What is a student loan waiver?

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PSLF Student Loan Forgiveness can help government officials more easily qualify for loan forgiveness. (Shutterstock)

End of 2021, the Biden administration announced the Limited Public Service Loan Forgiveness Waiver – a measure to make it easier for federal student loan borrowers to qualify for the Public Service Loan Forgiveness Program.

If you work for a government agency or non-profit organization, you may be eligible for federal student loan forgiveness under the PSLF program. Here’s what you need to know about the PSLF waiver.

If you have private student loans, you will not be eligible for student loan forgiveness, but you can visit Credible for learn more about refinancing student loans.

What is a student loan waiver?

Student Loan Forgiveness is a temporary waiver of the rules of the Ministry of Education’s Civil Service Loan Forgiveness Program. The waiver lasts until October 31, 2022 and provides borrowers with PSLF credit for certain prior payments that would not otherwise have qualified.

For some borrowers, this may mean full federal loan forgiveness much earlier than expected. In fact, in February 2022, the Department of Education wrote off nearly $5 billion in student loan debt for 70,000 borrowers under the program.

What is Public Service Debt Forgiveness (PSLF)?

The Public Service Loan Forgiveness Program forgives — or erases — federal student loan debt for eligible borrowers employed full-time by federal, state, local, or tribal governments or nonprofit organizations.

Under normal circumstances, you must have direct federal loans and make at least 120 qualifying payments while working for an eligible employer to be eligible. You must also follow an income-based repayment plan, which bases your monthly payment on your income.

To learn more about this program, visit the Ministry of Education website PSLF information page.

How does PSLF Student Loan Forgiveness work?

The Civil Service Loan Forgiveness Waiver is a temporary break on some of the traditional PSLF program requirements. The Ministry of Education announced the waiver on October 6, 2021 and it will run until the end of October 2022.

For years, the PSLF program has experienced low adoption rates due to service issues, misinformation, and other issues. This new waiver was intended to make it easier for many borrowers to qualify, instantly granting the average borrower credit for two additional years of qualifying payments.

“Borrowers who dedicate a decade of their life to public service should be able to count on the promise of public service loan forgiveness,” said US Secretary of Education Dr. Miguel Cardona when announcing the the waiver. “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.”

What are the new PSLF requirements?

The waiver changes quite a few things about the PSLF program, including eligible payments, eligible loans, etc.

Here is a breakdown of the new requirements:

  • You can receive credit for payments on Direct Loans, Perkins Loans and FFEL Loans. If you have Perkins Loans or FFEL Loans, you will need to consolidate them into a Direct Consolidation Loan before the remaining balance can be forgiven.
  • Any repayment plan counts. You don’t need to be on an income-driven repayment plan to qualify.
  • Late payments and partial payments count. You can also count payments for time spent on COVID-19 abstention or military deferment.
  • You do not need to be currently employed by a government agency or non-profit organization to apply for the discount. However, you must have made your 120 payments while working for an eligible employer.

Keep in mind that these changes only last until October 31, 2022. Unless the waiver is renewed at that time, the PSLF program will revert to its previous eligibility requirements.

If you don’t have federal student loans, you can compare private student loan refinance rates using Credible, and it won’t affect your credit.

What PSLF requirements remain the same?

Some of the most basic PSLF requirements remain the same, despite the temporary waiver in place.

You will still need:

  • Make 120 qualifying payments.
  • Be employed full-time by a government or 501(c)(3) non-profit organization while making your 120 payments.
  • Work full time.
  • Get direct loans or consolidate your FFEL loans or Perkins loans into a direct consolidation loan.
  • Certify the periods of employment for which you are claiming payment credit.

To certify your employment, the Department of Education asks you to complete this PSLF form each year or each time you change employers.

Who can benefit from the PSLF student loan exemption?

The PSLF student loan forgiveness only applies to federal borrowers who have been employed full-time by a government or non-profit organization. Although payments made on Perkins loans and FFEL loans are eligible for waiver, you will need a direct loan or need to consolidate your Perkins loans and FFEL loans into a direct consolidation loan before your forgiveness can be considered.

If you are unsure whether you qualify, see these instructions (under “How to know if you are eligible for additional payments”) from the Ministry of Education.

What to do if you are not eligible for PSLF student loan forgiveness

If you are having difficulty with your student loan repayments and do not qualify for student loan forgiveness under the Limited Relief, consider these other options:

  • Apply for an income-based repayment plan. The Department of Education offers four IDR plans, which set your monthly payment based on your income. You’ll typically only pay 10% to 20% of your Discretionary Income (although this varies slightly depending on the plan you sign up for). If you want to apply for an IDR plan, contact your federal student loan officer.
  • Consider a gradual repayment plan. This allows you to pay smaller payments up front and then larger payments later, once your income increases. Payments will typically increase every two years, ensuring your loans are paid off in 10 years (or 10-30 years if you have a consolidation loan). All federal student loan borrowers are eligible for this repayment plan. Contact your student loan officer to apply.
  • Consolidate your federal loans. Consolidate your federal student loan debt into a federal direct consolidation loan can help you streamline your payments. Your new interest rate will be a weighted average of all your existing loans, so it may or may not be lower. But consolidating can also help you qualify for the PSLF later.
  • Apply for forbearance or deferment with your student loan officer. If you are having financial difficulties, you may be able to request a forbearance or postponement. These allow you to suspend your payments or defer them to later in the life of your loan under certain circumstances. Remember that if your loans are deferred, you will not accrue additional interest on your loan balance. But if they don’t, interest will continue to accrue.
  • Refinance your student debt with private student loans. Refinance your federal loans in private loans can be an option if you need a longer repayment period, a lower interest rate or if you want to change other terms of your loan. But think carefully before refinancing federal student loans into a private loan: you will lose the many benefits that come with federal loans if you refinance in private.

If you choose to refinance, be sure to shop around with multiple lenders to find the best loan option for you. Interest rates, fees and terms can vary widely from lender to lender. Credible allows you compare private student loan refinance rates from various lenders, all in one place.

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