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The US Department of Education plans to make several key changes to a long-troubled student loan forgiveness program for public servants, the department announced Tuesday.
The program, Public Service Loan Forgiveness, or PSLF, was poorly managed for more than a decade, resulting in forgiveness for only a small portion of qualified borrowers.
“The idea was simple. Qualifying for a pardon was not,” Education Secretary Miguel Cardona said in a call with reporters. “Like a teacher told me, the system was full of trapdoors. If you go through the wrong one, you’re out of luck.”
The department is now removing some of those hatches.
The Biden-Harris administration had already temporarily implemented many of the changes announced Tuesday, including expanding the types of payments that qualify for forgiveness. in a limited waiver which expires on October 31. Since the waiver debuted, more than 200,000 borrowers have been approved for more than $14 billion in forgiveness.
Key Changes for PSLF
The basis of PSLF is that government and nonprofit employees will have their remaining loan balances forgiven after 120 qualifying monthly payments while working full-time for a qualifying employer.
The Department of Education announced that it is permanently expanding what types of payments count as Qualification. Under the new regulations, borrowers can receive PSLF credit on late payments, in installments, or in a lump sum. The old rules would disqualify a payment if it was more than 15 days late, even by a few cents.
The department clarified that full-time employment is now defined as 30 hours per week with more specific guidelines for adjunct professors and professors.
The new regulations also expand the types of situations in which it is okay for a borrower to defer or pause their payments. Before the change, deferring things like cancer treatment or financial hardship could derail borrowers in the program.
Two dates to know
Eligible borrowers with Federal Direct Loans and Federal Family Education Loans, or FFELs, which are administered by the Department of Education will see these changes applied to their accounts in July 2023, as part of a one-time account adjustment, the department said. .
Borrowers who do not currently have eligible loans, including those with business FFEL loans, can still take advantage of these changes and the one-time account adjustment if they consolidate into direct loans before May 1, 2023.
The differences between resignation and permanent changes
Borrowers who believe they qualify for PSLF must still Submit a request before the limited exemption expires on October 31. While Tuesday’s announcement makes many of the changes included in the waiver permanent, there are a few key things that will go away after the waiver expires.
Typically, to qualify for PSLF, borrowers must be actively employed by a government or nonprofit entity when they apply. The limited waiver provided a path for qualified borrowers who left their field during the pandemic to continue receiving PSLF. When the waiver runs out, this trail will be closed. To qualify while out of public service, borrowers must apply prior to 31 October.
The second path that disappears in November is for borrowers who work for Teacher Loan Forgivenessor TLF. Under the limited waiver, borrowers can count time for both TLF and PSLF, but after Oct. 31 that will no longer be the case.