The U.S. Department of Education announced plans Wednesday to overhaul the much-maligned Public Service Loan Forgiveness Program, which would bring relief to more than 550,000 student loan borrowers employed as public servants, including teachers, nurses, first responders and active-duty service members.
The PSLF was designed to cancel loans once those who work in the public sector had fulfilled 10 years of monthly payments, however stringent rules have handcuffed many of those participating in it. Borrowers have had past-due payments or those that were short by pennies not counted because of technicalities. New changes would help to give credit back to those who apply for waivers.
Under the new limited-time plan, those with consolidated loans would see an average of two years of progress toward that 10-year goal. Some 50,000 borrowers would have their loans released, including 22,000 who would see $1.74 billion in immediate forgiveness. The remaining 27,000 individuals – totaling another $2.8 billion in relief – would need to certify employment in order to be granted full waivers.
“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” said U.S. Secretary of Education Miguel Cardona. “The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country. So many public service workers have had our back especially amid the challenges of the pandemic. Today, the Biden Administration is showing that we have their backs, too.”
Part of the mission of the PSLF program has been to help keep strong the public service workforce. But beset by financial and family struggles and the difficulties of those jobs during the COVID-19 pandemic, some are opting to leave. The PSLF is one of many incentives, that if not satisfied, could push them into private sector positions.
“Many public servants have been on the front lines of the pandemic, making personal sacrifices to keep the rest of us safe,” the Department said in a statement. “Nonprofits are still recovering jobs lost in the last year, and some public service workers have reported they are considering leaving public service altogether. Frontline sectors like teaching and healthcare are already seeing burnout and employee shortages. Alleviating some of the financial strain associated with student debt can help borrowers in these sectors as they continue to navigate the fallout of this pandemic.”
What comes next
The Department says it will be reaching out to borrowers with more information on the program in the next few months and its impacts, but the Federal Student Aid office is already making information available on the waiver process, which will be required for borrowers to get relief. Borrowers can qualify if they have Direct Loans or are willing to consolidate their Federal Family Education Loans, Federal Perkins Loans, or other loans into the Direct Loan program by Oct. 31, 2002. Those who have Parent PLUS loans would not be eligible.
Aside from the Direct Loan requirement, borrowers must have been employed full-time (or averaged 30 hours of work per week) in a government, not-for-profit or other service position during times when prior payments were made. As long as waivers are received by Oct. 31, payments that were made starting from October 2007 will be honored. The Department promised to work with employers in the future as well as assess other regulations.
The Department admitted that FFEL borrowers may have gotten inaccurate information from their servicers on how to matriculate payments to satisfy those loans. The Consumer Financial Protection Bureau noted that servicers have used “unfair or deceptive acts or practices related to payment application” in its Supervisory Highlights report this summer. They hope to rectify those situations now and in the future.
“We will pursue opportunities to automate PSLF eligibility, give borrowers a way to get errors corrected, and make it easier for members of the military to get credit toward forgiveness while they serve,” the Department said, noting that acting-duty service members will have deferments and forebearances count and will be data-matched in the future to ensure a smoother application process. “We will pair these changes with an expanded communications campaign to make sure affected borrowers learn about these opportunities and encourage them to apply.”
In addition to the relief, the Department said it would try to better the reporting on the PSLF program, including “improving outreach and communication with PSLF-eligible borrowers, simplifying the application process and making long-term improvements to PSLF through rulemaking.