Student loan program changes could help forgive your debt

If you are paying off student loans, you probably have noticed recent headlines about making student loan forgiveness possible for more borrowers. The U.S. Department of Education (DOE) is making (temporary) fixes, officially called a waiver, to the Public Service Loan Forgiveness (PSLF) program. Here’s your guide to understanding the DOE’s changes and navigating the system so you can get your payments counted towards forgiveness.

If these changes affect you, it’s crucial that you take action as soon as possible. The waiver will end on October 31, 2022.

What is Public Service Loan Forgiveness (PSLF)?

College graduates working for government agencies and non-profits are typically paid much less than their counterparts in private industry, yet they need the same level of education. Congress passed legislation in 2007 creating the Public Service Loan Forgiveness program to make public service more appealing to graduates. PSLF offers forgiveness on the remaining balance of qualifying federal student loans after 120 qualifying payments, while working for a qualifying employer.

What Changes is DOE Making to PSLF?

The Department of Education created this waiver — finally — after years of complaints and a dismal rate of loan forgiveness. PSLF has been riddled with poor communication about program processes, confusion over what payments qualify for forgiveness, poor servicing and administrative foot dragging. The DOE has approved a mere 1% - 2% of PSLF applications since the first loans have been eligible for forgiveness in October of 2017. That’s only 16,000 borrowers out of millions who work in public service!

According to the press release from the Department of Education, its changes to PSLF will:

• Count all prior payments made by student borrowers toward PSLF, regardless of the federal loan program.
• Simplify what it means for a payment to qualify for PSLF.
• Eliminate barriers for military service members to receive PSLF.
• Review denied PSLF applications.
• Identify and correct errors in PSLF processing.

Here’s what didn’t change:

• You must be employed by a government agency, a 501(c)(3) nonprofit agency or other non-profit organization that provides a qualifying service.
• You must work full-time.
• You must have qualifying loans.

What Are Qualifying Loans?

Normal PSLF program rules define qualifying loans as those made through the William D. Ford Federal Direct Loan Program. They can be Direct Subsidized, Direct Unsubsidized, Direct Grad PLUS Loans, or Direct Consolidated Loans. Do you a see a pattern here? They’re all federal Direct Loans.

One of the biggest barriers for borrowers to qualify for forgiveness was having Federal Family Education Loans (also called FFEL or Stafford Loan programs) and/or Perkins Loans. If you attended college before June 2010, you might have FFEL Loans, and if you attended before October 2017, you might have Perkins Loans. Neither loan program exists now.

The waiver makes FFEL and Perkins Loans eligible for forgiveness. Private student loans do not qualify.

What Are Qualifying Payments?

Under normal PSLF rules, qualifying payments are on-time payments made under either a 10-year, standard repayment plan or any of the federal Income-Driven Repayment Plans, in which your monthly loan payment is based on your income and family size. The payments do not have to be consecutive, so if you leave public service for a while and then return, you can resume your payments where you left off. All of that still holds true.

Under its waiver, the Department of Education expands the definition of “qualifying payment.” Any prior payment made will count as a qualifying payment, regardless of loan type, repayment plan, or whether the payment was made in full or on time. All you need is qualifying employment. For individuals who have certified some employment for PSLF, the Department says they will “automatically adjust PSLF payment counts for payments made on or before October 31, 2022. Borrowers who haven’t yet certified employment or applied for forgiveness, but do so by October 31, 2022, will benefit from the same temporary rules.”

What is Qualifying Employment?

Anyone who works full-time for any government agency (federal, state, county, city or Tribal) or a 501(c)(3), tax-exempt nonprofit agency has qualifying employment. Other nonprofit organizations that are not tax-exempt are also qualifying employers if they provide what the federal Internal Revenue Code defines as “qualifying public services.” This includes employment in:

• Military service
• Public safety and law enforcement
• Emergency management
• Public interest law services
• Public education, other school-based services and early childhood education
• Public services for individuals with disabilities and older adults
• Public library services
• Public health

Nonprofit organizations that are not qualifying employers include:

• Labor unions
• Partisan political organizations
• Government contractors working for private, for-profit companies
• Nonprofit organizations that are not tax-exempt and do not provide a qualifying public service as their primary function

Full-time employment means you work in any position for one of the above qualifying employers for an average of 30 hours per week. You may also be considered full-time if you work for two different qualifying employers and you average a total of 30 hours per week. Under normal PSLF program rules, a borrower must be employed at a qualifying employer when they receive forgiveness; the DOE now waived that requirement until October 31, 2022.

On July 1, 2021 the Department also changed their regulations so that time engaged in any form of religious instruction, worship services or proselytizing may now be counted as full-time employment. Unlike the temporary waiver rule changes, this rule change is permanent.

What Are My Next Steps?

If you have loans other than Direct Loans or Direct Consolidated Loans:

• Look up your financial aid summary to identify your loans.
• If you have FFEL and/or Perkins Loans, consolidate those together. Do not include your Direct Loans.
• Request an Income Driven Repayment Plan for future payments.
• Complete a PSLF Form through the PSLF Help Tool.

If you believe you work for a qualifying employer and you previously tried to certify employment for PSLF but were denied:

• Use the PSLF Help Tool.
• Submit a new form through this site.
• This site also has a list of employers the department has already determined as eligible.

If you haven’t yet certified that you work for a qualifying employer or applied yet for loan forgiveness:

• Go to the PSLF Help Tool and complete a PSLF Form. 

Where Can I Go for Current Information or More Assistance?

While these changes are a fantastic step forward, they don’t resolve all issues and they are temporary — only in effect for payments made on or before October 31, 2022. Keep up on all the details by visiting StudentAid.gov. If you are having challenges working with your loan servicer, go to the Feedback Center at Studenaid.gov, where you can file a complaint or get the Federal Student Aid Ombudsman involved.

You can also meet with one of LSS Financial Counseling’s experienced counselors for individualized answers on your federal student loan debt and any other student loan questions. Our counselors are certified by the National Foundation for Credit Counseling (NFCC). Appointments are always free; call 888.577.2227 to set up yours.

Author Shannon Doyle is a Program Manager with LSS Financial Counseling.