The Biden administration has updated key eligibility guidance for an expanded student loan forgiveness program for public service employees. Here’s what it means for borrowers.
Public Service Loan Forgiveness (PSLF) Limited Waiver Program
The updated guidance pertains to a temporary extension of relief under the Public Service Loan Forgiveness (PSLF) program, which the Biden administration first announced last October.
PSLF can offer federal student loan borrowers full loan forgiveness after 120 qualifying payments — the equivalent of 10 years, if those payments are made consistently. Under the original program rules, however, PSLF was limited to borrowers who paid off direct federal student loans under specific repayment plans tied to their income. Complicated regulations, and poor communication of program requirements by loan servicers resulted in high rejection rates. Borrowers can consolidate non-direct federal student loans (such as FFEL loans and Perkins loans) into direct consolidation loans to qualify for PSLF, but payments made prior to consolidation will not count.
Under the expansion of the program, which the Biden administration called a “limited PSLF waiver,” the Department of Education will be able to temporarily count back periods of repayment that would have been dismissed under the “old” rules. In particular, payments made on non-direct federal loans such as FFEL loans and Perkins loans can count for loan forgiveness regardless of the repayment plan. However, borrowers who have not yet consolidated those loans into federal direct consolidation loans will need to do so before October 31, 2022, to qualify for relief under the exemption.
How the Biden Administration Will Calculate Payments for Student Loan Forgiveness Before Consolidation
Under the PSLF waiver, for the first time since the start of the program, payments made by borrowers prior to direct loan consolidation can now potentially be counted among the 120 payments required to receive loan forgiveness, provided that the borrowers make repayment while working. was in position. Eligible PSLF employment. But how will the department calculate those payments when multiple loans may have different repayment histories?
The department had earlier indicated that in such scenarios, the department would credit the direct consolidation loan with the maximum number of eligible payments based on the personal loan involved in the consolidation, which has the largest number of payments that can count towards PSLF. Ltd. In guidance posted on the PSLF Waiver website, the department says, “Assuming that your repayment history overlaps for each loan, the consolidation loan will be credited with the largest number of payments for the consolidated loan.”
In the departmental example, if a borrower consolidates two FFEL loans—one with 50 qualifying payments and another with 100 qualifying payments—assuming the two repayment periods overlap (meaning at least 50 payments on both loans during the same period). were made), the department will credit the new direct consolidation loan with a total of 100 payments. The department doesn’t get the payments from both loans, but by accumulating the direct consolidation loan with a payment calculation that shows one underlying loan has a higher qualifying payment than the other.
But what happens if the repayment periods of multiple loans being consolidated do not overlap? Earlier this month, the department updated its guidance to provide more clarity. “If your repayment history does not overlap for each loan, the consolidation loan may be credited with more than the highest paying loan.” So using a similar example – one FFEL loan has 50 qualifying payments, and another FFEL loan has 70 qualifying payments – a direct consolidation loan can have a total of 120 payments towards PSLF (to get full loan forgiveness). sufficient for) if neither of the prior payments on those two loans overlapped during the same time period.
Put another way, the department cannot submit more than one payment towards PSLF in a month. So in most cases it makes sense for the department to credit the direct consolidation loan with the largest number of payments based on the underlying loan with the longest qualifying payment history. But when payments are made on different loans as a whole during different time periods, the department can move on. In the example above, if 50 qualifying payments were made on Loan 1 between 2008 and 2013, and 70 qualifying payments, made on Loan 2, were made between 2014 and 2020, the department may credit the borrower with 120 . Pay towards PSLF (as opposed to 70) because there will be 120 different months with qualifying payments, and none of the payments will overlap with each other.
The department’s new guidance could allow many more borrowers to qualify for student loan forgiveness under the waiver.
Borrowers can review the department’s guidance on the limited PSLF waiver program here.
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