The Biden administration is in the process of cancelling $2 billion in student loans for 30,000 borrowers.
“Check your inboxes!” said Secretary of Education Miguel Cardona in a tweet last week, noting that $715 million in student loan forgiveness had already been finalized, with another $1.2 billion on the way. “Over the coming weeks, more borrowers – including veterans & service members – will get emails” about student loan forgiveness, he said.
Student Loan Forgiveness Expanded For Borrowers Working In Public Service
The relief that Secretary Cardona was referring to is a new expansion of the Public Service Loan Forgiveness (PSLF) program, which forgives the federal student loan debt for borrowers after 10 or more years of qualifying public service employment for nonprofit and government organizations. Last month, the Biden administration announced that it would temporarily relax some of the core PSLF program requirements.
The PSLF program requires 120 “qualifying payments” for a borrower to achieve loan forgiveness. Previously, only Direct federal student loans, and certain types of repayment plans based on a borrower’s income, would count towards a borrower’s student loan forgiveness term under PSLF. Due to a combination of confusing eligibility criteria established by Congress, poor facilitation by loan servicers, and a lack of oversight by the Department of Education, many borrowers who thought they were on track for PSLF were not actually complying with the program’s rules. Other student loan borrowers were doing everything right, but encountered bureaucratic red tape and other administrative issues that caused payments to be rejected. As a result, the PSLF program has long suffered from low approval rates.
Under the new changes announced last month, which the administration is calling the “Limited PSLF Waiver” program, the Department is temporarily relaxing the rules governing PSLF to allow most types of federal student loans, and most types of repayment plans, to qualify. The Department will also be counting past payments that should have qualified but were rejected due to technical issues or other errors.
These Borrowers Are Getting Their Student Loans Forgiven Under The Expanded PSLF Program
The 30,000 student loan borrowers that Secretary Cardona was referring to in his earlier tweet largely fall into several definable categories:
- Direct federal student loan borrowers who have already certified their public service employment, but had prior payments rejected for PSLF because those earlier payments were made on a non-qualifying federal student loan (such as a FFEL loan or Perkins loan) prior to Direct loan consolidation.
- Direct federal student loan borrowers who have already certified their public service employment, but had prior payments rejected for PSLF because those earlier payments were made under a non-qualifying repayment plan, such as an Extended or Graduated repayment plan.
- Direct federal student loan borrowers who have already certified their public service employment, but had prior payments rejected for technical reasons (such as timeliness).
These borrowers essentially represent the low-hanging fruit of a larger potential pool of PSLF-eligible borrowers. Since these borrowers already have Direct-program federal student loans and have already certified their periods of qualifying employment, the Education Department can simply review borrowers’ prior repayment records and loan status histories, and determine administratively how many additional payments should be added to a borrower’s total PSLF payments. The Department can then automatically forgive the federal student loan debt for borrowers who qualify under the waiver.
More Borrowers Will Get Their Student Loans Forgiven In The Coming Months
Many other borrowers will become eligible for the Limited PSLF Waiver program in the coming months, including the following:
- Borrowers who currently have FFEL loans or Perkins loans and have been working in qualifying PSLF employment. To qualify for the Limited PSLF Waiver, these borrowers must consolidate these loans via the federal Direct Consolidation loan program, and certify their employment by submitting the PSLF Employment Certification form, before October 31, 2022. Some borrowers are in the process of consolidating now. But since the process typically takes 30-60 days, most of these borrowers have not yet had their student loans forgiven under the PSLF waiver.
- Borrowers who have Direct loans, but have not certified their employment. To qualify for the Limited PSLF Waiver, these borrowers must certify their employment by submitting the PSLF Employment Certification form before October 31, 2022.
- Borrowers who have irregularities or errors in their loan records. These borrowers may have to request a manual review or audit of their accounts if the Department does not automatically adjust their PSLF payment count.
The Department has not provided an official estimate of how many borrowers will become eligible after the initial wave of approvals, or how much student loan debt will be forgiven as a result. However, the Department suggested in previous statements that an additional $2.82 billion in student loan forgiveness, on top of the initial $2 billion, could be on the way.
“There is more to come!” said Secretary Cardona in a tweet on Sunday, alluding to the additional student loan forgiveness that will continue to roll out in the coming months.
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