3 things to know about the overhaul of the Public Service Loan Waiver program


THROUGH Sydney lake07 October 2021, 12:41

Miguel Cardona, U.S. Secretary of Education, speaks during a Senate Committee on Health, Education, Labor, and Pensions hearing in Washington, DC, United States, in September 2021. (Photographer : Greg Nash — The Hill / Bloomberg / Getty Images)

The education service Wednesday unveiled radical changes to its widely failed Public Service Loan Forgiveness Program (PSLF), which was created to provide debt relief to public servants. The changes will immediately write off an additional $ 1.7 billion in student loan debt, on top of the nearly $ 10 billion in forgiveness for a wide variety of borrowers that President Joe Biden has announced since taking office.

Congress created the PSLF in 2007, and the program was set up to write off the balance of direct loans given to public service workers after making 10 years of payments, or 120 qualifying monthly payments. But since its inception, 98% of borrowers who requested a rebate have been turned down by the program due to a number of obstacles in the approval process.

“So many Americans who have dedicated their careers to public service have looked to the PSLF for relief, but have found the odds against them thanks to a multitude of issues that plagued the program,” he added. Chuck bell, director of advocacy programs for Consumer reports, said in a statement. “Instead of writing off their loans after a decade of serving their communities, borrowers were left with a heap of debts and broken promises. “

The overhaul of the PSLF program is expected to fix some of these issues, including three of the major changes below. Here’s what you need to know.

PSLF changes could help over 550,000 borrowers

The PSLF program is set up to help public servants including teachers, firefighters, social workers and other government or nonprofit employees.

When the program was launched in 2007, the requirements for obtaining a student loan forgiveness seemed quite simplified. Borrowers were required to work in the public sector, be on a repayment plan, and make 120 on-time payments on their student loans.

The “who” in this equation remains the same – the program will always help public servants. The overhaul will only facilitate the process of asking for forgiveness from borrowers.

With the changes to the program, 22,000 borrowers will automatically be eligible for the rebate “without the need for further action on their part.” according to the Ministry of Education. According to the Ministry of Education, 27,000 additional borrowers could receive a collective discount of 2.8 billion dollars if they “certify periods of additional employment.” However, it is estimated that the long-term changes will benefit more than half a million borrowers.

“In total, the ministry estimates that more than 550,000 borrowers who have already consolidated will see an increase in qualifying payments, with the average borrower receiving two more years of progress toward forgiveness,” according to the education ministry. “Many more will also see progress as borrowers consolidate into the direct lending program and apply for the PSLF, and the ministry rolls out further changes in the weeks and months to come.”

Recast will count previously neglected ineligible payments

One of the biggest problems with the PSLF program was that it ignored certain payments made on federal loans. A limited waiver introduced Wednesday as part of the overhaul will allow borrowers to count payments on loans from the Federal loan for family education (FFEL) or the Perkins loan program.

Borrowers must submit a PSLF form by October 31, 2022, so that all of their student loan payments count towards the PSLF. Borrowers from the FFEL and PL programs will have to consolidate their loans in the direct loan program and submit the PSLF form within the same deadline. Members of the active service will also be able to count postponements and abstentions towards the PSLF.

The Education Department will also review previously denied PSLF claims for errors and allow borrowers to reconsider their forgiveness decisions.

“These actions will help identify and resolve service errors or other issues that have prevented borrowers from getting the PSLF credit they deserve,” according to the Department of Education.

The Department is working on “lasting” changes at the PSLF

The Education Department is also exploring other measures to facilitate PSLF forgiveness for borrowers. It will do this through a process called negotiated regulation.

The Office of Post-Secondary Education has compiled a laundry list issues related to how the PSLF has been regulated and managed; and ways to “make payment rules less confusing, to ensure borrowers don’t accidentally lose their progress towards relief through deferrals, abstentions and consolidation, and to give borrowers a clearer process for reconsidering their decisions, ”according to notes from the initial rule-making session this week.

The ministry proposed solutions, including removing some application requirements, improving payment counting, allowing certain deferrals and withholdings from counting as payments, and notifying borrowers about PSLF eligibility.

“Borrowers who devote a decade of their lives to public service should be able to rely on the pledge to forgive public service loans,” Education Secretary Miguel Cardona said in Wednesday’s announcement. “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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