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The federal Public Service Loan Forgiveness Program is temporarily offering expanded debt forgiveness but borrowers need to file paperwork soon.
The Biden administration announced this week a significant cancellation of student loans for many borrowers. For some public employees, additional relief is available. The federal Public Service Loan Forgiveness Program is temporarily offering expanded forgiveness to eligible government workers—but only through Oct. 31.
In a webinar hosted by the National League of Cities Thursday, panelists urged government employers to clue their employees into the program, also known as PSLF, and share tips and tools for doing so ahead of the October deadline.
What Is PSLF?
Congress created the Public Service Loan Forgiveness Program in 2007 to forgive the remaining balance on federal direct student loans after a government or nonprofit employee has made 120 monthly payments under a qualified repayment plan.
But it was a flawed program and difficult to navigate, explained Ashley Harrington, a senior advisor at the U.S. Department of Education’s Student Office of Federal Student Aid.
“You may have heard about the issues of borrowers not [qualifying], not knowing what type of loans there are, being on the wrong repayment plan and getting denied, and huge rejection rates,” she said in the webinar.
Not all federal student loans–including Family Federal Education Loans and Perkins Loans–were eligible for public service loan forgiveness, and payments that weren’t paid in full did not count toward PSLF, she said.
What Is the Limited Waiver?
In October of last year, in response to the Covid-19 pandemic, the U.S. Department of Education waived many requirements to qualify for PLSF. Those changes provide eligible borrowers the opportunity to receive credit for past payments that otherwise would not qualify for forgiveness, Harrington said.
“Under the waiver, any prior period of repayment can count for PSLF, regardless of the loan program repayment plan, whether a borrower made the payment in full or made it on time,” she said.
The change, referred to as the “limited PSLF waiver,” has significantly expanded loan forgiveness, Harrington said. Before the rules change, only 7,000 public servant borrowers had their loans forgiven under the program. Today, that figure has jumped to 172,000.
But the waiver is only temporary, and borrowers need to file their paperwork by Oct. 31 to take advantage of the expanded program.
How Governments Can Help
To apply for PSLF, borrowers need to consolidate their nondirect loans and fill out a PSLF form, Harrington said.
As for governmentss, there are two critical but simple steps, said Winston Berkman-Breen, deputy director of advocacy and policy counsel for the Student Borrower Protection Center, a nonprofit focused on alleviating the burden of student debt.
First, employers need to spread the word and let their employees know this opportunity is available. Then, they need to sign a form to certify their employee’s work status.
Employers do not need to be experts in PSLF or the waiver to help their employees enroll in the program, Berkman-Breen said. He pointed to ForgiveMyStudentDebt.org as a rich resource for borrowers and their employers when navigating PLSF.
The website is largely geared toward borrowers, but it features a comprehensive toolkit for employers, including a template email explaining the program to an eligible employee or colleague, and a sample of the one-page PSLF form the employer needs to fill out.
Millions of Public Servants Eligible
About 9 million people could benefit from the program, Berkman-Breen said. The program can benefit local governments too, as PLSF can help with attracting and retaining new employees.
“We really, really hope you will push information to your employees,” he said. “You are a trusted messenger, they're going to open your emails [and] you can reach them in ways that we all can't about the program.”
PSLF will return to its former rules in November, Berkman-Breen said, though the Biden administration has proposed some longer-term changes that would take effect next year.
“After this [October] deadline, everyone will have gotten sped up to where they need to be, they'll be in the right programs, have the right loans, know all the rules, and then we'll proceed forward and continue to recruit credit,” he said.
For more information about the program click here.