This week, the Biden administration announced a drastic change in the Civil Service Loan Forgiveness (PSLF). This is a major federal student loan forgiveness program that has been plagued by problems and low approval rates since its inception.
The government relaxes key requirements that limited PSLF eligibility to certain types of federal student loans and certain repayment programs. According to the Ministry of Education, the result could be a significant expansion of the program, ultimately benefiting nearly 600,000 student loan borrowers.
An overview of the new changes in the PSLF program includes potential targets and how to request relief.
All repayment plans are subject to Public Service Loan Exemption (PSLF)
Under the new changes, the Ministry of Education has shown that payments made under a repayment plan can now be counted as eligible payments for PSLF. “Previous payments made while working for a qualified employer are counted as qualified payments, regardless of loan type or repayment plan,” said the Ministry of Education.
Previously, only payments made under an income-driven repayment plan or a 10-year standard repayment plan were counted as eligible payments. Payments made under extended repayment plans, gradual repayment plans, and other fixed or level plans with a term of more than 10 years were excluded. Payments made under these plans are currently counted as long as the borrower was in a PSLF qualified employment at the time the payment was made.
Importantly, the change dates back to the creation of the PSLF program in October 2007, but not before that date. Therefore, payments made before October 2007 cannot be counted in PSLF. Most non-payment periods, such as school postponements, hardship grace, and default periods, do not count towards PSLF.
Payments made on non-direct federal student loans, including FFEL loans, are now eligible for PSLF
The ministry has also relaxed PSLF standards that limit eligibility for payments made solely on direct federal student loans. Payments made with other types of federal student loans, such as Perkins loans and older FFEL program loans, were not historically counted as eligible PSLF payments. “Counting upfront payments for additional types of loans is especially important for borrowers who have or have had loans from the Federal Family Education Loans (FFEL) program,” the Ministry of Education wrote in a statement. .. “Approximately 60% of borrowers certified to employ PSLF fall into this category.”
Under the new changes, the department will count payments made on non-direct federal student loans, including FFEL loans and Perkins loans, to PSLF only if the borrower was engaged in qualified employment for PSLF. Borrowers need to consolidate these loans through the Federal Direct Integrated Loan Program in order to make a profit.
However, some loans are not yet eligible for PSLF. For example, payments made on private student loans and payments made on Parent PLUS loans prior to direct loan consolidation will continue to be excluded.
Payments made prior to direct loan consolidation may count towards PSLF
Another major change the department is making includes counting payments made prior to direct loan consolidation to PSLF. Historically, loan consolidation effectively “restarts the clock” during the borrower’s repayment period, including the purpose of PSLF.
The consolidation resumes the watch for the borrower’s wider repayment period (which should be noted), but if the borrower worked in a qualified employment, the department would pay the payments made prior to the direct loan consolidation. Allow PSLF to count Payments have been made. “Payments before the direct loan consolidation … will be covered by the change,” the department wrote in the announcement.
However, as mentioned above, payments made with a Parent PLUS loan prior to direct loan consolidation are not eligible for PSLF.
PSLF payments rejected for technical reasons will be revived
The department will also take steps to revoke the professional refusal to pay. “Due to technical requirements for payment planning, payment timing and borrower choice of amount, too many payments will not be counted in PSLF,” the agency wrote. “In some cases, the borrower missed credit to PSLF because the payment was delayed by a penny, or just a few days.”
The ministry has conducted audits over the next few months to show that it will automatically adjust eligible PSLF payments for borrowers who are unfairly rejected for this type of technology.
Special PSLF changes for military personnel
The ministry also announced a drastic change in PSLF for military service members. “The number of months spent in active duty allows the service member’s loan to be counted in the PSLF even if it is postponed or postponed rather than actively repaid,” the Biden administration said. This is usually a requirement for PSLF. “This change eliminates the need for military members to focus on student loans while serving our country.”
The ministry will also take steps to automate the registration of military service members and federal officials with PSLF.
How to apply for relief under the extended PSLF
The ministry has characterized changes to the PSLF program as “limited PSLF exemptions” implemented using emergency enforcement agencies. As a result, relief is available for a limited period of one year, with a deadline of October 31, 2022.
The department will automatically provide some of the relief. For example, the department has shown to automatically adjust for rejected payments due to identifiable technology.
However, for other borrowers, action may be required. For example, a borrower who has not integrated FFEL and Perkins loans will integrate the loan through the Federal Direct Integration Program by October 31, 2022 to obtain a prepayment for these loans to count on PSLF. need to do it. Before the merger, the borrower must be absolutely confident that employment for the required period will be subject to PSLF.
Borrowers who already have all direct program federal loans must apply for a PSLF-based student loan exemption by October 31, 2022 (if they have made a total of 120 payments required), or You must prove your employment by that date. Eligible for PSLF exemption benefits.
The ministry said it would release more information in the coming weeks to help guide borrowers.
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