have a qualifying employer and what other steps you might need to take to become eligible for PSLF. The tool will eventually provide you with the form you need based on the information you provide.
4. What if I Don’t Qualify?
More than 43 million Americans currently have an average of $39,000 in student loan debt – meaning the large majority of borrowers are not public service workers and will not qualify for the PSLF program.
If you find yourself in that group, you have other options:
You might have other ways to have your loans forgiven, canceled, or discharged. You could qualify if:
- You’re permanently disabled.
- You file for bankruptcy (very conditional based on amount of debt).
- Your college falsely certified your eligibility for the loan.
- You become a teacher in a low-income school.
- You volunteer for the Peace Corps.
- You become a child or family services worker.
- You’re in the armed forces and serving in a hostile area.
- You can find forgiveness and discharge forms on the Department of Education site.
Search for student loan payoff contests and grants. Some examples include:
- Between February 2021 and January 2022, Discover Student Loans is giving one winner per month a $5,000 check to help pay off their student debt.
- Sallie Mae is currently hosting a sweepstakes awarding $1,000 to a winner each month. The catch? You’ll need to register for one of their free college planning tools.
- Scholarships 360 has a list of grants, for everyone from lawyers to social workers, that will help borrowers pay back debt.
- Scholly helps students find scholarships, but they also have a weekly cash giveaway. Enter weekly and maybe you’ll receive some cash!
Get out of debt the old-fashioned way.
There’s nothing revolutionary here, but these are some tried and true ways you can pay down your loans and eventually save money.
- Get a side hustle. The ideas are limitless, from rideshare and grocery delivery drivers to freelance creatives, pet sitters and online tutors.
- Cut expenses. Trade in your car to lower payments. Take a break from eating out. Consider changing your phone plan.
- Save money by budgeting. Use the 70/20/10 method to really save cash.
- Sell a bunch of stuff. Let’s face it: Most of us have way too much junk around the house. Sell some old clothes, comic books, books, gift cards, old phones and household items, and even, well, sperm.
The Bottom Line
Whether or not the changes to the NSLF program have the type of effect the Department of Education says they will is yet to be seen. At the very least, they indicate the government’s willingness to recognize the massive burden that has become student loan debt for many Americans.
For more information about student loan forgiveness, and to create an FSA ID, visit the Department of Education website.
Robert Bruce is a senior writer for The Penny Hoarder.