As civil service loan forgiveness ends, more borrowers could get relief
The waiver was implemented as the ministry sought to make changes to the PSLF program, which has long been criticized for its complexity and poor management. An overhaul is expected to come into effect in July.
“Our team has been working to turn the cancellation of a public service loan from a broken promise into a promise kept,” Education Secretary Miguel Cardona said on a call with reporters on Tuesday. “We are working to make this program work for the long term…to reduce the bureaucracy and confusing rules that have plagued the pilot program in the past.”
The PSLF program, created by Congress in 2007, requires borrowers to make 120 monthly payments on time for 10 years to have their remaining balance canceled. They must work for the government or certain non-profit organizations and have loans made directly by the federal government. And they must be enrolled in specific repayment plans, primarily those that cap monthly loan repayments at a percentage of their income.
With the end of the PSLF waiver looming, some liberal advocates and lawmakers have pushed for an extension to give people more time to benefit before the new PSLF changes take effect.
Instead of granting an extension, the Biden administration has said it will continue to identify officials eligible for rebate through single account adjustment — first announced in April – which aims to give people extra credit for debt cancellation under income-driven repayment plans.
The plans cap monthly payments at a given percentage of earnings, with the promise to cancel the balance after 20 or 25 years of payments. But inconsistencies in the way student loan managers and the department processed and tracked payments left borrowers repaying their loans much longer than necessary. — a problem that the adjustment aims to remedy.
Just as it did in the PSLF waiver, the department will count the months that borrowers deferred their payments by forbearance or deferral under the IDR adjustment. The recount could result in additional credit for those working the civil service, which requires borrowers to enroll in an income-tested plan.
From November, the ministry will automatically cancel the loans of anyone who has made the required number of payments for the rebate based on the single account adjustment. People who receive additional credit, but not enough to meet the cancellation threshold, will have their accounts adjusted in July.
People with loans from the now-defunct federal Family Education Loans program and private corporations will need to combine into a direct loan to be eligible for the adjustment. The Department of Education encourages them to do so by May to ensure they benefit from this initiative.
“The waiver was a one-time action and it was related to the circumstances our country found itself in a year ago. Our goal is to try to fix this program permanently and for the long term,” Education Undersecretary James Kvaal said on a call with reporters on Tuesday.
In July, the National Education will implement its overhaul of the PSLF. The new regulations will allow borrowers to receive credit for payments made in a lump sum, in installments or late. The existing rules only counted a payment as eligible if it was made in full within 15 days of its due date.
Time spent in certain periods of adjournment or abstention will also count permanently towards the civil service leniency under the new rule. These periods include military service, economic hardship, cancer treatment deferrals, and time in the National Guard or AmeriCorps.
Borrowers will also receive credit for past payments when they consolidate their commercial FFEL into direct loans. Typically, only payments made after the consolidation would be eligible for the rebate, but now those made previously will also be eligible.