Borrowers who haven’t applied for the public service loan forgiveness (PSLF) waiver should still sign up before the October 31 deadline despite major changes coming to the program that the Education Department (ED) announced this week.
That’s because the eligibility requirements under the PSLF waiver are broader than what ED is planning to do, allowing more borrowers to qualify for cancellation.
Overall, these efforts are part of the Biden administration’s promise to help borrowers struggling with student loan debt.
“We’re taking bold steps that will automatically move more hardworking public service workers closer to forgiveness and making permanent changes to reduce the red tape that riddled the PSLF program,” U.S. Secretary of Education Miguel Cardona said in a press release. “The Biden-Harris team is as committed as ever to upholding the promise of PSLF and ensuring borrowers who devote their careers to teaching our children, strengthening our communities, and serving our nation get the relief they’ve earned.”
Here’s what to know.
What is the PSLF program?
Employees who have worked at least 10 years in the public service jobs with federal, state, local, or certain non-profit organizations are eligible for the public service loan forgiveness (PSLF) program — including the military.
Under the normal PSLF program, borrowers must work at least 10 years with a qualifying employer and have made at least 120 full on-time payments in a standard payment plan to be eligible. Also, only Direct Loans qualified for PSLF.
Around 25.6% of the labor force are employed in the public and nonprofit sector, with 17.5% of these employees having student debt eligible for PSLF, according to research by NBER.
However, more than 98% of borrowers who applied for the PSLF program were denied loan forgiveness by ED under former U.S. Education Secretary Betsy DeVos from the Trump Administration.
What is the PSLF waiver?
The PSLF waiver, enacted as part of a 2021 legal settlement with the Education Department (ED), allows those denied loan forgiveness to reapply. It also expands who qualifies to apply for forgiveness and counts payments that are otherwise not eligible for the original program. The waiver expires October 31, 2022 as part of that settlement.
Eligibility for PSLF doesn’t disqualify a borrower from President Joe Biden’s forgiveness of up to $20,000 in student loans.
“The Biden-Harris team’s temporary changes to Public Service Loan Forgiveness helped over 236,000 teachers, nurses, veterans, government employees and other public service workers secure more than $14 billion in debt relief,” Cardona said in a press release.
With the waiver, public service borrowers not in default became retroactively eligible to have prior payments on any repayment plan — including income-driven repayment (IDR) plans — and periods of forbearance count as qualifying payments. Under the normal PSLF, only on-time payments in a standard payment plan counted.
“Under the PSLF waiver, partial payments count toward the 120 payments,” Mark Kantrowitz, author and student loan expert, told Yahoo Money. “Additionally, the 34 months of nonpayments during the forbearance pause count towards loan forgiveness payments.”
Also under the waiver, Perkins, and FFEL loans are included. However, if you have FFEL and Perkins loans you must consolidate them into the Direct Loan Program by October 31, 2022.
Another benefit to the waiver program is that borrowers who made payments under the Teacher Loan Forgiveness can retroactively count towards PSLF, according to NBER. Before the waiver, payments made towards Teacher Loan Forgiveness forfeited eligibility under PSLF.
Overall, ED has discharged $10 billion in debt for borrowers using the PSLF waiver.
What to do before the October 31 deadline?
Go to the PSLF waiver page on the Federal Student Aid (FSA) website. Use the PSLF help tool to apply by October 31.
If you use the PSLF Help Tool and file online by October 31, even if your employer hasn’t submitted your certification or you’re waiting for determination of your employer’s eligibility, your application will still be processed.
According to the PSLF waiver website, you don’t need to submit a PSLF form to MOHELA by October 31 if you use the PSLF Help Tool.
If you submit your application by paper, you must have all documents, including employer certification, received by October 31.
What happens after October 31?
If you miss the October 31 waiver deadline, borrowers will need to qualify under the normal requirements for PSLF and the Temporary Expanded Public Service Loan Forgiveness (TEPSLF). However, you may receive additional credit toward PSLF when the one-time account adjustment occurs in July and what payments are eligible for PSLF will broaden next year.
One-time adjustment and changes going forward
This week, ED announced when it will count certain types of payments toward a one-time adjustment. The credit will we applied in two waves — one starting in November and another beginning in July 2023.
The one-time adjustment will credit borrowers with Direct Loans or FFEL loans for partial or late payments; payments regardless of loan type or repayment plan; any months when loans were in an eligible repayment, deferment, or forbearance status before consolidation; months during a 12-month consecutive forbearance; months from 36 cumulative months in forbearance; and any month in deferment before 2013.
In November 2022, ED will begin discharging loans for borrowers who have 20 years (240 monthly) payments or 25 years (300 monthly) payments with the one-time adjustment. Borrowers who applied for PSLF before October 31, 2022 and reach 120 payments due to the deferment and forbearance changes will also receive loan discharges.
In July 2023, ED will automatically apply the same one-time credit to all Direct and FFEL loans for borrowers who do not reach the required months for forgiveness.
Also starting in July, ED will implement permanent changes to the PSLF program that mirror some under the waiver now that expand eligibility of payments. Borrowers will get credit toward forgiveness on late, installment, and lump-sum payments, while certain deferment and forbearance periods will also qualify. Borrowers will also get some credit for payments when they consolidate their Direct Loans, which does not exist now.
Don’t ignore the waiver expiration
Even with the new changes, many borrowers need to consider the October 31 deadline for the PSLF waiver. That’s because the waiver includes more than just the changes ED announced this week.
For instance, the waiver allows payments borrowers made under the Teacher Loan Forgiveness payments to retroactively count towards PSLF, according to NBER. Additionally, with the PSLF waiver, if a borrower is not employed by a qualifying employer at the time of applying for forgiveness, you are still eligible for relief. These are not part of the permanent changes.
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda