Public Service Student Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) program was created in 2007 as part of an effort to encourage students to go into public service as a vocation. Qualifying public servants, like government workers and teachers, could potentially receive forgiveness of student loan debt after ten years of qualifying payments on said loans.
The program, in the state that it was originally created, wasn't doing much. In fact, up until October of last year, only about 16,000 people had seen their student loan debt forgiven. An estimated 98% of all forgiveness applicants were turned down. The reason for this? The government had restricted eligibility for PSLF to only certain types of federal student loans and specific repayment plans.
This all changed last October when President Joe Biden expanded, albeit temporarily, the qualification terms for receiving forgiveness. Consequently, according to data released by the Department of Education (DOE) in late January, roughly 70,000 people have received forgiveness since October 2021, an increase of over 400%.
To qualify for PSLF, you must first meet the following three qualifications:
• Be employed at a US federal, state, local, or tribal government or nonprofit organization;
• Work full-time; and
• Have "Direct" Federal Loans.
It's that last requirement of having direct federal loans that seems to be the crux of why so many that otherwise might qualify for forgiveness were being denied. More specifically, in the early days of the PSLF program, many debtors had obtained their loans from private lenders, not directly from the federal government. And while the private lending option ended in 2010, so that all subsequent loans are direct federal loans, anyone having a loan still under the old private system did not qualify for PSFL.
Further, even those who had their loans moved from private to public did not get credit towards the ten-year payment requirement mentioned in the first paragraph above for payments made while the loans were still privately held.
For a limited time, however, things have changed. Now, through October 31, 2022, a special waiver is in effect that gives credit for prior payments made to any program that would otherwise not count toward PSLF, with one big caveat, that being you must have met the initial three qualifying conditions.
This means that if you already have direct federal loans, or you have already consolidated your student loans into direct federal loans, all you have to do is submit the PSLF application to receive credit for all past loan payments to any student loan toward your loan forgiveness progress. This must be submitted on or before October 31, 2022.
If, on the other hand, you still have loans not considered direct federal loans, you will need to consolidate your loans into direct loans to receive credit for payments made on that previous debt. But you will need to consolidate BEFORE applying for forgiveness and again, all of this must be done on or before October 31, 2022. As things stand now, loans consolidated after this date will not qualify to have payments prior to consolidation qualify towards the ten-year progress period.
Even more good news, the DOE says that it will be reviewing all prior denied applications looking for applicants that were erroneously denied relief, and will correct any errors found with further action needed on the part of the applicants.
More information on the expanded forgiveness program and action you may need to take can be found at https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service.
