More than 550,000 people could be see their debt wiped away sooner than expected due to the changes to PSLF, the Department of Education said. That includes 22,000 borrowers who are immediately eligible for debt forgiveness.
Here’s what student loan borrowers need to know about who is eligible and what steps they may need to take to receive debt relief.
The program was created in 2007 and provides an incentive for workers to remain in lower-paying, public service jobs despite their student debt. Teachers, social workers and first responders can be eligible as well as doctors and lawyers — if they were employed full time by a nonprofit or the government while making payments.
After borrowers make 120 monthly payments, their remaining federal student debt is wiped away.
But prior to the recently announced changes, eligibility also hinged on having a Direct Loan and being enrolled in an income-driven repayment plan, which sets payments based on income and family size. Those with Federal Family Education Loans, which were made by private lenders but backed by the government, did not qualify. More than 80% of borrowers who have filed forms that did not meet the program’s requirements had one of these loans.
Borrowers say those qualifications were not always clearly communicated by the company servicing their loans, and many discovered they weren’t eligible for debt relief only after making nearly 120 payments.
Borrowers are allowed to consolidate a Federal Family Education Loan into a Direct Loan to become eligible for the program, but none of their previous payments would count toward the required 120 — until now.
Here’s who gained eligibility
Due to the temporary waiver, it no longer matters what kind of federal student loan a borrower has or what payment plan he or she is enrolled in. All payments will be eligible for the Public Service Loan Forgiveness program if the borrower was working full time for a qualifying employer.
The Department of Education will review past payments to count those made on Federal Family Education Loans. It will also count months that service members spent on active duty toward PSLF, even if loan repayment was on a temporary suspension through a deferment or forbearance.
The department’s review will also take a look at payments that were potentially miscounted by the company or organization servicing the loan. In some instances, borrowers missed out because their payments were off by as little as a penny or late by a few days. Sometimes a payment was posted but the record showed that no bill was generated. The Department of Education says it will adjust the count for borrowers affected by this issue as well.