By Lila Quintiliani, ChFC®, AFC®, MOAA Program Director, Financial and Benefits Education
The Department of Education has announced it will completely overhaul the Public Service Loan Forgiveness (PSLF) program, which is supposed to forgive the remaining balance on eligible student loans if a person works in a public service job for at least 10 years.
This is potentially good news for the over 176,000 active-duty servicemembers with federal loans eligible for the program. The current application process is complicated and confusing, DoD has not sufficiently publicized the program, and a recent Government Accountability Office (GAO) study found 94% of DoD borrowers who applied for forgiveness were denied and only 124 total military members had ever been approved.
The program has been so fraught with issues that fixing it was one of MOAA’s top priorities in a January letter to the incoming Biden administration.
Key areas being addressed in the overhaul include:
- Counting all prior payments made by student borrowers toward PSLF. The Department will offer a temporary waiver through Oct. 31, 2022, giving borrowers credit for prior payments they made that would not otherwise count toward PSLF. Any prior payments made while working for a qualifying employer will count as a qualifying payment, regardless of the loan type or repayment plan.
- Eliminating barriers for military members. The Department of Education will allow months spent on active duty to count toward PSLF even if the servicemember’s loan was in forbearance or deferred. Previously, either of these actions would have set the repayment clock back to zero.
- Simplifying the process for a payment to qualify for PSLF. Many borrowers had complained payments they made did not count toward loan repayment because of technical requirements related to payment dates and amount of payment. This resulted in the program not counting payments that were a day or two late or pennies off the full amount. The Department of Education has said it will adjust previous payments that were affected by this issue and will identify and correct errors in processing.
- Automatically helping servicemembers and federal employees access the program. One of the criticisms listed in the GAO study was that DoD did not widely use the PSFL program for recruitment and retention and preferred to use other, DoD-controlled benefits, such as bonuses or DoD-run student loan repayment programs. Now the Department of Education will begin giving federal employees credit for PSLF automatically by matching their data with information held by other federal agencies about servicemembers and the federal workforce.
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These improvements will roll out over the coming months; borrowers should visit StudentAid.gov/PSLFWaiver for the latest details and should make sure that their contact information on file at StudentAid.gov is up to date.
Those who have not yet applied for the program should submit their application by Oct. 31, 2022.