Biden administration announces student loan forgiveness program overhaul, will impact over 500K borrowers
The Biden administration is extending $1.74 billion in student loan forgiveness to public servants through an overhaul of its Public Service Loan Forgiveness program. (iStock)
The Biden administration announced Wednesday an overhaul to the Public Service Loan Forgiveness (PSLF) program that it said could affect about half a million student loan borrowers.
The program was created to provide relief to public servants such as teachers, nurses, firefighters and others who serve their community through public service jobs. The program cancels their student loans after ten years of public service but it has created confusion over the years, prompting the administration to make changes.
"We will offer a time-limited waiver so that student borrowers can count payments from all federal loan programs or repayment plans toward forgiveness," the Department of Education announced. "This includes loan types and payment plans that were not previously eligible. We will pursue opportunities to automate PSLF eligibility, give borrowers a way to get errors corrected and make it easier for members of the military to get credit toward forgiveness while they serve. We will pair these changes with an expanded communications campaign to make sure affected borrowers learn about these opportunities and encourage them to apply."
Student loan forgiveness is only available for federal student loans. Private student loan holders can find other ways to lower their payments, such as through a refinance. Visit Credible to see how much you could save on your monthly payments.
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More than 500K borrowers to benefit from changes
To receive student debt forgiveness, borrowers must make 120 on-time qualifying payments on an income-driven repayment plan. But because of the complicated nature of the program's eligibility rules, many borrowers made loan payments that did not count toward the 120 requirement. This is because the payments had to be made toward direct loans and not Federal Family Education Loans (FFEL) or Federal Perkins loans.
The Department of Education is now simplifying those rules and retroactively applying the payments borrowers made toward any federal loan, not just a federal direct loan, to their remaining balance of required payments.
The department estimates that this change will help more than 550,000 student loan borrowers see instant progress toward meeting their 120 payments. The average borrower will see an additional 23 payments count toward their total. And about 22,000 borrowers could have their federal student loans instantly discharged, the department said. These actions will total about $1.74 billion in student loan forgiveness.
If you have private student loans and don’t qualify for loan forgiveness, a refinance could help you lower your monthly payments. Visit Credible to compare multiple lenders at once and see how much you could save.
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Other changes from the overhaul
Another point of confusion from the PSLF program was a borrower’s employment, resulting in uncertainty over which ones were eligible. Under the new changes, about 27,000 borrowers can qualify for another $2.82 billion in loan cancellation by showing full-time employment certification for additional periods, the department said.
To date, more than 16,000 borrowers have received forgiveness under the PSLF program, according to the administration. With these changes, it now anticipates many more will receive credit.
"Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness," U.S. Secretary of Education Miguel Cardona said. "The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country. Teachers, nurses, first responders, servicemembers, and so many public service workers have had our back especially amid the challenges of the pandemic. Today, the Biden Administration is showing that we have their backs, too."
If you have private student loans and do not qualify for student loan forgiveness, consider refinancing to lower your monthly payments. Contact Credible to speak to a student loan expert and get all of your questions answered.
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