Public Service Loan Forgiveness Program Gets Revamped

The Department of Education announced a set of actions that, over the coming months, will allow thousands of student loan borrowers to qualify for Public Service Loan Forgiveness.

The Public Service Loan Forgiveness (PSLF) program was developed to provide debt relief for public servants, like firefighters, nurses, and teachers, by canceling their federal student loans after ten years of public service. But around 98% of people who applied for PSLF in 2021 were rejected. (See Federal Public Service Loan Forgiveness Data, April 2021). This rate is similar to the rejection rate in all other years since the program was created.

Most applications were denied due to borrowers not meeting program requirements for reasons like not having eligible student loans, failing to make 120 qualifying payments, or not working for a qualified employer. Other applications were denied because of missing or incomplete information on an employment certification form. So, to help more borrowers qualify for loan forgiveness, the U.S. Department of Education announced a complete overhaul of the PSLF program, which will happen over the upcoming year.

The major changes announced include the following.

  • All federal student loan payments made while working for a qualifying employer will count towards PSLF regardless of loan program or payment plan. Payments made under any repayment plan can now count as qualifying payments towards PSLF. Previously, only payments made under an income-driven repayment plan or the ten-year Standard repayment plan counted as qualifying payments. Also, the Education Department is eliminating the requirement that only payments made on Direct federal student loans count for PSLF. So, for a limited period of time, borrowers may receive credit for past payments made on loans that otherwise would not qualify for PSLF. For example, payments made on Federal Family Education Loans (FFELs) and Perkins loans can now count toward PSLF. (To get credit for these payments, borrowers with FFEL, Perkins, or other non-Direct Loans must apply to consolidate into the Direct Loan program and submit a PSLF form by October 31, 2022. See below for more information.) This change is retroactive to when the PSLF program was created in October of 2007. But payments made before that date can't count toward PSLF. Also, skipped payments due to in-school deferments or hardship forbearances and periods of default generally won't count towards PSLF. And some loans still won't qualify for PSLF; for example, payments made on Parent PLUS loans before Direct loan consolidation won't qualify.
  • Payments made prior to Direct loan consolidation can count towards PSLF. In the past, consolidating your federal student loans into a Direct Consolidation Loan effectively restarted the clock on your repayment term, including for purposes of PSLF. Now, payments made before Direct loan consolidation can count for PSLF if the borrower was working in qualifying employment. (But not payments made on Parent PLUS loans before Direct loan consolidation.)
  • Military servicemembers will get credit for PSLF after pausing payments while on active duty. Under the revised PSLF program, servicemembers will be able to count months spent on active duty when student loans were in deferment or forbearance toward PSLF.
  • The Education Department will automatically provide credit for PSLF for military servicemembers and federal employees by using federal data matches. The Department of Education will begin using data matches next year to give military servicemembers and federal employees credit toward PSLF without the need to submit an application.
  • More student loan payments, including those with minor technical issues, will count toward forgiveness. According to the Education Department, in some instances, borrowers missed out on credit toward PSLF because their payments were off by a cent or two or late by a few days. The Department of Education will perform an audit and then automatically adjust qualifying PSLF payments for borrowers unfairly rejected for PSLF because of this type of minor issue. So, payments you made in the wrong amount or that were late may be automatically applied towards PSLF. But if you haven't yet applied for PSLF forgiveness or certified your employment, you'll need to do so by the deadline (see below).
  • The Education Department will review denied PSLF applications and correct errors in PSLF processing. The Department of Education will develop a process to identify and fix servicing errors or other issues that stopped borrowers from getting proper PSLF credit.

How to Take Advantage of the Upcoming PSLF Relief

While some of the announced changes to the PSLF program are automatic, like adjusting payments that were rejected for mere technicalities, much of the relief is characterized as a "Limited PSLF Waiver" and you have to apply for the relief. The deadline to take advantage of the Limited PSLF Waiver by applying to the Department of Education is October 31, 2022.

So, to have previously ineligible payments counted, borrowers with all Direct-program federal loans need to either:

  • apply for PSLF by October 31, 2022 (if they've made the 120 total payments required for loan forgiveness), or
  • certify their employment by October 31, 2022 to qualify for the PSLF waiver benefits. (Use this PSLF Help Tool to assist you in completing the required forms.)

To get credit for prior FFEL, Perkins, or other non-Direct loan payments, you must apply to consolidate into the Direct Loan program and submit a PSLF form by October 31, 2022. But before you consolidate, make sure your employment during the time you made payments qualifies for PSLF. To check your employer's eligibility for PSLF before consolidating, log into the PSLF Help Tool at StudentAid.gov/PSLF. To learn more about loan consolidation, go to Student Aid.gov's Direct Consolidation Loan website.

Getting More Information on the Limited PSLF Waiver

To learn more about how to qualify for the Limited PSLF Waiver benefits, go to StudentAid.gov/PSLFWaiver. Also, be sure that the Department of Education has accurate contact information for you on file by registering for an FSA ID at StudentAid.gov/create-account or by updating your StudentAid.gov contact information by logging in at StudentAid.gov/settings. That way, the Education Department can communicate with you directly about the Limited PSLF Waiver and how it might affect you.

Effective date: October 6, 2021