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The Biden administration will revamp the Public Service Loan Forgiveness program, opening up a path for at least 550,000 teachers, nurses, social workers and others who have struggled to access promised student-debt relief.
Among those 550,000 is an estimated 22,000 borrowers who will automatically become eligible for relief from their $1.74 billion in student loans as a result of the changes.
“The news comes after years of complaints dating back to the Obama administration that a combination of the program’s stringent requirements and shoddy student-loan servicing were throwing obstacles in the way of public servants’ path to debt relief.”
The announcement Wednesday from the Department of Education comes after years of complaints dating back to the Obama administration that a combination of the program’s stringent requirements and shoddy student-loan servicing were throwing obstacles in the way of public servants’ path to debt relief — cancellation that in some cases they’d planned their financial lives around.
The changes are part of a series of actions taken by the Department over the past several months to cancel the debt of borrowers who are eligible for relief through certain programs. The agency has discharged more than $1.5 billion in debt from borrowers who were scammed by their schools and $5.8 billion in loans for borrowers with severe disabilities. Still, lawmakers and advocates are calling for some kind of broad-based debt relief.
“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” Secretary of Education Miguel Cardona said in a statement announcing the changes. “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.”
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Simple idea with a complicated reality
The idea of Public Service Loan Forgiveness, which was signed into law in 2007, seems relatively simple: work in a public service job for at least 10 years, make your monthly student-loan payments during that time and have the remainder of your student debt cancelled.
But the reality turned out to be much more complicated. To qualify for the program, borrowers needed to have the right type of federal student loan:
- Only a Direct Loan is eligible.
- You must be in the right type of repayment plan — it must be income-driven.
- Only those with an eligible public-service job qualify — typically government work or a 501(c)3.
- In addition, borrowers have to make 120 eligible monthly payments before qualifying for forgiveness.
- In some cases technicalities — like making a payment too early — would throw off a borrower’s progress from the 120 eligible monthly payments.
What’s more, the student-loan companies hired by the government to manage the repayment process often didn’t give borrowers enough or the right information to navigate the program’s requirements, according to borrowers, lawsuits and government reports. That meant in the first few years borrowers were eligible to have their debt cancelled under the program, the vast majority — 99% — had their applications rejected, even though some had worked in public service for 10 years.
Counting previously ineligible payments
Wednesday’s announcement aims to help public servants who have faced some of these obstacles — and those who may not have even tried to access the program — get closer to receiving promised relief. The agency is doing this through a temporary waiver that will run through Oct. 31, 2022, during which time borrowers working in eligible public-service jobs, but whose payments were ineligible for a whole host of reasons can have those payments counted towards the 120 needed for relief.
Any payments public servants made towards Family Federal Education Loans historically haven’t counted towards forgiveness. Borrowers in this category who consolidate their loans into Direct Loans and submit a PSLF form by the Oct. 31, 2021 deadline will have the payments on their FFEL loans count as part of their progress towards forgiveness.
Public servants who previously consolidated their debt into Direct Loans to qualify for the program had the clock on their progress towards restarted at the time of consolidation, meaning they didn’t get credit for years-worth of student loan payments and public service.
“Payments made by public servants before Oct. 31, 2022 that were previously deemed ineligible because they were in the wrong repayment plan, or because of a timing issue or other technicality, will also now count towards relief.”
As part of the limited waiver, the Department will automatically readjust payment counts for borrowers who previously consolidated their FFEL loans into Direct Loans and certified with the agency that at least some of their employment is eligible for PSLF. Borrowers in this category should expect to see their accounts adjusted to reflect these changes in the coming months, the Department said.
Payments made by public servants before Oct. 31, 2022 that were previously deemed ineligible because they were in the wrong repayment plan, or because of a timing issue or other technicality, will also now count towards relief. The Department will automatically make these changes to borrowers’ accounts as long as they have already certified some of their employment as eligible for PSLF.
As part of the changes announced Wednesday, the agency also plans to make it easier for federal employees to receive debt relief without raising their hand. Beginning next year, the Department will match its data with data held by federal agencies and the military about their workforce and automatically give these employees credit towards debt relief.
In addition to making adjustments to the PSLF program broadly, the Department is also making it easier for military-connected borrowers to receive relief. As of January of last year, just 124 of these borrowers had their debt cancelled, according to a report from the Government Accountability Office, despite performing a quintessential public service. Now, any months military-connected borrowers spent on active-duty will count towards their eligibility for loan forgiveness, even if their payments were paused during that period of service.
Public servants who worked and paid their student loans for 10 years and left the public sector or retired will be eligible for the relief available under the limited waiver.
‘We breathe a collective sigh of relief’
Advocates who had been calling on the agency for years to improve the Public Service Loan Forgiveness program and who since the Biden administration took office had been urging specifically for the Department to cancel the debt of public servants who had worked for at least 10 years cheered the administration’s announcement.
These borrowers have taught children in school, cared for sick patients in hospitals, served in the military and they “took on billions and billions of dollars in debt to do those jobs and to do those jobs well,” said Seth Frotman, the executive director of the Student Borrower Protection Center, one of the organizations that urged the Biden administration to cancel the debt of public servants who worked for at least a decade. “They fulfilled their end of the bargain.”
“What you see starting to come out of the Department is recognition that these folks deserve better,” Frotman said. “We can’t just create a system that tries to improve the situation going forward or tell these borrowers to start again at square one.”
Randi Weingarten, the president of the American Federation of Teachers, which pushed for changes to the PSLF program for years through lawsuits and other advocacy, said in a statement that “today we breathe a collective sigh of relief as the Kafka-esque system that dashed the dreams of far too many finally starts to be dismantled.”
Still, given that beleaguered history of the program, “these wounds will take time to heal,” she added. “The Biden administration’s decision to act is a giant step in both the direction of both basic fairness and legislative intent.”
Questions remain
Of course, there are still questions — particularly given the program’s history of paperwork and logistical challenges — about how smoothly and quickly borrowers will receive the promised relief. Historically, many borrowers have taken pains through meticulous record-keeping, phone calls with their student-loan companies, and more in order to prove their eligibility for the program.
Complicating these challenges is the fact that the student-loan servicing system is in flux. Four student-loan servicers have announced they’re leaving the program in the last year, including the organization, the Pennsylvania Higher Education Assistance Agency, also known as FedLoan servicing, that managed the PSLF program. We’re also just a few months away from the government turning the student loan system back on for the first time.
“Complicating the challenges in proving eligibility for student-loan forgiveness is the fact that the student-loan servicing system is in flux. Four student-loan servicers have announced they’re leaving the program in the last year.”
On a conference call with reporters, a Department official said the agency is “taking care to think through that transition in and of itself really carefully for borrowers.”
“Obviously with the announcement of these changes we are thinking really carefully about how the transition might interact with that,” the official said.
As part of the changes announced Wednesday, the Department will be doing an internal review of previously denied applications based on its own data to identify any errors and working with an outside company to assess FedLoan’s PSLF-related servicing practices, the official said. If after both of these reviews a borrower still believes they were denied incorrectly they will have access to a reconsideration process next year.
To make the changes announced Wednesday the Department is relying on flexibility granted to the agency during the pandemic to waive some of the statutory restrictions to address harm related to the COVID-19 emergency, a Department official said on the call with reporters. That means many of the changes don’t apply to the PSLF program after the limited waiver window closes.
Still, the agency is hoping to make more permanent tweaks to the program that could help borrowers more easily access relief. As part of a collaborative rulemaking process kicking off this week, the agency is considering changes to PSLF, including using data matches instead of an application process in some cases to determine when a borrower might be eligible, allowing certain deferments and forbearances to count as payments towards the 120 necessary for relief and counting payments made on a FFEL loan before consolidation towards forgiveness.
Aaron Ament, the president of the National Student Legal Defense Network, called Wednesday’s announcement “a step in the right direction in addressing the student loan crisis facing our country.”
Last year, Ament’s organization urged the Department of Education to discharge the debt of borrowers working in public service for 10 years who had been in repayment. They’ve also represented both borrowers and the American Federation of Teachers in lawsuits regarding challenges accessing PSLF.
“Countless public servants across the country believed in the promise of loan discharge when they made their decision to work in the public sector,” Ament said in a statement. “Unfortunately, the failures of the Department and its servicers made it nearly impossible for public servants to obtain relief.”
