U.S. Department of Education announces major fixes to public service loan forgiveness program

Personal Finance

Secretary of Education Dr. Miguel Cardona answers questions during the daily briefing at the White House August 5, 2021 in Washington, DC.
Win McNamee | Getty Images

The U.S. Department of Education announced Wednesday a host of major changes to the public service loan forgiveness program, which could bring more than 550,000 borrowers closer to being debt-free.

The PSLF program, which was signed into law by then-President George W. Bush in 2007, allows nonprofit and government employees to have their federal student loans canceled after 10 years, or 120 payments. The Consumer Financial Protection Bureau estimates that one-quarter of American workers could be eligible.

However, the program has been plagued by problems, making people who actually get their debt forgiven a rarity. Less than 5% of borrowers who’ve applied for the relief have qualified.

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Instead, hundreds of thousands of people in public service jobs believe that they’re paying their way to loan cancellation only to discover at some point in the process that they don’t qualify for one technical reason or another. Most commonly, the type of federal loans a borrower holds, or the repayment plan they enrolled in, make them ineligible.

Now, the U.S. Department of Education hopes to give many of the borrowers who’ve been excluded from the relief a second chance.

“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” said Education Secretary Miguel Cardona, in a statement. “The system has not delivered on that promise to date, but that is about to change.”

Over the coming months, the agency said it will offer a limited waiver so that borrowers can get their payments counted, regardless of their federal loan or repayment plan type.

That change will bring more than 550,000 people closer to loan forgiveness, and make 22,000 borrowers immediately entitled to the cancellation, according to the department. So far, just 16,000 people have had their student loans excused under the program.

Consumer advocates applauded the news.

“This is a good day for teachers, nurses, service members, and millions of workers serving on the front lines of the pandemic,” said Seth Frotman, executive director of the Student Borrower Protection Center.

“For too long, those who give the most to our communities and our country have been given the runaround and forced to shoulder debts that should have been canceled.”

The department said it will also review rejected requests for forgiveness, improve the application process and reduce errors that have led many borrowers to complain that the agency’s count of their qualifying payments is below the number they’ve made.

“I’ve seen several examples where borrowers had made 120 qualifying payments, yet the loan servicer said they had made only half that number,” said higher education expert Mark Kantrowitz.

Register for a special town hall with U.S. Secretary of Education Dr. Miguel Cardona on Wednesday, October 13.

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