President Joe Biden speaks on the student debt relief plan as Secretary of Education Miguel Cardona listens in the Eisenhower Executive Office Building on Oct. 17, 2022, in Washington, D.C. Alex Wong/Getty Images hide caption
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Alex Wong/Getty Images
President Joe Biden speaks on the student debt relief plan as Secretary of Education Miguel Cardona listens in the Eisenhower Executive Office Building on Oct. 17, 2022, in Washington, D.C.
Alex Wong/Getty Images
The U.S. Department of Education is planning to make several key changes to a long-troubled student loan forgiveness program for public servants, the department announced Tuesday.
The program, Public Service Loan Forgiveness or PSLF, was mismanaged for over a decade resulting in forgiveness for only a small portion of qualifying borrowers.
"The idea was simple. Qualifying for forgiveness was not," Education Secretary Miguel Cardona said in a call with reporters. "As one teacher told me, the system was full of trap doors. If you walk through the wrong one, you're out of luck."
The department is now removing some of those trap doors.
The Biden-Harris administration had already temporarily implemented many of the changes announced on Tuesday – including expanding the types of payments that qualify for forgiveness – in a limited waiver that expires Oct. 31. Since the waiver debuted, more than 200,000 borrowers have been approved for over $14 billion in forgiveness.
Key changes for PSLF
The basis of PSLF is that government and nonprofit employees will have their remaining loan balances forgiven after 120 qualifying monthly payments while working full-time for a qualifying employer.
The Education Department announced it is permanently expanding what types of payments count as qualifying. Under the new regulations, borrowers can receive credit toward PSLF on payments that are made late, in installments, or in a lump sum. Prior rules would disqualify a payment if it was even a few cents short or late more than 15 days.
The department clarified that full-time employment is now defined as 30 hours per week with more specific guidelines for adjunct faculty and lecturers.
The new regulations also expand the types of situations in which it's OK for a borrower to defer or pause their payments. Before the change, deferment for things like cancer treatment or economic hardship could derail borrowers in the program.
Two dates to know
Eligible borrowers with federal Direct Loans and Federal Family Education Loans, or FFEL, that are managed by the Education Department will see these changes applied to their accounts in July 2023, as part of a one-time account adjustment, the department said.
Borrowers who don't currently have eligible loans, including those with commercially held FFEL loans, can still benefit from these changes and the one-time account adjustment if they consolidate into Direct Loans by May 1, 2023.
The differences between the waiver and the permanent changes
Borrowers who think they qualify for PSLF should still submit an application before the limited waiver expires on Oct. 31. While Tuesday's announcement makes permanent many of the changes included in the waiver, there are a few key things going away after the waiver expires.
Normally, in order to qualify for PSLF, borrowers have to be actively employed by a nonprofit or government entity when they apply. The limited waiver provided a path for qualifying borrowers who left their field during the pandemic to still receive PSLF. When the waiver runs out, this path will close. In order to qualify while outside of public service, borrowers must submit their application before Oct. 31.
The second path going away in November is for borrowers working toward Teacher Loan Forgiveness, or TLF. Under the limited waiver, borrowers are able to count time towards both TLF and PSLF, but after Oct. 31 that will no longer be the case.
The Joint Consolidation Loan Separation Act May Offer a Way to Apply for PSLF
Recently Announced! On October 11, 2022, President Biden signed into law the 'Joint Consolidation Loan Separation Act,' to permit borrowers to separate joint consolidation loans.
Act now to take advantage of the PSLF Limited Waiver! While the U.S. Department of Education (ED) is working to implement the changes to separate joint consolidation loans, a specific process has been established for borrowers with these loans to let ED know they want to take advantage of the PSLF Limited Waiver, which ends on October 31, 2022.
Visit StudentAid.gov/pslfwaiver to see what steps you need to take by October 31, 2022, to benefit from the PSLF Limited Waiver.
Student Loan Debt Relief Plan
On Aug. 24, 2022, the Biden-Harris Administration announced a Student Debt Relief Plan that includes one-time student loan debt relief targeted to low- and middle-income families.
The U.S. Department of Education will provide up to $20,000 in debt relief to Federal Pell Grant recipients and up to $10,000 in debt relief to non-Pell Grant recipients. Borrowers with loans held by U.S. Department of Education are eligible for this relief if their individual income is less than $125,000 (or $250,000 for households). Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education. If the U.S. Department of Education doesn't have your income data, the Administration will launch a simple application which will be available in October. Once a borrower completes the application, they can expect relief within 4-6 weeks. Borrowers are advised to apply before November 15th in order to receive relief before the payment pause expires on December 31, 2022.
MOHELA will be open the following Sundays from 9 A.M. to 1 P.M. on October 16, October 23, and October 30. Our PSLF phone number will be closed.
To learn more about the Student Loan Debt Relief Plan and review Frequently Asked Questions, please visit Studentaid.gov/debt-relief-announcement.
Public Service Loan Forgiveness
As of July 2022, MOHELA became the student loan servicer for Public Service Loan Forgiveness (PSLF). Borrowers pursuing PSLF will be transferred to MOHELA upon the approval of their submitted PSLF form. Check the status of your PSLF form.
Have you recently received notification that your loans will be transferring to MOHELA? Get more information about the transfer. We appreciate your patience during this transition period.
If you submitted a PSLF form or used the PSLF Help Tool on or before Oct. 31, 2022, to generate a PSLF form to take advantage of the PSLF Limited Waiver, MOHELA will continue to process these forms under the PSLF Limited Waiver rules. Get information about the PSLF Limited Waiver.
Income-Driven Repayment and Public Service Loan Forgiveness Program Account Adjustment
U.S. Department of Education (ED) revealed several changes and updates that will bring borrowers closer to forgiveness under income-driven repayment (IDR) plans. ED will begin work on implementing these changes immediately, but borrowers will not see the effect in their accounts until fall of 2022. Learn more at mohela.com.
Public Service Loan Forgiveness Servicer
Beginning July 2022, MOHELA will transition to become the student loan servicer for Public Service Loan Forgiveness (PSLF). Borrowers pursuing PSLF whose loans are serviced by FedLoan Servicing will transfer to MOHELA. Learn more about the transition of Public Service Loan Forgiveness.
We appreciate your patience during the transition period.
COVID-19 Information
Check mohela.com/covid19 for information regarding student loan payments restarting, updates about student loan processing, and COVID-19.
New Message For Borrowers Serviced by MOHELA:
COVID-19 emergency relief for federal student loans held by the Department of Education has been extended through December 31, 2022. Visit StudentAid.gov/coronavirus for updates.
During this time no interest is accruing. In addition, no payment will be due until after the payment pause ends, unless you opted out of the forbearance (payment pause).
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