Changes to Student Loan Forgiveness


In recent weeks, the US Department of Education has made changes to the federal student loan forgiveness program. These changes are intended to make good on the initial promises to reform the Public Service Loan Forgiveness (PSLF) program made by the Bush administration in 2007.

These changes will be implemented over the next several months, and are estimated to relieve approximately 550,000 borrowers, and 22,000 borrowers will have their loans forgiven immediately based on what the US Department of Education is calling the “PSLF Overhaul”. Let’s review these changes, and how they may impact you. 

Streamlined Processes

First and foremost, it’s important to note that the PSLF program has long been a frustrating experience for borrowers across the country for many years. The program is notably tough to navigate, and as a result, many qualified borrowers end up not receiving the loan forgiveness they’re entitled to due to mismanaged enrollment.  

One of the primary changes that the US Department of Education is implementing is streamlining the loan forgiveness process for borrowers. The application process is being revamped, and student loan servicers are being brought into the process earlier to help educate borrowers on the eligibility requirements for forgiveness. This coordination between loan servicers and the US Department of Education will provide clarity for borrowers on how to apply for forgiveness (and have their application meet all requirements). 

As a financial planning practice, the team at Wealth Dimensions often hears from clients, friends, and colleagues, about how frustrating the PSLF program has been. Understanding eligibility and ensuring that they “check all of the boxes” is exhausting. In total, for the duration of the program, only 463,000 (this is an approximate number) loans have been discharged for qualified borrowers. This is in comparison to the 2.99 million borrowers who are eligible to apply. Hopefully, by streamlining the process, borrowers who qualify will be more likely to receive the forgiveness they’re entitled to through this program. 

Correcting Past Problems for Borrowers

The US Department of Education has also put a one-time waiver into effect until October 31, 2022. This waiver is intended to authorize all prior payments from borrowers, regardless of the payment plan they’re on, to apply toward loan forgiveness. 

One of the primary complaints from borrowers is that they make payments toward their loans for a number of years, and when they go to apply for forgiveness, they realize they’ve been on a payment plan or loan type that doesn’t qualify. This waiver seeks to amend that common pain point, and ensure that borrowers can have their loans forgiven if they check all of the appropriate boxes. 

Per the US Department of Education: 

“This Limited PSLF Waiver will apply to borrowers with Direct Loans, those who have already consolidated into the Direct Loan Program, and those with other types of federal student loans who submit a consolidation application into the Direct Loan Program while the waiver is in effect,”

Loan Forgiveness for Military Service Members

One new loan forgiveness initiative that is being implemented is loan forgiveness for military service members and federal employees. Specifically for those in the military, time spent on active duty will be credited towards PSLF, even if they weren’t actively paying their loans at the time. This is a unique opportunity for those who have served our country, and many military personnel will have their loans forgiven immediately as a result. 

Remember: Federal Loan Payments Are Currently Paused

In the midst of all of these new changes, and the renewed focus on past PSLF promises, it’s important to remember that federal loan payments are paused until January 31, 2022. It remains to be seen what economic impact reinstating payment expectations will have in the future. 

Staying Informed

As these new PSLF processes are developed, the Wealth Dimensions team will continue to look for strategies to help our clients navigate their student debt. We will always prioritize the financial health of our clients, and work to stay informed about any new initiatives that will positively impact their goals of financial wellness. 

Do you have questions about the student loan forgiveness overhaul? We encourage you to reach out to us today by clicking here. We look forward to speaking with you. 

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