During the COVID National Forbearance, employees of certain non-profits and government agencies have been earning Public Service Loan (PSLF) credit months. For some employees that ended on November 1, 2021, due to the PSLF Limited Waiver law. This new law fixes many of the issues borrowers faced trying to qualify for PSLF. If the borrower does not make the proper changes, they are forfeiting PSLF credit months from November 1,2021 . This mostly affects teachers, medical professionals, government employees, and many others.
PSLF Limited Waiver law only covers PSLF errors through October 31, 2021. The most common errors are that the borrower has FFEL loans with an outstanding balance or is enrolled in the wrong repayment methods. Depending on the borrower’s situation these errors need to be corrected before PSLF credits can be earned.
PSLF Limited Waiver Success
To attain loan forgiveness under the Limited Waiver program, the borrower must submit the proper documentation and fix their current error. To do this the person needs to show their compliance to the PSLF rules before forgiveness is granted.
The rules for PSLF are the following:
- Make 120 on-time payments
- Have Direct Federal Loans
- Use an Income-Drive Repayment (IDR) method
- Be classified as a Full-time or have multiple part-time jobs reaching 30 hours per week
- Employed by a Qualified employer (Certain non-profit or Government Agency)
As part of the process, some of these items may have been completed yet the proper documentation has not been submitted. These can be completed and submitted online. PayForED has written a detailed article to help borrowers with 10 Steps to PSLF Limited Waive Approval.
Avoiding Forfeiting PSLF Credits
Many borrowers who thought they did not qualify for PSLF will now qualify. This problem occurred due to incorrect advice provided by the loan servicers as these PSLF plans were rolled out. There were little details that were overlooked or misunderstood by both the servicers and borrowers. These misunderstandings led to a very low approval rate which the Waiver Program corrects.
An important part of avoiding forfeiting PSLF credits is for borrowers to submit their PSLF employment verification form. It is recommended that you identify your reasons for denial based on the rules above, first. These should be corrected before submitting the PSLF form. While that is being processed, get your PSLF form complete by qualified employers dating back to 10/1/2007 or when you started repayment.
When that is submitted, the Department of Ed will reconcile the work history submitted with payment history. They will then email the borrower the number of PSLF credits earned.
Here is where the confusion resides, during COVID PSLF credits were being earned without payment. Now with the new PSLF Limited Waiver Program, borrowers with these errors are not earning PSLF credits and think they are. This is why identifying your error and correcting them is critical.
Moving to Loan Forgiveness under PSLF Limited Waiver
Once the borrower receives their PSFL earned credits, there could be two outcomes.
Some borrowers may qualify for PSLF immediately if the reconciliation shows that they have earned the 120 credits. This means that the required 120 credits was reached based on their payment history and employment during this timeframe. Remember the errors should be corrected before submitting their employment verification. If the error is not corrected the credit months cannot be earned. In this case, future payments may not be required starting on May 1, 2022.
Others will need to make additional payments to reach the 120-payment requirement. Now that the borrowers have their approved PSLF credits that were previously denied, they can create a plan to loan forgiveness.
We are seeing cases of borrowers saving anywhere from $10,000 to over $300,000.
Avoid Forfeiting PSLF Credit Summary
The new PSLF Limited Waiver Program offers a great opportunity for over 550,000 borrowers to now qualify for student loan forgiveness. Many of the people that qualify for this program are over 30. They were the initial borrowers who were denied PSLF. Student loan borrowers must correctly identify the reason for non-compliance to the PSFL rules and then fix them. At that point, submit the PSLF form to FedLoan Servicing.
For each month these errors are not corrected, it will result in additional student loan repayment months. Another important date of the PSLF Limited Waiver is the registration date. A borrower must submit a PSLF form before October 31, 2022. If they do not, they forfeit PSLF credits for all payments prior to October 31, 2021, that were in error.