No more. There are some new hurdles, but with proper guidance, everyone who has worked public service for ten years will now finally receive the forgiveness they were promised. Things to know:
- If you’d been denied for filling out the forms wrong but have made 120 payments on a Direct loan you will automatically receive a refund for any qualified payments you made in excess of 120.
- If you still have FFEL or Perkins loans, you ABSOLUTELY MUST consolidate your loans to Direct before OCTOBER 1, 2022 to receive the benefits of this new change.
- Any payments toward any federal loans (Direct, FFEL or Perkins) made after October 2007 when the PSLF program was enacted can be counted toward the 120 payments required under PSLF.
- Payments made pre-consolidation WILL count.
- No refunds will be provided for overpayments.
- Previously denied applications will be re-reviewed.
- Allowing active duty service members to count deferments and forbearances toward PSLF. This solves a problem for service members who have paused payments while on active duty but were not getting credit toward PSLF.
- Automatically providing credit toward PSLF for military service members and federal employees using federal data matches. The Department will implement data matches next year to give these borrowers credit toward PSLF without an application.
Pitfalls to watch out for:
- Don’t think that all of this will occur automatically. If you fail to consolidate within one year, you will lose the benefits of this and none of your payments toward FFEL or Perkins loans will count toward PSLF and you’ll be back in the same boat.
- An application needs to be filed for ED to review prior payment histories.
- Never consolidate a Parent Plus loan with your own federal loans as you will severely limit repayment options to only the Income Contingent Plan (ICR) which will have a much higher payment than IBR, Paye or Repaye.
- You can do a separate consolidation for any FFEL Parent Plus loan and keep it separate to avoid that higher payment.
- If your employer is not federal, none of these things will happen automatically with data matching — you’ll need to correctly consolidate, you’ll need to file a PSLF application.
Why is there a new deadline of October 1, 2022? We believe that the Department of Education felt that if it called this COVID relief, it could fall under its emergency powers provided by recent stimulus bills. Otherwise, an act of Congress would be required to allow FFEL payments to count. Smart move. It also encourages people to act quickly to right the ship, and not let this linger for years and years. It also calls into question whether there will be a need for a student loan bill if ED can fix most of the problems through its rule making committee process.
Half of the problem ED has nowadays is identifying who is out there. Most people don’t know how the system works, aren’t aware of what buttons to push to obtain relief in whatever circumstances they find themselves in. We now have a Department of Education that is ready and willing to grant relief and fix problems provided they have a legal basis to do so and it comes to their attention.
We’ve been watching the rulemaking committee and others debating changes to the student loan programs this week. Rather than widespread universal relief of 10K or even 50k, it appears that the Department of Education has chosen to favor targeted relief toward broken programs in an attempt to make good on promises made to borrowers years ago. This is exactly what we were hoping for and advocating for – fixing what is broken.
I always like to say I wouldn’t be a lawyer today if it weren’t for the student loan programs. I didn’t receive any forgiveness, but I didn’t need any. I wasn’t the victim of false promises by my school. I went to school before the astronomical increases in tuition. While I graduated from law school during a recession in 1992, jobs were still available and I wasn’t forced onto years of forbearance due in an inability to pay loans. My servicers didn’t mislead or lie to me. My circumstances didn’t deserve forgiveness. I repaid my loans. But they were very reasonable and affordable back then.
Unfortunately though, many if not most people out there, have a different set of circumstances now. They simply cannot afford to repay the excessiveness generated by their student loans. The loan payments are often the size of a mortgage. Some have attended fraudulent schools where the degree is worthless. Some haven’t been able to obtain a job that paid enough to maintain a minimal standard of living and repay their loans. Some have worked public service after having been promised a ten year forgiveness term. ED has now taken removed the barriers for PSLF and I hope that everyone out there make sure to take advantage of this opportunity. Remember, the deadline of October 1, 2022 is looming. One year. After that, it’s back to the same. I know that seems unusual as a permanent fix sounds more logical, but that limit is what allows ED to take this step — and we can live with that!
Additional changes to PSLF rules and procedures are still being discussed. More may come out after this afternoon’s rulings in fact. Stay tuned. And reach out to us if you would like help to make sure you are doing all that you can to obtain PSLF forgiveness under these new rules.