This is the last week to apply for student loan forgiveness under a unique solution to the Public Service Loan Forgiveness Program (PSLF), called the PSLF Limited Waiver. The waiver initiative has already enabled thousands of student borrowers to receive billions of dollars in loan forgiveness that they might not have otherwise qualified for.
If you haven’t yet taken the steps to apply, there is still time. Here’s what borrowers need to know.
How the Civil Service Loan Relief Worked Before
Public Service Loan Forgiveness (PSLF) is a student loan forgiveness program for borrowers who commit to working for non-profit or government organizations. Congress passed the program in 2007, and it can result in full forgiveness of federal student loans in as little as 10 years.
But Congress initially created fairly complex eligibility rules for the PSLF, which in turn were not always properly communicated to borrowers by the Department of Education and its network of student loan servicers. The program required 120 “qualifying payments” (which, if made consecutively, equals 10 years, although consecutive payments are not required). Only payments made on direct federal student loans under a standard 10-year plan or one of the available income-contingent repayment (IDR) plans would be considered, and payments had to be made within 15 days following the billing due date. Payments made on the “wrong” type of federal student loan (such as FFELP loans), under the “wrong” type of repayment plan (such as an extended or graduated plan) would not count. And payments made too early or too late in relation to the due date could be rejected for technical reasons.
Because of these issues, the PSLF program never really eclipsed a 2% approval rating.
Student Loan Forgiveness Through Limited PSLF Waiver
The Biden administration signed into law the limited PSLF derogation last year as a one-time, temporary solution to long-standing problems with the PSLF program.
Under the PSLF’s limited exemption, the Department of Education can retroactively count prior loan periods as early as October 2007 as “eligible payments” to the PSLF, as long as the borrower was in eligible government employment. Past loan periods that can count include:
- Any repayment period on any Direct, FFELP or Perkins loan under any repayment plan, whether payment has been made in full or on time. This includes periods prior to loan consolidation.
- Abstention periods of 12 consecutive months or more, or 36 cumulative months or more.
- Months spent in deferment prior to 2013 (other than school deferments), as well as deferments due to economic hardship as of January 1, 2013.
With these sweeping changes, millions of federal student loan borrowers will significantly advance their progress toward student loan forgiveness under the PSLF, and many will receive full loan forgiveness.
But the Limited PSLF Waiver initiative is a unique solution, and it is due to end on October 31. After that, the original PSLF rules come back into effect.
Applying for Student Loan Forgiveness under the PSLF Exemption
Some borrowers may not have to do anything to qualify for the limited PSLF waiver. In particular, borrowers who have all direct federal student loans (either because they started with all direct loans or later consolidated direct or FFELP loans into one federal direct consolidation loan) and have already certified their employment in the public service using the PSLF employment certification forms, can automatically obtain credit under the waiver.
But other borrowers may need to act:
- Borrowers with FFELP loans or Perkins loans who want those loans to get credit under the limited PSLF waiver must consolidate those loans through the Federal Direct Consolidation Program by October 31.
- Borrowers with multiple federal student loans (whether direct loans or FFELP loans) with different numbers of PSLF payments can consolidate their loans through the Direct Loan Consolidation Program by October 31 to maximize the PSLF credit. Through the limited PSLF waiver, the Department of Education says it will apply the highest number of eligible PSLF payments to a direct consolidation loan based on the PSLF number of individual loans consolidated.
- Borrowers who have not certified all of their public service jobs (whether they have FFELP loans or direct loans) must complete and submit PSLF employment certification forms by October 31. The Ministry of Education strongly recommends that borrowers use the Online PSLF Help Tool to create their PSLF forms which will then need to be signed by their employer.
What does the October 31 deadline for student loan forgiveness mean?
The direct consolidation process normally takes a month or two. However, the Department of Education says borrowers simply need to submit their request for direct online credit consolidation through StudentAid.gov before October 31 for it to be considered timely.
For the PSLF employment certificate forms, the education department says: “Don’t panic! You are not required to submit a PSLF form to MOHELA [the Dept. of Education’s PSLF loan servicer] before October 31, 2022, if you have completed » certain steps:
- Use the PSLF Helper Tool before October 31 and complete all the steps required to generate a PSLF form which will then be printed, signed, submitted and approved.
- Submit a manual PSLF form (not generated by the PSLF Helper Tool) with your employer’s signature dated October 31, 2022 or earlier, which will then be approved. “To receive the benefits of the PSLF limited waiver, the employer signature and date on your PSLF form must be on or before October 31, 2022, even if you submit your form at a later date,” the Department explains. education.
The Biden administration has created a website with detailed guidance on the PSLF limited waiver application process, including more details on eligible loans and prior loan periods, as well as instructions on exactly what borrowers must do to qualify for the limited PSLF waiver in these final days of the program. Borrowers should carefully review all guidelines posted on this website to understand their options and obligations.
Student loan forgiveness temporarily blocked, but not for PSLF
Borrowers should be aware that the limited PSLF waiver is entirely separate from Biden’s waiver unique student loan forgiveness program who can provide $10,000 or up to $20,000 in student loan forgiveness for borrowers with qualifying loans who have earned within certain income guidelines.
Last week, a federal appeals court temporarily blocked implementation of Biden’s one-time student loan forgiveness program in response to a lawsuit filed by Republican-led states. However, this administrative stay only applies to the single cancellation program. This makes not contact the PSLF.
Moreover, while FFELP loans are excluded from relief under the Single Cancellation Initiative Following a policy reversal by the Biden administration several weeks ago, FFELP loans can still potentially qualify for the limited PSLF waiver and ultimately qualify for student loan forgiveness if borrowers follow the required steps.