Ministry of Education clarifies rules for new expanded curriculum
In October, the Biden administration announced significant new changes to Public Service Loan Forgiveness (PSLF), a federal student loan forgiveness program.
Since its inception, the PSLF program has had complicated eligibility requirements and dismal approval rates. The new changes aim to fill gaps in the program and dramatically expand eligibility to reach more borrowers. But for weeks after its initial announcement, the Education Department left many details about how the expansion of the program would actually be implemented unanswered. This week, the ministry released key new guidelines.
Biden Changes to Public Service Loan Remission (PSLF): How It Works
The Ministry of Education calls the new expansion of the program the “PSLF Limited Waiver” program. The waiver program temporarily relaxes several rules governing the PSLF program. For most of next year, the ministry will account for past payments on non-direct federal student loans, such as FFEL loans and Perkins loans (which are not eligible for PSLF under the original program rules. ), within the 120 “qualifying” payments that a borrower must make to get a student loan discount. The waiver will also allow payments made under any repayment plan to count as well; previously, only payments made under income-based repayment plans and a standard 10-year plan could qualify.
For some borrowers, relief under the limited PSLF waiver program will be automatic. Direct loan borrowers who have already certified their employment, for example, can see their PSLF payment accounts automatically adjusted by the ministry to reflect changes under the new waiver program. Thousands of borrowers have already had their federal student loans canceled through this process.
For other borrowers, action may be required by October 31, 2022. Borrowers who have not yet certified their employment in the public service will need to do so by submitting the appropriate PSLF employment certificate form. And FFEL and Perkins loan borrowers may need to consolidate their loans through the Federal Direct Consolidation Program, before going through the job certification process. So far, the Department has remained vague on some key eligibility and procedural elements for these borrowers.
Student loan waiver amid loan service changes
One of the Department of Education’s federal student loan services, FedLoan Servicing, was the primary contractor in charge of the PSLF program. But earlier this year, FedLoan announced it would pull out of the ministry’s federal student loan system, raising questions about the agency that would handle the limited PSLF waiver and the direct loan consolidations and associated employment certifications. .
Earlier this month, FedLoan and the Department of Education announced an agreement to extend FedLoan’s contract for an additional year. And this week, the ministry clarified that “FedLoan Servicing will continue to serve PSLF borrowers until all borrowers are transferred to their new loan manager. The FSA will ensure that all FedLoan Servicing borrowers, including PSLF borrowers, have a smooth transition. So borrowers who need to consolidate their FFEL or Perkins loans, or submit employment certifications, can continue to go through FedLoan Servicing.
Student Loan Waiver for Direct Consolidation Loans with Complicated Repayment History
When borrowers consolidate multiple FFEL loans into one Direct Consolidation Loan, these FFEL loans may have had different repayment histories or different repayment periods. Now that past payments on FFEL loans can be factored into the loan cancellation under the PSLF limited waiver, the Education Ministry had not clarified how it would treat direct consolidation loans when the underlying loans were in repayment for varying durations.
This week, the ministry released clarifying guidelines. According to the ministry, “As long as your repayment history overlaps for each loan, the consolidation loan will be credited with the highest number of payments from the loans that have been consolidated. For example, if you had 50 qualifying payments on one subsidized Stafford loan and 100 qualifying payments on another subsidized Stafford loan and you consolidate those loans, you will receive 100 qualifying payments on the new direct consolidation loan.
Student loan waiver for Parent PLUS borrowers
The ministry initially said that Parent PLUS loans were completely excluded from the limited PSLF waiver program, even if a borrower consolidated these loans before Oct. 31, 2022. But officials did not say whether the Parent PLUS loans that were already consolidated could benefit from the exemption. Direct Consolidation Loans that contain Parent PLUS Loans may qualify for PSLF under the original program rules, provided they are repaid under the Income-Based Repayment Plan.
This week, the ministry provided additional information indicating that Parent PLUS Consolidated Loans may potentially qualify for the PSLF Limited Waiver Program under certain conditions. According to the ministry, “If you are consolidating (or have previously consolidated) a Parent PLUS loan, the consolidation loan may be eligible for credit to PSLF. The Department gave the example of a borrower who consolidated two loans – a federal Parent PLUS loan and a federal Stafford loan – years ago. In this example, the ministry states that “although the history of repayment status of the FFEL Parent PLUS loan is not taken into account, the repayment status of the FFEL subsidized stafford loan will be taken into account and the entire loan of direct consolidation … would receive credit “for the overlapping repayment period under the waiver program.
Notably, however, the department did not directly consider whether payments made on the Direct Consolidation Loan itself qualify for the PSLF Limited Waiver Program if it only contains Federal Parent PLUS Loans.
How Student Loan Payments Will Count for the PSLF Limited Waiver
This week, the ministry also clarified how it would count “payments” for the purposes of the limited PSLF waiver. Rather than going back and using a loan officer’s actual payment history for a borrower, the Ministry has confirmed that it will simply use a borrower’s repayment history status as reported to Federal Student Aid.
“You can receive credits for any month after October 2007 during which you held an eligible job and are in a repayment situation,” the ministry explains. “Previous repayment periods will now count, whether or not you made a payment, made that payment on time, for the full amount owed, against a qualifying repayment plan. “
Next Steps for Borrowers Requesting Student Loan Remission Under the PSLF Limited Waiver
Federal Student Aid COO Richard Cordray has sought to reassure borrowers in a letter released earlier this month that administration officials pledged to make the limited PSLF waiver work. “Please understand that complex changes of this magnitude are difficult to process and execute,” he wrote. “They require large-scale data and processing work, which takes time… We are working as quickly as possible to update your account and give you clear and accurate information. It may take several months.
In the meantime, borrowers can find out more about the program. here.
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