The Biden administration has approved billions of dollars in student loan forgiveness under the Limited PSLF 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’s the latest.
Student Loan Forgiveness Under PSLF Waiver Continues, Even As First Phase Ends
The Public Service Loan Forgiveness (PSLF) program can wipe out the federal student loan debt for borrowers who work in public service careers as employees of certain nonprofit or government organizations. After 10 years of qualifying employment, the borrower can receive tax-free student loan forgiveness under federal law.
The PSLF program has been riddled with problems for years, however. The program had complicated eligibility requirements, with strict rules about what constituted a “qualifying payment” that could be counted towards the 120 payments required to receive loan forgiveness. One mistake by a borrower — such as making a payment under the wrong plan, or consistently paying too late or too early — could jeopardize eligibility. The rules were also often poorly communicated to borrowers by loan servicers, or not communicated at all. The result was a dismal approval rate.
The Limited PSLF Waiver, which the Biden administration announced last year, was designed to address these problems. Under the waiver, the Education Department can retroactively credit many past loan repayment periods as “qualifying payments” towards PSLF regardless of the type of federal student loan or the repayment plan, or whether a payment was made in full or on time. A related initiative called the IDR Account Adjustment allows certain past periods of deferment and forbearance to count towards PSLF, as well.
Although the Limited PSLF Waiver ended on October 31, the Education Department and MOHELA (its contracted PSLF loan servicer) are still processing a backlog of submitted applications. According to new data released last week by the department, the administration has so far approved $24 billion in student loan forgiveness for 360,000 borrowers through October under the waiver. And more is coming, as the data does not include the many PSLF forms the department received closer to the October 31st deadline, according to a department official.
Even More Student Loan Forgiveness is Coming Over The Next Few Months
While the Limited PSLF Waiver officially ended last month, many of the program flexibilities and benefits are effectively being extended by its companion program, the IDR Account Adjustment.
Just like for the Limited PSLF Waiver, the IDR Account Adjustment will allow the Education Department to retroactively credit many past periods of repayment, deferment, and forbearance towards student loan forgiveness under 20-year and 25-year Income Driven Repayment (IDR) terms. However, these periods can also count towards PSLF for borrowers who were working in qualifying public service jobs during the periods that can be credited.
The IDR Account Adjustment is ongoing. According to an Education Department official, 90,000 of the 360,000 borrowers already approved for student loan forgivenes under the Limited PSLF Waiver were able to get deferment and forbearance periods credited towards PSLF through the IDR Account Adjustment.
The Education Department is continuing to process PSLF applications that were already submitted before the October 31 deadline, and that process is expected to continue through the winter. Meanwhile, PSLF borrowers who missed the October 31 deadline for the waiver may still be able to benefit from the IDR Account Adjustment. Implementation of that initiative is not expected to be completed until July 2023.
Impacts of Student Loan Forgiveness Coming Into Sharper Focus
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 for PSLF borrowers has been profound.
Using survey data collected during the summer as the Limited PSLF Waiver was gaining steam, the researchers found that PSLF borrowers’ rates of homeownership increased as they neared and received student loan forgiveness. Borrowers’ credit scores improved significantly after cancellation. And borrowers reported lower psychological distress as they approached the 120 qualifying payments and then received student loan forgiveness. But in the years prior to receiving any cancellation, borrowers reported financial and psychological strains.
“These preliminary findings help us better understand the benefits of realized debt cancellation and underscore the need to ensure that borrowers within [the PSLF program] enjoy reliable pathways to promised debt relief,” reads the report summary.
“This report is one step towards understanding the benefits of student loan forgiveness under PSLF or any other program,” said Dr. Dan Collier and Dr. Dan Fitzpatrick, the authors of the new paper, in a statement on Tuesday. “As such, we’ve found that receiving loan forgiveness through PSLF comes with important financial and well-being benefits. However, being on the path to forgiveness does not give a proportional share of those benefits; borrowers with loan balances still several years out from forgiveness show some stress measures that are legitimately concerning.”