What you need to know about the changes to the public service loan exemption

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Hundreds of thousands of student loan borrowers received a surprise giveaway from the federal government last week when the U.S. Department of Education announced temporary changes to the Public Service Loan Cancellation Program (PSLF), including the ‘extension of the types of eligible loans.

The Education Department estimates that an additional 550,000 borrowers – including teachers, nurses, the military and others – may now be eligible for forgiveness due to the changes.

It’s part of the Biden administration’s larger effort to cancel some student loans. Already, the administration has canceled the debt of more than 450,000 people, including some disabled borrowers and others who have been swindled by for-profit colleges.

Here’s what to know about the most recent changes.

The PSLF program is designed to write off the remaining debt of nonprofit and government employees who make 120 on-time monthly payments on certain types of federal student loans.

To be eligible, borrowers must tick four boxes:

1. They must work full time for a qualified employer
2. They must make 120 monthly payments on time for the full amount due on their invoice
3. They must have direct loans (or group together in direct loans)
4. They have to pay off their debt as part of an income-based repayment plan

However, it has been notoriously difficult for borrowers to qualify for the rebate, due to complex rules and administrative negligence. The education department most recent data reveals that only about 5% of student loan borrowers who applied for relief got it.

The Department of Education is making several big changes.

One of the most important is that the ministry is now offering a dispensation count retroactively FFEL, or federal family education loans, toward the 120 payments needed for forgiveness, as long as the loan is consolidated in the direct loan program.

It could help hundreds of thousands of government officials who have made payments on these types of loans for years without knowing they were not eligible for forgiveness, said Betsy Mayotte, president of the Institute of Student Loan Advisors. , a non-profit organization.

In addition, the Department of Education now counts any prior payments made as eligible for the 120 needed, “regardless of loan type, repayment plan, or whether payment was made in full or on time,” as long as the borrower has to lend. So, partial payments, those made under an extended repayment plan, and late payments will all count towards the 120. That said, there is one type of loan that is still not eligible: Parent PLUS Loans.

“What you have paid or when you have paid it does not matter with this waiver”, specifies Mayotte. “They only look at the months your loans were in repayment status.”

Federal employees and military service members will also have their jobs certified automatically, rather than having to do it themselves. Members of the military who suspend their loans while in service will see those months count toward the 120 required payments.

The ministry will also review all applications that have already been denied for errors and offer an appeal process to those who believe they should have qualified.

Borrowers will be able to use this loophole for next year, until October 31, 2022, the current end date of the national Covid-19 emergency. The Ministry of Education is able to make the changes under the HEROES Act, a 2003 law that allows it to waive certain rules during times of national emergency.

After that, “the old rules of the PSLF apply again”, specifies Mayotte. “I wouldn’t count on any kind of grace period for that.”

Borrowers will receive a letter from the Ministry of Education with an update on the changes. However, it will likely take FedLoans until February or March to update each borrower’s record to reflect the status of the remission process, Mayotte says.

To qualify for the waiver, borrowers with FFEL program loans, federal Perkins loans, or any federal student loans that are not direct must consolidate their loans in the direct loan program by October 31, 2022. Borrowers can do it here. They must also present proof of eligible employment. Then borrowers can submit a PSLF application.

Mayotte says that under normal PSLF rules, consolidation restarts a borrower’s monthly payment count. This is suspended during the waiver period. For more information on consolidation, visit StudentAid.gov Where Mayotte FAQ here.

Borrowers must also generally work for an eligible employer when they request a rebate in order to receive it, but this requirement is also waived. Borrowers who have made 120 payments with an eligible employer but have since obtained a new job may still be eligible for a pardon.