Student loan forgiveness: 550K borrowers to benefit from program overhaul
WASHINGTON - The U.S. Department of Education on Wednesday unveiled major changes to a troubled student loan forgiveness program designed for borrowers working in public service jobs — but has been criticized for its complex requirements.
The new temporary changes will bring an estimated half a million borrowers closer to being debt-free.
The Public Service Loan Forgiveness (PSLF) program was launched in 2007 as a reward for college students who go into public service, including many teachers, nurses, social workers and military members. As long as they made 10 years of payments on their federal student loans, the program promised to erase the remainder.
But since its creation, the program has only helped just 5,500 borrowers get their loans erased. After making a decade of payments, many borrowers have found that they have the wrong type of federal loan or repayment plan to be eligible for the program.
More than 90% of applicants have been rejected, ending up stuck with debt that they thought would be eventually cleared, according to the Associated Press.
Under the new changes, those borrowers will now be eligible to get their loans erased. The Education Department announced an "overhaul" to the program, saying it will drop some of the toughest requirements and could result in debt relief for thousands of teachers, social workers, military members and other public servants.
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Borrowers who have worked 10 years in a qualifying job will be eligible for loan relief no matter what kind of federal loan or repayment plan they have through Oct. 31, 2022. Past loan payments that were previously ineligible will now count, moving some borrowers closer to the finish line, the department said.
The change will immediately make 22,000 borrowers eligible to get loans canceled, and another 27,000 could become eligible if they get previous payments certified, according to the department.
In total, more than 550,000 borrowers will be moved closer to forgiveness "with the average borrower receiving 23 additional payments," the agency said.
"Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness. The system has not delivered on that promise to date," U.S. Secretary of Education Miguel Cardona said in a statement.
"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," Cardona added.
FILE - Miguel Cardona, U.S. secretary of education, speaks during a Senate Health, Education, Labor, and Pensions Committee hearing in Washington, D.C., on Sept. 30, 2021. (Photographer: Greg Nash/The Hill/Bloomberg via Getty Images)
It’s particularly beneficial for borrowers with Federal Family Education Loans, a defunct loan program that issued federally backed loans through banks. Loans in that program, which ended in 2010, were previously ineligible but can now be canceled through the updated rules.
The department will also allow military members to count time on active duty toward the 10 years, even if they put a pause on making their payments during that time.
The department noted how members of the military frequently "find out that those same deferments or forbearances granted while they served our country did not count" toward the student loan forgiveness program.
"This change ensures that members of the military will not need to focus on their student loans while serving our country," the department said.
This story was reported from Cincinnati. The Associated Press contributed.