On July 29, 20 state attorneys general sent an open letter to President Biden and Education Secretary Miguel Cardona, urging them to take significant action by extending (and expanding) the Public Service Loan Forgiveness Waiver that the federal government enacted in October to well past its current expiration date.
“Although, through the waiver, your administration has temporarily relaxed many of the complex rules that contributed to the PSLF Program’s failure, we believe additional action is needed to support our public service workers and ensure they can access the benefits they so justly deserve,” the attorneys general write.
What’s Happening With The PSLF Waiver?
As it stands right now, the PSLF waiver is set to expire on Oct. 31, 2022. The PSLF waiver, a number of reforms to the existing Public Service Loan Forgiveness program, was created because the program was functionally broken.
The program promised to give people who went into public service — through being teachers or working in health care, for example — a path to student loan forgiveness if they worked in their chosen field for a certain amount of time and made a certain number of qualifying payments. That program was enacted in 2007. Ten years later, when the first generation of public service workers who applied for the program tried to get their loans expunged, just 2% of applicants were approved. That’s right: 98% of borrowers were denied.
The Biden Department of Education enacted a bunch of PSLF reforms in October of 2021 to correct the problem.
Changes included loosening requirements on what types of student loan payments would count toward forgiveness, automatically giving service members PSLF credit without them having to deal with a mountain of paperwork, reviewing previously denied PSLF applications, simplifying the application process, and more.
Those changes had immediate effects: $1.74 billion in loans for 22,000 borrowers who should have qualified for PSLF forgiveness had their loans immediately forgiven, and by June 1 of this year, a total of $9.5 billion in loans has been forgiven for more than 140,000 borrowers total.
Why Do The AGs Want It Expanded And Extended?
Per Business Insider, a report from the Student Borrower Protection Center found that “while 9 million public servants are eligible for student loan forgiveness, only 2% of them have actually gotten their debt wiped out since November 2020. And fewer than 15% have filed paperwork to track their payment progress.” So while the PSLF overhaul has been a massive success, it hasn’t reached enough people and, the AGs argue, extending the program’s eligibility could allow a lot more eligible borrowers receive the money they are due.
Furthermore, the attorneys general note that the PSLF waiver should be timed with the Income-Driven Repayment Program’s major overhaul. (More than 130 organizations also made this point alongside the Student Borrower Protection Center in an open letter sent to the administration in July.)
The IDR payment overhauls issues that plagued the program, which sets student loan payment installments based on a family’s income in an effort to make it more affordable for people in need. IDR is supposed to allow for complete loan forgiveness after 20 to 25 years of repayment. Major revisions to that plan will start after the PSLF waiver expires, which is why the AGs argue the programs should run in tandem “into a unified adjustment policy. The simplest way of doing so may be to incorporate certain critical aspects of the waiver into the [IDR adjustment.]”
Other problems the AGs brought up in terms of wanting to expand the waiver include that it does not “go far enough” to deal with misconduct done by loan servicers; that the department should count “all forbearance periods” toward PSLF as a way to deal with that misconduct; that borrowers were “steered” into forbearance, rather than IDR payment plans or more affordable payment plans, by federal loan servicers themselves, which harmed their ability to qualify for PSLF at the end of their decade of employment; and more.
The bottom line? The PSLF waiver has done a lot of good for those in need, but it could do far more.
“More than nine months into the waiver, many borrowers ... remain understandably confused. Some are still unaware of the benefits available through the waiver and the steps they must take to access them. Additionally, given that large numbers of borrowers have not been required to actively deal with their loans throughout the payment pause, many will not consider the Limited PSLF Waiver until they return to repayment status, are put in touch with a servicer, and are again required to grapple with their loans. Ending the waiver on October 31, 2022 would provide only two months for borrowers to take the critical steps necessary to receive waiver benefits,” the letter writers note.
In the meantime, as student loan stakeholders fight to expand reform for certain borrowers, many are still awaiting to see whether or not Biden will take significant action on student loans for all federal borrowers, not just those that work in public service, or if he will extend the federal student loan payment pause once again.