The Biden administration has approved billions of dollars in student loan forgiveness under the PSLF Limited Waiver, a temporary initiative that expanded eligibility through the Public Service Loan Forgiveness Program, according to new Education Department data.
Hundreds of thousands of borrowers have directly benefited from this relief. And unlike Biden’s one-time student debt cancellation initiative, which remains blocked by federal courts, implementation is ongoing.
Here is the latest.
Student loan forgiveness continues under the PSLF forgiveness, even as Stage 1 ends
The Public Service Loan Forgiveness (PSLF) program can cancel federal student loan debt for borrowers who work in public service jobs as employees of certain nonprofit or government organizations. After 10 years of qualifying employment, the borrower can receive tax-deductible student loan forgiveness under federal law.
However, the PSLF program has been riddled with problems for years. The program had complex eligibility requirements, with strict rules about what constituted a “eligible payment” that could be counted among the 120 payments required to receive loan forgiveness. A single mistake by a borrower—such as making a payment under the wrong plan, or persistently paying too late or too early—can jeopardize eligibility. And the rules were often poorly communicated to borrowers by loan providers, or not at all. The result was a dismal approval rate.
The PSLF limited waiver, announced by the Biden administration last year, is designed to address these issues. Under the waiver, the DOE can retroactively add multiple prior loan repayment periods as “eligible payments” toward the PSLF regardless of the type of federal student loan or repayment plan, or whether repayments were made in full or on time. A related initiative called IDR Account Reconciliation allows for certain prior periods of deferral and forbearance to draw on the PSLF as well.
Although the PSLF limited waiver expired on October 31, the Ministry of Education and MOHELA (the PSLF contracted loan service) are still processing the backlog of applications submitted. According to new data released by the department last week, the administration has so far approved $24 billion in student loan forgiveness for 360,000 borrowers through October under the forgiveness. And more is to come, as the data does not include several PSLF forms the department received near the Oct. 31 deadline, according to a department official.
More student loan forgiveness is coming over the next few months
While the PSLF limited waiver officially ended last month, many of the program’s flexibility and benefits are actually extended through a companion program, the IDR Account Adjustment.
Just as with the PSLF Limited Forgiveness, the DOE’s retroactive IDR calculation adjustment would allow multiple prepayment credits, deferrals, and forgiveness toward student loan forgiveness under 20-year and 25-year income-driven repayment (IDR) terms. However, these periods can also Reliance on the PSLF for borrowers who were employed in eligible public service jobs during the periods for which they can be credited.
Reconciliation of the IDR account is in progress. According to a Department of Education official, 90,000 of the 360,000 borrowers already approved for student loan forgiveness under the PSLF limited waiver were able to have deferral and forbearance periods credited to the PSLF through IDR account reconciliation.
The Department of Education continues to process PSLF applications already submitted before the October 31 deadline, and this process is expected to continue through the winter. Meanwhile, PSLF borrowers who miss the October 31 deadline for forgiveness may still be able to take advantage of IDR Account Adjustment. Implementation of this initiative is not expected to be completed until July 2023.
The effects of student loan forgiveness focus more sharply
According to new data released this week by the Student Borrower Protection Center (SBPC) and teams of researchers at the University of Memphis and the University of Michigan, the impact of student loan forgiveness on PSLF borrowers has been profound.
Using survey data collected during the summer as PSLF Limited Forgiveness was gaining traction, researchers found that PSLF homeownership borrowing rates increased as they approached and obtained student loan forgiveness. Borrowers’ credit scores improved significantly after the cancellation. Borrowers reported less psychological distress when they approached 120 eligible payments and then received student loan forgiveness. But in the years before receiving a revocation, borrowers reported financial and psychological stress.
These preliminary findings help us better understand the benefits of achieved debt cancellation and underscore the need to ensure that borrowers are in [the PSLF program] Enjoy the promised reliable paths to debt relief,” reads the summary of the report.
“This report is one step toward understanding the benefits of student loan forgiveness under the PSLF or any other program,” Dr. Dan Collier and Dr. Dan Fitzpatrick, co-authors of the new paper, said in a statement Tuesday. We have found that receiving loan forgiveness through PSLF comes with significant financial and wellbeing benefits. However, taking the path of tolerance does not give a commensurate share of these advantages; Borrowers who have loan balances that, after several years of forgiveness, still show some stress on measures that are legitimately cause for concern.”
Further reading Student Loan Forgiveness
Got a Student Loan Forgiveness Email? The Department of Education sends collective notices to borrowers
Court agrees to forgive $6 billion student loan for 200,000 borrowers to resolve lawsuit
8 signs Biden might actually extend a student loan hold again
Student Loan Forgiveness Status: 6 Updates After Many Courts Forgiveness