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October 07, 2021 at 04:55 PM
What You Need to Know
- The overhaul addresses longstanding problems with the public service loan forgiveness (PSLF) program.
- It will provide about 49,000 student loan borrowers $4.5 billion in loan forgiveness, most of it previously denied.
- Active service members who paused payments during deployments can apply those months as credit toward PSLF.
The Department of Education is finally overhauling the public service loan forgiveness program (PSLF) which until now has failed to live up to its promise.
Since the first public service workers became eligible for debt cancellation in 2017, at least 98% of their applications for relief have been denied, almost all of them under the Trump administration. Even a temporary expanded PSLF program established by then Education Secretary Betsy DeVos had a similar denial rate.
The overhaul announced by Education Secretary Miguel Cardona means 22,000 borrowers will be immediately eligible for $1.74 billion in forgiveness. Another 27,000 borrowers could potentially qualify for an additional $2.82 billion in forgiveness if they certify additional periods of employment. Hundreds of thousands more will benefit, as the DOE credits past payments as qualifying credits in the program.
“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” Cardona said in a statement. “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.”
The PSLF program allows workers employed by federal, state, local or tribal governments or a not-for-profit organization to have their federal student loans forgiven after they make 120 qualifying payments. Until now, only payments on federal student loans made and owned directly by the Education Department qualified, but that loan program didn’t start until 2010.
Payments on government-backed bank loans, known as Federal Family Education Loans, available before 2010 didn’t qualify, neither did late or partial payments or payments made in repayment plans. Many borrowers were not aware their payments weren’t credited toward the 120-payment requirement.
