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Public Service Loan Forgiveness program gets big update in 2023 to eliminate ‘barriers’

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The Biden administration announced a number of permanent changes to the Public Service Loan Forgiveness (PSLF) program that will “eliminate many unnecessary barriers” and make it easier for eligible borrowers to receive relief.

The PSLF program cancels the debt of qualifying government and nonprofit workers who have made 10 years of on-time monthly payments. Though the program was established with noble intentions, in practice, very few people were actually able to have their debt discharged before President Joe Biden took office.

But his administration has made a number of changes to the program over the past few years. And on Tuesday, the U.S. Department of Education announced several more. A major one: Starting July 1, 2023, borrowers will receive credit toward the 120 total PSLF payments they need even if they make them late, send partial payments, pay in installments, or are in forbearance or deferment. The rules are being changed through updated federal regulations.

Under current rules, payments are only eligible if they are made in full within 15 days of the due date. And certain deferment and forbearance periods—including those for military service, cancer treatment, economic hardship, and time served in AmeriCorps, the PeaceCorps, and the National Guard—will count.

Additionally, borrowers will no longer lose all of the progress they’ve made toward forgiveness if they consolidate their loans. Instead, they will receive a weighted average of their qualifying payments made under the old loan and the new loan.

“Under the new regulations, for example, a borrower with 60 qualifying payments on Direct Loan with a balance of $30,000 who consolidates their loan with another Direct Loan with a balance of $30,000 with 0 qualifying payments will have a new payment count of 30 payments,” the department’s announcement reads.

The department is also adopting a single standard for the full-time employment that counts under the program. Borrowers must work 30 hours a week to qualify.

The adjustments will be made automatically, but to qualify, borrowers must have direct loans. Those with a Federal Family Education Loan (FFEL) or a Federal Perkins Loan must consolidate into the direct loan program before July 2023 to benefit.

The department also gave more information on the one-time account adjustment that is being made to income-driven repayment (IDR) accounts that it first announced back in April. Borrowers in these plans could have all of their past payments recounted, with more counting retroactively toward the total they need to receive forgiveness.

The department will adjust borrower accounts to give them credit for any months they were in repayment (regardless of if they were made on time or not) as well as for some forbearance and deferment periods.

If the account adjustment gets borrowers to the number of payments they need for forgiveness (that’s 240 for 20 years and 300 for 25 years), then those borrowers could see the relief reflected as soon as next month. Those who still need to make additional payments to have their debt forgiven will see the account adjustment in July 2023.

Limited PSLF waiver is about to expire

The news comes just days before a temporary waiver related to the PSLF program expires. Using the waiver, qualifying borrowers can have previous impartial or late payments, or those made in the wrong repayment track, counted toward the 120 total they need for forgiveness.

The waiver is meant to make up for years of bureaucratic mismanagement and confusion related to the forgiveness program. The Biden administration announced changes to the PSLF in October 2021 to make it simpler for those who have made 10 years of on-time payments to actually have their debt discharged as the program originally promised.

U.S. Sen. Bob Menendez, D-N.J., who has introduced changes to the PSLF program in the past, applauded the announcement—but said the Biden administration should also extend the deadline for the PSLF waiver.

“Today’s announcement means millions of public service workers will now have a second chance at loan forgiveness,” Menendez said in a statement.

Other Democrats have also called for the waiver to be extended.

According to the Education Department, 236,000 borrowers have received $14 billion in student loan forgiveness as a result of the temporary waiver.

Future of widespread student loan forgiveness still unknown

All of this is separate from Biden’s plan to forgive between $10,000 to $20,000 in federal student loan debt for most borrowers.

That program, which his administration announced in August and recently opened applications for, applies to most federal borrowers with incomes under $125,000 in 2020 or 2021 (double that income limit for married couples).

Though the administration is still encouraging borrowers to apply—the application takes about five minutes to fill out on StudentAid.gov, according to those who have submitted one—it cannot actually forgive any student loan debt yet due to a court order.

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