Public service loan forgiveness just got easier for 550,000 borrowers: who qualifies and how to apply

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The public service loan forgiveness program is undergoing a major overhaul, making it easier for applicants to reach 120 eligible payments. Here’s who qualifies for the PSLF relief and how you can apply. (iStock)

The Biden administration has announced a temporary overhaul of the Public Service Loan Forgiveness Program (PSLF) that will make it easier for some applicants to get rid of their federal student loans.

Under the new rules, which are amended “for a limited time due to the national COVID-19 emergency,” any prepayment made by a borrower eligible for the PSLF program will count as an eligible payment. This regardless of the type of loan, the repayment plan or whether the payment was made on time or in full.

Borrowers who have federal direct loans or who have already entered the direct loan program will be eligible for this program change. Public service workers who have Federal Family Education Loans Program (FFEL) loans or Federal Perkins loans will need to transfer their federal student loan debt into a direct consolidation loan by October 31, 2022, in order to qualify.

The Education Department estimates that 22,000 borrowers on consolidated loans will be immediately eligible for a $ 1.47 billion student loan forgiveness as part of the PSLF limited waiver, according to an Oct. 6 press release.

“Another 27,000 borrowers could potentially receive an additional discount of $ 2.82 billion if they certify additional employment,” the department also said.

In total, the ministry estimated that more than 550,000 borrowers who were not eligible for the PSLF will, on average, be two years closer to their student loan cancellation.

“Borrowers who dedicate a decade of their life to public service should be able to count on the promise of forgiveness of public service loans. The system has failed to deliver on that promise to date, but that is about to change for many borrowers who have served their communities and their countries.

– US Secretary of Education Miguel Cardona

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The announcement comes weeks after the Education Ministry launched a public inquiry into how the PSLF could better serve borrowers. The PSLF’s “broken” program has recently been criticized for its “confusing” eligibility criteria, with 98% of applications rejected since the inception of the program.

“Teachers, nurses, first responders, the military and so many public service workers are supporting us, especially amid the challenges of the pandemic,” Cardona added. “Today, the Biden administration shows that we support them too.”

However, this time-limited waiver will not benefit all federal student loan borrowers. Read on to learn more about applying for PSLF and what to do if you don’t qualify, including income-tested repayment plans and private student loan refinancing.

If you do decide to refinance your private student loans, be sure to compare the rates of several lenders in Credible’s online market.

How to apply for a public service loan forgiveness

Previously, the vast majority of PSLF applications were rejected. But with these temporary relief measures, it should be easier for public servants like teachers, active-duty members of the military and federal employees to meet the eligibility criteria. Here’s how to apply:

  1. Consolidate your student loans. To be eligible for the PSLF, you must have Federal Direct Loans or Direct Consolidation Loans. It’s free to consolidate your federal loans, like FFEL loans and Perkins loans, on the Federal Student Aid website.
  2. Find out if you are working full time for an eligible employer. You will need your most recent W-2 or your employer’s Federal Employer Identification Number (EIN) to determine your eligibility.
  3. Fill out the PSLF form on the FSA website. Most people complete the process in less than 30 minutes, according to the FSA.

If your application is approved, the remaining balance of your federal student loan debt will be forgiven after you have made 120 qualifying payments.

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What to do if you are not eligible for the PSLF

Even with these changes to the PSLF program over the coming months, not all student borrowers will be eligible for their student loan waiver. For example, private student loans are not eligible under the PSLF. Here are a few things you can do with your federal and private student loans if you don’t meet the eligibility requirements:

Compare your student loan repayment options in the sections below.

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Reduce your monthly student loan payments by refinancing

Private student loans are not eligible for the PSLF program, even if they are held by public officials or active duty members. Any payment on your private student loans is considered ineligible and will not count towards your 10 years of loan repayment.

Since private student loans are separate from the PSLF program, you will need to find another way to reduce your student loan debt, such as refinancing. Refinancing a private student loan can help you lower your monthly payments, pay off debt faster, and even save money over the life of the loan, thanks to lower interest rates.

Keep in mind that if you refinance your federal loans to a private loan, you will not be eligible for federal programs like the PSLF.

Private student loan rates are near historic lows, Credible data shows. Thanks in part to the low rates, borrowers who refinanced a shorter term loan on Credible were able to save almost $ 17,000 over time and pay off their loans 41 months faster. Those who took a longer term loan were able to reduce their monthly payments by more than $ 250 on average, all without increasing the cost of the loan.

Browse the student loan refinance rates in the table below and visit Credible to see your estimated interest rate without affecting your credit score. Then use a student loan refinance calculator to see if this option is right for you.

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Use federal benefits such as income-based reimbursement and hardship forbearance

Federal student loan borrowers who still do not qualify for the PSLF – including part-time employees and those who are not public servants – might consider other federal protections such as income-tested repayment plans and forbearance. additional federal.

It’s free to sign up for an income-based repayment plan for your federal student loans on the FSA’s website. This limits your monthly payments to around 10-20% of your disposable income, depending on the type of loan you have.

Federal student loans are currently on administrative forbearance until January 2022, but some student loan borrowers may not be ready to resume their payments. When the federal payment break expires, consider requesting up to 36 additional months of federal forbearance through deferral of unemployment or deferral of economic hardship.

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Find other student loan exemption programs

The PSLF is not the only student loan exemption program offered by the federal government. The Biden administration has so far paid off nearly $ 10 billion in student loan debt under the following programs:

  • Defense of the borrower on repayment. If your school has misled you or committed some other form of misconduct, you may be eligible for your federal student loan debt cancellation under the Borrower Defense Program.
  • Closed school outings. If you attended a school that closed while you were enrolled or shortly after you withdrew your enrollment, you may be eligible for your federal student loan cancellation.
  • Exits from total and permanent disability. The Biden administration recently automatically paid off federal student loan debt for 323,000 total and permanent disability (PDT) borrowers.

To learn more about your student loan cancellation and repayment options, contact an experienced loan officer at Credible.

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Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.


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