It's now easier to qualify for public service loan forgiveness. Here's what to know

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Hundreds of thousands of student loan borrowers received a surprise gift from the federal government last week when the U.S. Department of Education announced temporary changes to the public service loan forgiveness (PSLF) program, including broadening the types of loans eligible.

The Education Department estimates an additional 550,000 borrowers — including teachers, nurses, service members and others — could now qualify for forgiveness due to the changes.

It's part of the Biden administration's larger effort to forgive some student loans. Already, the administration has forgiven the debt of more than 450,000, including some disabled borrowers and others who were defrauded by for-profit colleges.

Here's what to know about the most recent changes.

What is PSLF?

The PSLF program is designed to forgive the remaining debt of non-profit and government employees who make 120 monthly on-time payments on certain types of federal student loans. 

In order to qualify, borrowers must check off four boxes:

1. They must work full time for a qualified employer
2. They must make 120 monthly, on-time payments for the full amount due on their bill 
3. They must have direct loans (or consolidate into direct loans)
4. They must repay their debt in an income-driven repayment plan

However, it has been notoriously difficult for borrowers to actually qualify for forgiveness, due to complex rules and administrative sloppiness. The Education Department's most recent data reveals that just around 5% of student loan borrowers who've applied for the relief have gotten it.

What are the changes the Education Department is implementing?

The Education Department is making several big changes.

One of the biggest is that the department is now offering a waiver to retroactively count FFEL, or Federal Family Education Loans, toward the 120 payments needed for forgiveness, as long as the loan is consolidated into the Direct Loan program.

This could help hundreds of thousands of public servants who made payments on these types of loans for years not knowing they weren't eligible for forgiveness, says Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit. 

In addition, the Education Department will now count any prior payment made as qualifying toward the 120 needed, "regardless of loan type, repayment plan, or whether the payment was made in full or on time," as long as the borrower has a direct loan. So partial payments, those made in an extended repayment plan and late payments will all count toward the 120. That said, there is one type of loan that is still not eligible: Parent PLUS loans.

"What you paid or when you paid it does not matter at all with this waiver," says Mayotte. "They're only looking at months that your loans were in a repayment status."

Federal employees and military service members will also have their employment automatically certified, rather than having to do so themselves. Military members who put their loans on hold while serving will have those months count toward the 120 payments needed.

The department will also review all applications that were previously denied forgiveness for errors and offer an appeal process for those who believe they should have qualified.

How long do the waivers last?

Borrowers will be able to use this loophole for the next year, through Oct, 31, 2022, the current end date for the Covid-19 national emergency. The Education Department is able to make the changes under the HEROES Act, a 2003 law that allows it to waive certain rules during periods of national emergency. 

After that, "the old PSLF rules apply again," Mayotte says. "I wouldn't count on any sort of grace period for this."

Borrowers will receive a letter from the Department of Education with an update on the changes. However, it will likely take FedLoans until February or March to update every borrower's record to reflect how far along they are in the forgiveness process, says Mayotte. 

How do I qualify for forgiveness?

To qualify for the waiver, borrowers with FFEL Program loans, Federal Perkins loans, or any federal student loans that are not direct, need to consolidate their loans into the direct loan program by Oct. 31, 2022. Borrowers can do that here. They also need to submit proof of eligible employment. Then, borrowers can submit a PSLF application. 

Mayotte says that under normal PSLF rules, consolidating restarts a borrower's monthly payment count. That is being suspended during the waiver period. For more information on consolidation, visit StudentAid.gov or Mayotte's FAQ here.

Borrowers also typically need to be working for a qualifying employer when applying for forgiveness in order to receive it, but that requirement is also being waived. Borrowers who have made 120 payments with a qualifying employer but have since gotten a new job may still qualify for forgiveness.

Where can I go for additional help?

To learn more about the program and how to qualify, check out the PSLF Reddit group, which Mayotte moderates, or the Institute of Student Loan Advisors' website. Additionally, the institute is hosting a webinar with the Consumer Financial Protection Bureau on these changes in the first week of November.

And StudentAid.gov has a wealth of information on the changes. There should also be more guidance coming in the weeks and months ahead.

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