The Biden administration is moving forward with its plan to reform the Public Service Loan Forgiveness program. Last week, Secretary of Education Miguel Cardona tweeted that 30,000 borrowers would have around $2 billion in debt forgiven. Here’s what you need to know.
Who qualifies for this round of student loan forgiveness?
Emails from the Department of Education are going out to borrowers who are eligible for the Public Service Loan Forgiveness program under new rules announced by the Biden administration in October.
The PSLF program forgives federal student loan debt for borrowers after a decade of qualifying employment in the public sector and/or non-profit organizations. According to Forbes, those whose loans will be forgiven in this round are all direct federal student loan borrowers who have already certified their public service employment with the Department but previously had their forgiveness denied.
Some borrowers had prior payments disqualified from the 120 required for PSLF because they were made on non-qualifying federal loans that were later consolidated into direct federal loans. Others made previous payments under a non-qualifying repayment plan. And some simply made payments that were rejected for technical reasons like timeliness.
Why did PSLF need to be reformed?
As you likely gathered from the previous paragraph, the PSLF program has exceedingly specific rules that have caused confusion from the start. Many borrowers believed they were complying with the program only to find out years later that they’d made a costly error that made years of payments ineligible. And by many, we mean many: 99 percent of the first class of applicants, those who applied a decade into the program, had their applications denied.
The Biden administration’s temporary relaxation of some of these rules is an effort to provide the life-changing relief of student debt forgiveness to more people.
Will Biden forgive more student debt?
Yes. Many more borrowers stand to benefit from the PSLF reforms, including those who have been making payments to other kinds of federal loans, those who have yet to certify their employment, and those whose records are plagued by irregularities or errors.
The deadline for these borrowers to consolidate into direct federal loans and/or certify their public service employment with the Department of Education is October 31, 2022. Borrowers with irregularities can request a manual audit from the Department if those errors aren’t corrected in the current reexamination of the program.
The Department estimates that up to an additional $2.82 billion in relief could be coming as a result of these changes.
Of course, even approximately $5 billion of forgiveness is a drop in the bucket compared to the $1.75 trillion in total student debt held by Americans. Unfortunately for other borrowers, the administration has thus far been content with drips and drops. Before the PSLF, its student debt cancellation and forgiveness efforts included the cancellation of $5.8 billion in debt held by 323,000 borrowers with disabilities and $1.1 billion held by 115,000 former ITT Technical Institute students.
The kind of large-scale student loan forgiveness widely supported by the public and leading Democrats and promised by Biden during his presidential campaign has not been forthcoming. White House Chief of Staff Ron Klein said the president directed Cardona to create a memo on the president’s legal authority, but it’s only been released in heavily redacted form.
The fact that Biden is aggressively canceling student debt for relatively small groups of people suggests that experts who say the president can unilaterally act to cancel federal student debt are correct, and that the delay is likely a political one. And with the pandemic pause on student loan interest and repayments expiring in January, it’s possible that things get worse for borrowers before they get better.