A Note from the Sherpa: This article was originally published on October 7, 2021. The Limited Waiver program described below has now expired.
However, many borrowers can still fix their PSLF eligibility issues by taking advantage of the one-time IDR update, which remains available until December 31, 2023.
It finally happened!
The Department of Education is finally fixing many of the issues that made Public Service Loan Forgiveness a mess.
There is a ton to unpack with this announcement, but two critical details stand out:
1.) Many borrowers who lost time towards PSLF because they were on the wrong repayment plans or had the “wrong” loan type can now qualify for forgiveness.
2.) This temporary program lasts until October 31, 2022. Borrowers need patience as counts get updated, but it is essential that this deadline doesn’t get missed by the borrowers who need to consolidate.
Who is now eligible for PSLF?
If you lost out on time because you were on the wrong repayment plan or because you had loans that needed consolidated, such as FFEL or Perkins loans, your previous payments may now count.
Even though there are some significant changes to PSLF, two requirements remain:
Parent PLUS loan borrowers are the one group that won’t benefit from the major changes.
Some borrowers will see their count towards PSLF automatically updated. Others will need to consolidate before the October 31, 2022 deadline to take advantage of the new rules.
Who Needs to Consolidate?
Federal student loan consolidation doesn’t lower interest rates. Instead, consolidation is a tool for borrowers to gain program eligibility.
Consolidation converts debt that isn’t eligible into PSLF into an eligible loan. Historically, the downside to consolidation was that it reset the forgiveness clock to zero.
The changes announced today meant that the reset doesn’t happen. If you made otherwise eligible payments, consolidating means that the old payments will now count towards PSLF. For many borrowers, this might mean forgiveness comes years earlier than initially anticipated.
If you have FFELP loans or Perkins loans, they are not eligible for PSLF. If you consolidate, the loans become eligible. Under the new rules, prior payments still count towards PSLF. The one exception is Parent PLUS loans. Parent PLUS loans can still become eligible for PSLF, but the payments made before consolidation won’t count.
The big deadline for the borrowers who need to consolidate is October 31, 2022.
Sherpa Tip: This is a complicated issue. If you are confused about whether or not your loans need to be consolidated for PSLF, I’d suggest taking a couple of steps:
First, visit the studentaid.gov website to get a complete list of your federal loans and how they are classified.
Additionally, call your servicer to discuss the loans you have and whether or not they require consolidation.
Updating Payment Counts
If you have previously applied for PSLF or submitted an Employer Certification Form, your payment count should automatically update in the coming weeks.
Borrowers with loans serviced by MyFedLoan should click on the “check my progress” link available on the Account Summary page. It looks like this:
I’m told that the FedLoan payment counts may take months to update. However, borrowers should receive an email in the coming days, or weeks at the latest, with updated counts.
If MyFedLoan does not service your loans, it means you have not completed an Employment Certification Form or applied for PSLF. If you think there is even a tiny possibility that you might qualify for PSLF, send in an Employer Certification form as soon as possible.
Working with FedLoan Servicing (MyFedLoan)
Working with MyFedLoan may present a significant challenge for borrowers trying to navigate the expanded PSLF rules.
Assisting borrowers with a major policy change is a challenge for loan servicers under the best of circumstances. Because FedLoan servicing is ending their contract with the Department of Education, difficulty is almost a certainty.
By December, MyFedLoan will be out of the loan servicing business. This means they don’t have much of an incentive to hire new staff or to train people.
For borrowers, the usual loan transfer advice still applies, but downloading documents and records takes on added importance. You may have a prior payment that only recently became eligible under the new rules. Your count towards forgiveness should automatically be updated, but if it isn’t, you will need to prove your eligibility. If the records get lost in the transition, you won’t have the documents you need.
Refunds for Previous Payments
One of the most remarkable aspects of the new rules is the refund provision for borrowers.
If you made “extra” payments due to the rule changes, you should receive a refund for the additional payments. For some borrowers, this might mean an enormous check is coming soon.
Unfortunately, the refund only applies to borrowers who earn forgiveness under the new rules. If you have previously had your loans forgiven under PSLF, additional payments due to expanded eligibility will not be refunded.
Expanded PSLF Example
To illustrate the new rules in action, an example might help.
For our example, let’s assume the following for Evan, our example borrower:
- Evan finished college in 2005.
- At that time, Evan had a mix of federal direct loans, FFEL Loans and Perkins Loans.
- After college, Evan took a job with the county government, where he was employed full-time from 2005 to present.
- When Evan started repayment in 2005, he couldn’t afford your monthly payment, so Evan signed up for the Graduated Extended Repayment Plan (a non-IDR plan that isn’t eliglbe for PSLF).
- In 2010, Evan relized his repayment plan wasn’t eligble for PSLF, so he signed up for IBR to fix the mistake.
- In 2015, Evan learned that his FFEL loans and Perkins loans were not eligible for PSLF, so he consolidated into a Federal Direct Consolidaiton loan.
- Evan thought he would earn forgiveness in 2025.
In this example, Evan had two major mistakes in his quest for PSLF. First, he was on the wrong repayment plan. Second, Evan waited to consolidate and lost precious time towards PSLF.
Under the new rules, the period between 2010 and 2015 now counts towards PSLF. Additionally, the time between 2005 and 2010 should also count towards PSLF.
This means that Evan earned PSLF in 2015 under the revised rules, even though he thought he was starting from scratch in 2015. Evan should qualify for a refund for all payments made from 2015 until the present.
Expanded Eligibility Rules and Conditions
In the coming weeks and months, expect plenty of clarification on the rules and how to correct mistakes.
For now, borrowers can find the most comprehensive list of rules on the Limited Waiver page on studentaid.gov.
This page will be updated as additional information becomes available.