Is student loan forgiveness happening? Feds change rules for another debt relief program
As the federal government fights with states and other groups over its expansive student loan debt forgiveness plan, the Education Department said Tuesday that it would make permanent some temporary changes to a program that makes it easier for people working as teachers, public defenders and other public sector workers to have their student loan debt forgiven.
Loan forgiveness for these workers has been available for years, but few people have been able to use the option because of complex rules about eligibility.
Education Secretary Miguel Cardona said he was appalled to learn that fewer than 7,000 borrowers had ever received relief through the Public Service Loan Forgiveness program when he joined the Education Department last year.
Last year, the Biden administration simplified the application process, temporarily, allowing roughly 236,000 people to have more than $14 billion in student loans forgiven. The one-time changes to the Public Service Loan Forgiveness plan are set to expire Oct. 31.
Cardona said his team has since tried to turn the program’s “promise broken into a promise kept.”
That promise, and its potential to forgive even more debt, is becoming more significant. With President Joe Biden’s broader student loan debt forgiveness plan in legal peril and temporarily blocked, the administration is leveraging other tools to cancel some of Americans’ $1.6 trillion in federal money borrowed to attend college.
“Today, we’re encouraging public service workers to take advantage of the program’s temporary changes before the deadline on October 31,” Cardona said. “At the same time, 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.”
Those changes would be in effect no later than July 1, the Education Department said.
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What is the Public Service Loan Forgiveness program?
In principle, the Public Service Loan Forgiveness program is simple: Give up the high wages of the private sector. Work a public sector job for 10 years. Make payments on student loan debt at the same time. After that decade, the federal government will discharge whatever student loan debt remains.
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In reality, the program’s strict bureaucratic requirements prevented many borrowers from accessing the promised relief. They were unaware, for example, that only Direct Loans qualified for the program when they might have held Federal Family Education Loans. Those are debts that are federally backed but commercially owned, which impedes the government’s ability to discharge the debt.
Borrowers also had to enroll in specific income-driven repayment plans, and late payments were at times counted as ineligible. The unyielding requirements meant only a few thousand of borrowers had qualified for relief through the program a decade after its introduction.
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The government’s waiver time to loosen the eligibility requirements for the program. The one-time waiver allows borrowers to count any payment toward their loans so long as they can prove they worked in a job that qualified for the program.
On Tuesday, the federal government said borrowers who apply after Oct. 31 but before July may still be able to count past payments toward their overall forgiveness. That’s because the government plans to review and credit borrowers’ past payments in the Public Service Loan Forgiveness plan and other income-driven repayment options.
To qualify for this relief, however, borrowers must have Direct Loans or FFEL loans managed by the federal government. Borrowers with other types of federal loans can consolidate their accounts into a Direct Loan. The Education Department encouraged borrowers to consolidate by May 1, to reap the benefits of its one-time payment adjustment.
Court challenges imperil Biden’s broader student loan debt forgiveness plan
The Biden administration’s announcement Tuesday comes amid a collection of challenges to the president’s plan to make good on a campaign promise to cancel student loan debt. Multiple groups are suing the administration that plan.
Biden’s plan calls for eliminating up to $20,000 in student loan debt for millions of borrowers who make less than $125,000 individually or $250,000 as a couple. As of Friday, Biden said 22 million people had already applied for student loan forgiveness, a little more than half of the eligible applicant pool of nearly 40 million borrowers.
Late Friday, the Eighth Circuit Court of Appeals temporarily blocked the federal government from canceling any student loan debt while it waits to hear arguments between the Biden administration and the six conservative states suing to block the plan.
On hold:Federal appeals court temporarily blocks Biden student debt relief plan
The White House has responded by saying the states have yet to prove they have legal standing in the case. The six states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – have argued the president acted beyond his authority and allege they could be hurt financially by the mass forgiveness of student loan debt.
Contact Chris Quintana at (202) 308-9021 or [email protected]. Follow him on Twitter at @CQuintanadc.