The Biden administration has reported a significant increase in student loan forgiveness approvals, benefiting hundreds of thousands of borrowers, thanks to initiatives aimed at enhancing the Public Service Loan Forgiveness (PSLF) program. PSLF is a crucial federal student loan forgiveness program that can erase a borrower’s federal student loan debt after 120 “qualifying payments,” equivalent to ten years. However, the PSLF program has long struggled with poor administration, insufficient oversight, resulting in errors, rejections, and approval rates that never exceeded single-digit percentages.
But following a series of reforms initiated by the Biden administration, the approval rates for student loan forgiveness under PSLF have seen a remarkable surge. The U.S. Department of Education stated in a Tuesday announcement, “The Biden-Harris Administration has already approved… $45.7 billion for 662,000 public servants through improvements to Public Service Loan Forgiveness (PSLF).” Furthermore, additional loan forgiveness is expected as these initiatives continue to unfold.
The first of these PSLF improvements, known as the Limited PSLF Waiver, was introduced in 2021. This one-time initiative relaxed the criteria for qualifying PSLF payments, expanding the scope of what could be counted toward loan forgiveness under the program. Previously, only payments made on Direct federal student loans under a 10-year Standard or income-driven repayment (IDR) plan were eligible for loan forgiveness. However, the Limited PSLF Waiver extended eligibility to include almost any period of repayment on any federal student loan, dating back to October 2007, when PSLF was initially established.
The IDR Account Adjustment, an ongoing program, subsequently extended many of the benefits of the Limited PSLF Waiver. While much attention has been given to student loan forgiveness for borrowers on 20- or 25-year repayment plans, it’s important to note that the IDR Account Adjustment can also benefit PSLF borrowers. This adjustment further broadened the range of payments and situations that can count toward student loan forgiveness. It even allows for the crediting of some periods of deferment, forbearance, and recent defaults for borrowers engaged in qualifying employment. The Education Department is implementing this adjustment gradually, and borrowers are receiving PSLF credit and associated loan forgiveness approvals throughout early 2024.
For some borrowers, the federal Direct consolidation program may be necessary to qualify for or maximize the PSLF benefits under the IDR Account Adjustment. Fortunately, there is still time to consolidate loans to take advantage of this adjustment, with the consolidation window closing on December 31, 2023.
On July 1, the U.S. Department of Education implemented new PSLF regulations, intended to provide more enduring benefits to borrowers seeking loan forgiveness through the program. These new rules partially formalize certain aspects of the temporary waiver and adjustment initiatives. They permit specific periods of deferment and forbearance to be counted toward loan forgiveness under PSLF. The reforms also ensure that borrowers can retain some PSLF credit after consolidation, a change from the past where consolidation would erase a borrower’s PSLF credit. Moreover, borrowers now have the option to “buy back” past periods that might not have previously qualified for loan forgiveness.
The new regulations additionally simplify and expand the definition of qualifying PSLF employment, particularly for non-full-time employees, specific contracted workers in limited scenarios, and adjunct faculty. Furthermore, the regulations relax the definition of a qualifying payment, allowing borrowers to make prepayments or lump-sum payments in certain circumstances.
The Biden administration’s initiatives have had a profound impact on student loan forgiveness under the Public Service Loan Forgiveness program. These efforts have led to a substantial increase in approvals, providing substantial relief to borrowers burdened by student loan debt. The Limited PSLF Waiver, IDR Account Adjustment, and new PSLF regulations collectively represent a concerted effort to address the historical challenges associated with the PSLF program, making it more accessible and beneficial to a broader range of borrowers.
