Education Department Overhauls Student Loan Forgiveness Program

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.

Under the PSLF overhaul, all of those unqualified payments will now be counted through a waiver that is available until Oct. 31, 2022. The DOE estimates the average borrower will receive two years worth of credits applied to their loan forgiveness application. To qualify for all these changes, borrowers must file a PSLF application by that deadline.

The overall will also allow active service members who paused payments during deployments to claim those months as credit toward their PSLF.

In addition, the Education Department said it would review denied PSLF applications to have their decisions reconsidered and create a formal appeals process for borrowers who have been denied forgiveness. It said it is also working on identifying further improvements to the program including partnerships with employers and revising regulations, informed by the more than 48,000 comments it received in response to a request for information on improving PSLF issued over the summer.

“The changes are a big improvement, affecting more than half a million borrowers,” said Mark Kantrowitz, a college loan and financial aid expert, noting also the $4.5 billion in immediate debt forgiveness.

Seth Frotman, executive director of the Student Borrower Protection Center, said the  announcement of the DOE policy changes for PSLF is “a good day for teachers, nurses, servicemembers, and millions of workers serving on the front lines of the pandemic. For too long, those who give the most to our communities and our country have been given the runaround and forced to shoulder debts that should have been canceled.”

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