On October 6, the Department of Education announced a major overhaul to the Public Service Loan Forgiveness (PSLF) program. It is estimated to help over 550,000 borrowers qualify for loan forgiveness under the New PSLF Waiver rules.  For some, this will provide immediate student loan forgiveness and others will benefit by earning PSLF credits that were previously denied.

The PSLF overhaul was overdue based on the complexity of the program and the misinformation provided to borrowers by the various loan servicers.  The limited PSLF Waiver corrects some of the most common errors that disqualified many borrowers from receiving Public Service Loan Forgiveness credits.  There are still specific rules that need to be followed which are described below.

Who Does the PSLF Overhaul Help

The PSLF changes are the result of borrowers being frustrated with the PSLF credit denial for multiple years.  Some of these adjustments will happen automatically through the review of current data.  Others will require the borrower to gather and submit additional information.

The most common issues where credits will be earned and applied to a borrower’s account are:

• Payments not matching exact monthly amount
• Payment not applied that were a few days late
• Payments made using a non-qualified repayment method
• Payments made to federal loans that were not Direct Federal Loans (FFEL and Perkins)
• Months of military active duty

PSLF credits will be earned for any payments with these errors that occurred before 10/31/2021.

Some Will Receive Credits Automatically

If a borrower had submitted their Employment Certification Form (EFC) or new Public Service Loan Forgiveness (PSLF) form, the loan servicer will be reviewing the information and adjusting the credits earned.  It is unclear how long that will take.  This also assumes that your employer was approved under the rules of PSLF.

The PSLF credit adjustment is anticipated to take a few months to complete.  It may be a good practice to regather your information in case the servicer requires it to be resubmitted.

Part of the PSLF overhaul includes the Department of Education planning to work with government agencies to have the employment verification automatically be sent to the proper servicer.  This would include military, public school teachers, and other government employees.

Resubmitting Your Information

Many borrowers who were initially denied could now qualify for PSLF.  The basic rules are the same

• Make payments while working for a qualifying employer
• Be a full-time employee (Multiple part-time qualified employment may qualify if it adds up to 30 hours per week)

Some borrowers will need to request their resubmitted ECF or PSLF from past employers.  This will need to be done to verify their employment.

Additional PSLF Waiver Steps Required

The new PSLF Waiver program has some additional rules that contradict some existing rules.  For borrowers who have not reached the full 120 credits for PSLF but earn additional credits, they will need to make sure they do a few things before October 31, 2022.

• Complete a Direct Consolidation (Will not restart the PSLF credit period)
• Change to an Income-Driven Repayment (IDR) method
• Continue to work for a qualifying employer

It is recommended that you do the direct consolidation and convert to the IDR method as soon as possible.  The PSLF credits earned under the PSLF Waiver are only available for errors before October 31, 2021. It is recommended that you use the PSLF Help Tool (StudentAid.gov/PSLF).

Another important consideration is the use of IDR methods.  The borrower’s monthly payment is based on their Adjusted Gross Income (AGI) and the way their taxes are filed.  Proper planning is required as this area will also be automated in this overhaul.  The problem is the loan servicers are unable to provide any personal finance advice.

Possible Over Payment Refund

For borrowers who receive PSLF under the PSLF Waiver and had overpaid their student loans, the Department of Education will be refunding your overpayment amount.  This is only for borrowers who receive PSLF forgiveness under this program.  Prior PSLF recipients cannot qualify for the refund.

PSLF Overhaul and New PSLF Waiver Summary

All of the changes appear to be a great first step to simplify this complex process.  With proper planning, many borrowers can save thousands of dollars in student loan repayment.  Going forward the Department of Education is planning on more automation and making it easier for borrowers to qualify for PSLF.

For those who need additional advice in navigating this process, please contact one of our CFSLA Advisors.  This is especially true for those who will need to make future payments under one of the IDR methods.  They may be able to save you thousands of dollars by properly managing your AGI and lowering your future payments as you work toward your PSLF.