House Democrats this week unveiled a new bill that would reform a key student loan forgiveness program. If passed, the bill would result in dramatically accelerated student loan forgiveness for borrowers who have devoted their careers to public service work.
Here are the details.
Student Loan Forgiveness for Public Service Borrowers Has Already Undergone Some Recent Big Changes
The Public Service Loan Forgiveness (PSLF) program can wipe out the federal student loan debt for borrowers who work for nonprofit or government organizations. Under the original program rules enacted in 2007, borrowers must work as full-time employees for at least 10 years for qualifying employers to become eligible for student loan forgiveness.
But for years, the PSLF program has been plagued by complicated and poorly-communicated rules, as well as administrative and implementation problems, resulting in sky-high denial rates. To address these issues, in October the Biden administration announced the Limited PSLF Waiver, a temporary overhaul which relaxes some of the PSLF program’s problematic eligibility rules to allow past loan periods — such as payments made on non-qualifying federal student loans or under non-qualifying repayment plans — to “count” towards a borrower’s student loan forgiveness term under PSLF.
But the waiver program does not change the employment requirements of PSLF — borrowers must still commit to 10 years or more of public service work for qualifying employers, even under the waiver. Furthermore, the waiver is temporary and set to end on October 31, 2022. Advocates for student loan borrowers have been urging Biden and Secretary Cardona to extend the initiative — but so far, top officials have given no indication that an extension is under serious consideration.
New Proposal Would Accelerate Student Loan Forgiveness for PSLF
This week, several House Democrats unveiled the “Simplifying and Strengthening PSLF Act of 2022,” which would build upon some of the Limited PSLF Waiver reforms and make even more sweeping changes to the program. Among them, the bill would shorten the employment commitment for student loan forgiveness under PSLF from 10 years to five.
“The Biden Administration put the Department of Education back on the side of students and hardworking American people—they made that clear when they overhauled PSLF last fall, and our new bill would make those improvements permanent,” said Rep. Joe Courtney (D-CT), one of the lead sponsors of the bill, in a statement. “PSLF was established to reward Americans who entered careers that our communities depend on, like teachers, nurses, firefighters, and police officers… October’s overhaul of PSLF was a big step in the right direction, and our new bill would codify those improvements along with an additional slate of upgrades to make it easier for America’s public service workers to qualify for, navigate, and benefit from this patriotic program.”
In addition to shortening the employment commitment for PSLF, the bill would also codify key elements of the Limited PSLF Waiver into law by allowing any period of repayment to count towards PSLF regardless of federal loan type, repayment plan, or whether payments were made in full or on time.
“The Biden administration’s temporary waiver for Public Service Loan Forgiveness has been a game-changer for borrowers, so many of whom are pauperized by student loan debt,” said Randi Weingarten, president of the American Federation of Teachers, in a statement. “The waiver means that many of our members across the country are breathing the sigh of relief that comes with being unburdened by student debt after their decade of public service is recognized, as Congress intended. But this relief is temporary… The Simplifying and Strengthening PSLF Act makes the waiver improvements permanent and modifies the program to allow borrowers relief after five years of public service. The sponsors of this bill have helped deliver on necessary debt forgiveness, the only just and moral response to the nation’s student debt crisis.”
Fate of the New PSLF Bill is Uncertain as Biden Administration Moves Forward with Regulatory Overhaul
While the new PSLF bill could potentially pass the House, it stands a tougher chance of passage in the Senate, where Democrats have only a slim majority. Several of President Biden’s top priorities have successfully passed the House, only to then die in the Senate.
While the fate of the new proposal is uncertain, the Department of Education is moving forward with a regulatory overhaul of PSLF. Last week, the Department unveiled proposed new regulations for the PSLF program. The new regulations would codify some elements of the waiver initiative, including allowing more kinds of payments to count towards student loan forgiveness. But the new rules would not go as far as the waiver or the Simplifying and Strengthening PSLF Act. The Department cited “statutory restrictions” for its inability to codify all of the elements of the Limited PSLF Waiver in its regulatory overhaul, signaling that legislation passed by Congress may be necessary to achieve that.
But given the lack of Congressional action on a range of issues, and the rapidly approaching October expiration of the Limited PSLF Waiver as well as the November elections, the Biden administration may face increasing pressure to extend the waiver beyond October 31.