Government Student Loan Debt Repayment
(NEXSTAR) – For 15 years, a federal program has existed to provide public workers like teachers, law enforcement and those who work for nonprofits with student loan forgiveness. Still, the overall approval rating of applicants is low.
Lawmakers now hope to change the effectiveness of the program with a new bill.
The Civil Service Loan Cancellation Program, or PSLF, was created in 2007 to help certain employees by canceling their student loan after 120 payments over 10 years. The number of applicants whose loans have actually been forgiven has been low: only 1 in 5 of the 1.3 million borrowers applying for debt forgiveness through the PSLF are on track for relief by 2026, according to a September report. report by the Center for the Protection of Student Borrowers.
In 2021, the U.S. Department of Education announced a change that temporarily waives specific PSLF requirements to provide borrowers with credit toward loan forgiveness, regardless of their federal loan type or they had been enrolled in a specific payment plan, as long as they consolidated their debt into a direct loan before the waiver expired.
Before the to renouncer, borrowers had to have a specific federal loan – a direct loan – to be eligible for the PSLF. Borrowers could consolidate their debt into direct loans for PSLF, but any payments made on the loans prior to consolidation were not counted in the required tally.
This waiver is currently due to expire after October 31, 2022, meaning eligible borrowers have less than four months to apply. Richard Cordray, the head of federal student aid, said at a conference earlier this year that, while pushing for the PSLF waiver to be extended, President Biden may not have the executive power to approve such a move.
Instead, some lawmakers hope to make the temporary changes brought about by the waiver permanent while enacting additional reforms to the program “to permanently address the concerns of PSLF applicants.”
In a recently introduced bill, dubbed the ‘Simplification and strengthening of the PSLF law‘Rep. Joe Courtney (D-Conn.) offers Halve the time it takes to get relief by reducing the number of payments needed to qualify for PSLF relief from 120 over 10 years to 60 over five years for borrowers working with an eligible employer.
If passed, the bill would include all previous payments made on borrower loans – regardless of loan type, payment plan or whether payments were made in full or on time – towards the payments necessary for the relief of the PSLF. These guidelines are largely already in place under the temporary waiver that will expire in the fall.
Courtney’s bill would also expand access to the PSLF for active duty military personnel and Peace Corp volunteers whose loans have been suspended while serving. Currently, some loan deferrals are not eligible for PSLF relief.
Additionally, under Courtney’s bill, parents with MORE ready – otherwise known as the Parental Loan for Undergraduate Students – or couples who have jointly consolidated their loans into a Federal Family Education Loan, or FFELwould be allowed to consolidate their loans into a direct loan, which would then be eligible for the PSLF.
On Thursday, the bill was referred to the House Committee on Education and Labor.
Earlier this month, the The Biden administration has proposed sweeping changes to the federal student loan system, including a permanent modification to the PSLF that would allow more payments to qualify for the program, including partial, lump sum and late payments. It would also allow particular types of deferments and abstentions to count for the PSLF, and it would create a formal reconsideration process for applicants who were denied access to the program.
Brad Dress contributed to this report.