Big PSLF Changes Are Coming: Here’s What Borrowers Should Know

The Public Service Loan Forgiveness (PSLF) program is going through some major, time-sensitive changes. It's understandable that many borrowers are finding it hard to keep track of things. While important, temporary flexibilities are coming to an end, many flexibilities are effectively receiving an extension. 

And even after those flexibilities end next summer, more distinct and permanent changes will go into effect through regulatory changes. 

Here's a breakdown. 

How PSLF worked before

Under the Public Service Loan Forgiveness program’s original rules, borrowers could only receive forgiveness of their remaining loan balance after making 120 “qualifying payments”. This is equivalent to 10 years of repayment if made consecutively, although payments do not have to be consecutive. A “qualifying payment,” under those original regulations, must have met these criteria:

• Payments must be made on Direct federal student loans.
• Payments must be made under a 10-year Standard repayment plan or income-driven repayment (IDR) plan.
• Payments must be made while the borrower works as a full-time, W-2 employee for qualifying nonprofit or public organizations working at least 30 hours per week. 

But PSLF had a lot of problems. Student loan payments made too early, too late, or were a penny off could be rejected. Periods of deferment and forbearance wouldn’t count. Additionally, many borrowers were not aware of core requirements, leading to surprise rejections. Borrowers found out they had the “wrong” type of federal student loans or were making payments under an ineligible plan. Approval rates for PSLF never really surpassed 2%.

Limited PSLF Waiver has provided historic relief for borrowers

As a result of these longstanding problems, the Biden administration created the Limited PSLF Waiver. Under temporary, emergency regulations, the U.S. Department of Education changed the rules to dramatically expand what counts as a “qualifying payment” that can be credited towards loan forgiveness under PSLF. 

Under the waiver, a qualifying payment can be:

• Any month in which a borrower was in a repayment status, regardless of whether monthly payments were partial or late, the loan type, or the repayment plan.
• Any month in which loans were in an eligible repayment, deferment, or forbearance status prior to consolidation.
• Months while a borrower spent at least 12 months of consecutive forbearance.
• Months while a borrower spent at least 36 cumulative months in forbearance.
• Any month spent in deferment (exception for in-school deferment) prior to 2013.

According to the Education Department, over 236,000 borrowers have been approved for over $14 billion in student loan forgiveness under the Limited PSLF Waiver. 

But the PSLF waiver ended on October 31, 2022. 

IDR account adjustment initiative will extend many benefits of the Limited PSLF Waiver to December 2023

The Limited PSLF Waiver has ended. But the Biden administration has effectively extended many of its benefits and flexibilities as it has begun to implement the IDR Account Adjustment. It's a somewhat related initiative for borrowers repaying their federal student loans under Income Driven Repayment (IDR) plans.

The IDR Account Adjustment is similar to the Limited PSLF Waiver in that it will allow the Education Department to retroactively count past loan periods — the same kinds of periods applicable to the Limited PSLF Waiver — towards a borrower’s 20-year or 25-year student loan forgiveness term under an IDR plan, such as Income Contingent Repayment (ICR), Income Based Repayment (IBR), Pay As You Earn (PAYE) and the new Saving on a Valuable Education (SAVE) plan that replaces Revised As You Earn (REPAYE).

But these changes will also benefit PSLF borrowers. These same periods will count towards loan forgiveness under both IDR and PSLF.

“The Department is clarifying that updated payment counts credited toward IDR forgiveness also count toward PSLF for any months in which a borrower has certified qualifying employment on loans borrowed as a student,” said the Education Department in a fact sheet released last week. 

“Borrowers with eligible [Direct] loans do not need to apply for this credit, it will be automatically computed by the Department. Borrowers who do not have eligible [Direct] loans will need to apply for consolidation no later than April 30, 2024, to ensure they benefit from the one-time account adjustment.”

Editor's note: The Department of Education extended the IDR Waiver deadline to June 30, 2024, allowing more opportunity for borrowers to get credit for this one-time account adjustment.

Therefore, borrowers with commercially-held Federal Family Education Loans (FFEL) need to consolidate by the end of 2023 to qualify.

Limitations of the IDR Waiver for PSLF borrowers

Not all benefits of the Limited PSLF Waiver are being extended, however. For example, under the Limited PSLF Waiver, borrowers would not have to be currently employed in qualifying PSLF employment to meet eligibility requirements for loan forgiveness if they reach 120 qualifying payments during the waiver period. But that exception disappeared with the PSLF Waiver after October 31, 2022.

Related: Student Loan Consolidation for Forgiveness: Do It Before or After the IDR Waiver?

New PSLF rules go into effect July 2023

When the IDR Account Adjustment ends, new rules for the PSLF program will go into effect. Unlike the Limited PSLF Waiver and IDR Account Adjustment, these new regulations are not temporary. Therefore, they won’t just last a few months. 

They will go into effect and have more permanence. In theory, another administration could try to rewrite those rules, although there is a fairly long process for doing that.

The new PSLF regulations will be somewhat of a middle ground between the original PSLF rules and the flexibilities afforded by the Limited PSLF Waiver and IDR Account Adjustment. The regulations effectively codify some, but not all, aspects of these temporary initiatives. 

Flexibility for qualifying payments

The new PSLF regulations will provide more flexibility for what constitutes a qualifying payment. “The regulations allow borrowers to receive credit for payments that are made late, in installments, or in a lump sum,” according to an Education Department fact sheet. “Prior rules only counted a payment as eligible if it was made in full within 15 days of its due date.”

In addition, the new regulations will count some, but not all, periods of deferment and forbearance towards PSLF. This includes: 

• Cancer treatment deferment.
• Military service deferment.
• Post-active-duty student deferment.
• Economic hardship deferment, which includes service in the Peace Corps. 
• AmeriCorps and National Guard service forbearances.
• U.S. Department of Defense Student Loan Repayment Program forbearance.
• Administrative or mandatory administrative forbearances.

Borrowers will be also able to access a “hold harmless” option. This will allow other periods of deferment and forbearance potentially counted towards PSLF if they make payments equivalent to what they would have owed at the time.

Changes to consolidation procedures

Borrowers who consolidate existing Direct loans while on track for loan forgiveness under PSLF will receive at least some credit from past loan periods, but not all credit. 

• Under the Limited PSLF Waiver, if a borrower would consolidate multiple Direct loans that each have different counts of qualifying PSLF payments, the Education Department would credit the new consolidation loan with the maximum number of PSLF payments based on those underlying loans. But that benefit goes away once the waivers end. 
• Under the new rules, borrowers will “receive a weighted average of existing qualifying payments toward PSLF when they consolidate their Direct loans,” according to the Education Department’s fact sheet. “Under current rules, borrowers lose all progress toward forgiveness when they consolidate. Under the new regulations, for example, a borrower with 60 qualifying payments on $30,000 in student loan debt who forms a consolidation loan with another $30,000 in loans will have a new payment count of 30 payments.”

Related: Student Loan Consolidation Guide for All 17 Types of Federal Student Loans

Updates to the definition of qualifying employment

The new regulations will also expand the definition of qualifying employment by:

• Simplifying the definition of full-time employment to working an average of 30 hours per week or more, regardless of the employer’s definition of “full time.”
• Making it easier for adjunct faculty to get PSLF credit for every credit hour taught.
• Allowing a qualifying employer to certify employment for a contractor if that individual is providing services that by State law cannot be filled or provided by an employee of that organization.

Resources for borrowers seeking loan forgiveness through PSLF

The Education Department has published several resources where student loan borrowers can get more information on the Biden administration’s efforts to revamp the PSLF program and provide student debt relief to American public servants:

• Limited PSLF Waiver details on the Federal Student Aid website
• Guidance on the IDR Account Adjustment
• Overview of PSLF changes as the Limited PSLF Waiver Ends
• Final regulations governing PSLF and other federal student loan program
• PSLF Help Tool to confirm your eligibility and submit your PSLF form