In October, the U.S. Department of Education announced a series of changes to the Public Service Loan Forgiveness Program, which is designed to give student debt relief to borrowers who work in public service.
In the past, the PSLF has been criticized for failing to live up to its name and purpose. In 2018, it was revealed that nearly 99% of applicants were denied forgiveness. But thanks to the recent changes, and the wide array of jobs that can qualify as public service, many are optimistic that more borrowers will benefit from the PSLF in the future.
"There are roughly 35 million PSLF-qualified jobs in the U.S. — 22 million federal, state and local government jobs and 13 million 501(c)(3) jobs," says Jason DiLorenzo, founder and CEO of PSLFJobs, an employer consultant and jobs platform. "The 'public service' sector is much larger than people think."
The Department of Education is offering a temporary waiver that borrowers can complete by October 31, 2022 if they would like to have previous payments, "regardless of loan type or repayment plan," counted towards the PSLF. This means many borrowers who work in public service have an opportunity to get closer to forgiveness.
The Department estimates approximately 570,000 borrowers will be impacted by the waiver. DiLorenzo estimates that closer to "1 million borrowers are affected by the recent overhaul; they are either eligible for forgiveness now, or they are closer to it as a result."
The PSLF allows borrowers with federal direct loans who make 120 qualifying monthly payments while working full-time for a qualifying employer to have the remainder of their balance forgiven.
According to the Department of Education's Office of Federal Student Aid website, "Borrowers must be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization. Federal service includes U.S. military service." Borrowers must work full-time for one of these organizations to even be considered for forgiveness.
Borrowers can consult the federal student aid website to confirm if their employment qualifies. "The PSLF help tool has been greatly improved recently," DiLorenzo says. "Borrowers who believe they qualify should start here to certify current or prior employment and learn if they need to consolidate any loans."
Of note, labor unions, partisan political organizations and for-profit organizations (including for-profit government contractors) are not considered qualifying employers.
"You must be directly employed by a qualifying employer for your employment to count toward PSLF. If you're employed by an organization that is doing work under a contract with a qualifying employer, it is your employer's status — not the status of the organization that your employer has a contract with — that determines whether your employment qualifies for PSLF," reads the program's description for qualifying employers. "For example, if you're employed by a for-profit contractor that is doing work for a qualifying employer, your employment does not count toward PSLF."
Ultimately, "the best thing that you can do is assume that you have the right to loan forgiveness if you work in public service," says Mike Pierce, executive director at the Student Borrower Protection Center. "I would much rather be a teacher starting out in my career in 2021, than in 2007, when this program first became available."
"What [The Department of Education] did with PSLF is an amazing life-changing act for the people who have taught, or have nursed, or have been engaged in the public service, and took out federal student loans," says Randi Weingarten, president of the American Federation of Teachers. "We've gone from 98% of people who got rejected (even though they thought they had qualified) to now, over 30,000 people have already gotten $0 balances on their loans."