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Financial Services Law Insights and Observations

Education Dept. to expand PSLF program

Federal Issues Department of Education Student Lending PSLF

Federal Issues

On October 6, the Department of Education announced several significant changes to its Public Service Loan Forgiveness (PSLF) program that will be implemented over the next year. According to the Department, approximately 22,000 borrowers with consolidated loans (including loans previously ineligible) may be immediately eligible to have their loans forgiven automatically. Another 27,000 borrowers could have their balances forgiven if they are able to certify additional periods of public service employment.

The changes will now give qualifying borrowers a time-limited PSLF waiver, which will allow all payments to count towards PSLF regardless of loan program or payment plan. These include payments made on loans under the Federal Family Education Loan (FFEL) Program or Perkins Loan Program. Restrictions will also be waived on the type of repayment plan as well as the requirement that payments be made in the full amount and on-time in order to count. Additionally, the Department states that all months a servicemember spent on active duty will now count toward PSLF, even if a borrower’s loans were in deferment or forbearance and were not actively being repaid. A fact sheet states that the Department is also, among other things, reviewing previously disqualified loan payments for errors and providing borrowers the opportunity to have their PSLF determinations reconsidered. Counting prior payments on additional types of loans will also help borrowers who have or had loans from the FFEL Program, many of whom, the Department says, reported receiving inaccurate information from their servicers about how to make progress toward PSLF. The Department will also “start automatically adjusting payment counts for borrowers who have already consolidated their loans into the Direct Loan Program and certified some employment for PSLF.” Waiver requests must be submitted by October 31, 2022.

In addition to these changes, the Department says it has started its first session of negotiated rulemaking, which includes PSLF. Future changes “would make it easier for borrowers to make progress toward forgiveness, including simplifying qualifying payment rules and allowing certain types of deferments and forbearances to count toward PSLF,” the Department explains.