Biden administration considers more program changes for public service workers
The Biden administration plans to make even more changes to the Public Service Loan Forgiveness Program (PSLF), a student loan forgiveness program that can write off federal student loan debt for borrowers working for employers at non-profit or public. These changes could go beyond some of the recent temporary reforms that the Education Ministry is currently implementing. Here is the last one.
Context of the remission of student loans to public service workers
The Public Service Loan Forgiveness (PSLF) is often described as a 10-year program, but technically it requires 120 âqualifying payments,â each of which must meet very specific (and often confusing) eligibility criteria. Under the original rules governing the PSLF program, an eligible payment must:
- Be done on Federal direct student loans. Other types of federal student loans, such as Family Federal Education Loan (FFEL) program loans and Perkins loans, do not qualify unless they are consolidated into a direct federal consolidation loan (and even in in this case, payments made before consolidation would not count).
- Be reimbursed under a income based repayment plan or the standard 10-year repayment plan. Payments made under other reimbursement plans and periods of non-payment (such as most deferrals and abstentions, with the exception of the current Covid-related forbearance) are not eligible.
- Be done in full and on time while the borrower is job as a full-time W-2 employee for a national government entity or non-profit organization (in most cases this should be a 501 (c) (3) non-profit organization ).
Due to these rather complex eligibility criteria and the historical mismanagement of the program by the Ministry of Education and its contract loan officers, the PSLF has been plagued by very low approval rates for years.
Temporary changes to the delivery of civil service loans: the limited exemption from the PSLF
On October 6, the Biden administration announced the âPSLF Limited Waiverâ program. Using the Emergency Executive Authority, the Ministry of Education is relaxing key rules governing the PSLF program which, for a limited period of time, will allow many more borrowers to qualify for a student loan discount under from the program. Here are the main features of the limited PSLF waiver:
- Payments made on most FFEL Loans and Federal Perkins Loans may count towards the PSLF, provided the borrower meets the conditions of employment and consolidates those loans through the Federal Direct Consolidation Program.
- Any month the borrower was in a ârepayableâ state can be counted in the PSLF, provided the borrower meets the conditions of employment. This means that the borrower’s repayment plan doesn’t matter or whether the borrower even made a payment on time.
The changes to the PSLF program will have significant benefits for thousands of student loan borrowers, many of whom have already started forgetting their loans. But the limited PSLF waiver does not correct all of the shortcomings of the PSLF program, and it is not permanent – the waiver will expire on October 31, 2022. This means the PSLF program would revert to rules of origin after that date.
Ministry of Education considers additional changes to PSLF
Last week, the Education Department hosted a negotiated rule-making session on long-term changes to the PSLF program. Negotiated rule making is a process by which a federal agency can amend existing regulations governing certain federal programs. The federal agency usually presents specific proposals for regulatory reform, followed by a rule-making committee made up of key stakeholders (in this case, student loan borrowers, advocates for legal services, schools, and officials. of the government) discusses and debates the proposals. If the committee reaches a consensus, the Ministry goes ahead and finalizes the new regulation in accordance with that consensus. If there is no consensus, the Ministry can go ahead on its own, but can take into account the comments of the regulatory committee and can modify some of its proposals.
Ahead of last week’s negotiated regulatory session on the PSLF, the Education Ministry released several PSLF improvement proposals that would come into effect after the expiration of the PSLF limited waiver, including:
- Automate job certifications through federal data-sharing tools, so borrowers don’t have to constantly submit documents signed by their employers for payments to count in the PSLF.
- Simplify payment counting “so that an amount paid by the borrower equals the full expected payment due counts for remission, even if the payment is made in installments or outside the payment window.” Prior to the waiver, borrowers often had payments rejected if they were not made in full all at once or on time.
- Allowing certain postponements and abstentions to count for the PSLF, where the postponement or withholding itself clearly counts as qualifying employment (such as withholding from AmeriCorps, where the borrower would be expected to work as a member of the AmeriCorps service. fulltime).
- Allow payments made before the direct loan consolidation, including on non-direct federal loans, to count towards loan cancellation. This would codify the temporary changes currently being implemented through the limited temporary waiver of the PSLF.
- Establish a PSLF appeal or review process for denied requests.
Members of the Negotiated Rules Development Committee applauded the ministry’s proposals, but argued that the ministry should go much further to improve the PSLF program. Advocates argued that the definition of eligible employment should be broadened to include certain occupations that are currently excluded, such as healthcare workers employed by for-profit healthcare entities and entrepreneurs who are not technically ” employees â, but only enter into contracts with non-profit or government entities to provide important services. The Ministry resisted these suggestions, finding them difficult or impossible to implement.
Advocates also pushed for a more streamlined and affordable income-based repayment plan that would go hand in hand with the PSLF program, but many negotiators on the committee were deeply disappointed with the ministry’s proposal for a new plan. reimbursement based on income.
Gradual loan forgiveness as the borrower progresses in their public service career, rather than all-or-nothing loan forgiveness at the end of 120 payments. Biden had proposed a gradual forgiveness of public service loans during his 2020 presidential campaign.
Next Steps for Student Loan Forgiveness for Public Service Workers
The negotiated rule-making committee could not reach a consensus on the proposed changes to the PSLF. As a result, the Ministry of Education is now free to proceed with the implementation of its proposals. Ministry officials will need to decide what, if any, suggestions from members of the negotiated rule-making committee to incorporate into the final rules. No changes would likely be in effect until 2023.
In the meantime, borrowers can take advantage of the limited PSLF waiver program – you can read more about this program. here.
Further reading on student loans
Student loan waiver: Ministry of Education clarifies rules for new expanded program
New Student Loan Income-Based Payment Plan Details: Some New Benefits, But Advocates Are Disappointed
Student Loan Forgiveness Changes: Who Qualifies and How to Apply for Biden’s Relief Extension
First wave of borrowers secures $ 715 million in student loan cancellations as part of new program expansion