Crossroads Planning

Public service loan forgiveness program PSLF on the desk.

What You Need to Know About the Public Service Loan Forgiveness Overhaul

In early October, the US Department of Education announced major changes to a federal student loan forgiveness program that could bring relief to more than 550,000 borrowers working in government and nonprofit sectors.  

The Public Service Loan Forgiveness program (PSLF) was introduced in 2007 by the College Cost Reduction and Access Act to help college graduates working in public service careers by forgiving their federal student loans after 10 years of on-time payments. 

But many teachers, social workers, nurses, and other nonprofit employees have been frustrated in recent years when they discovered that their loans were not being forgiven as promised.

The new rules, which are in effect immediately, will make it easier for borrowers to qualify for loan forgiveness and will protect them from having their loans canceled if they switch jobs or employers. 

In this post, we’ll describe the original requirements of the PSLF program, its temporary modifications, and what you should do to ensure you qualify for PSLF if that’s your objective.

The Original Requirements for Public Service Loan Forgiveness 

The original PSLF program had four main requirements in order to be eligible for forgiveness:

  1. You must have Direct Loans from the federal government or from a qualified servicer. 
  2. You must be employed full-time by a qualifying employer (U.S. Federal, State, Local, or a non-profit organization).
  3. You must repay your loans under an income-driven repayment plan.
  4. You must make 120 qualifying monthly payments.


While that may sound pretty straightforward, in practice, it was anything but. 

Meeting these criteria turned out to be more perplexing and onerous than expected and as borrowers attempted to adhere to the requirements, they were met with several issues.

One of the more common problems borrowers faced was payments that were made for even a penny less than the total amount or a day late were not being counted toward the 120 qualifying payments. 

Also, neither Federal Family Education Loans (FFELs) (a kind of federal loan issued prior to July 2010) nor Perkins loans (a federal loan issued prior to September 2017) were eligible for PSLF.

Due to poor guidance and, in some cases, inaccurate information provided by student loan servicers, many people did not realize that those types of loans needed to be consolidated into Direct Loans to qualify. 

Modifications to the Loan Forgiveness Program

In response to these challenges with the initial program, the Department of Education has enacted what they are calling a “limited waiver” to help more borrowers qualify. 

This “restricted exemption” will allow student borrowers to count payments on all federal loan programs or repayment strategies toward forgiveness, including those for various types of loans and payment options that were not previously eligible – for example, Perkins and FFEL Loans – as long as the borrower consolidates these loans into the federal Direct Loan Program before the limited waiver expires on October 31, 2022. 

This special provision will also apply any prior monthly payments on federal loans towards forgiveness, whether you are on an Income-Driven Repayment (IDR) plan or not. 

You will, however, need to be on an IDR plan from now on if you consolidate to a Direct loan. 

Another factor that will have an impact on many borrowers is that they will allow payments made a few days late or a few cents short to be considered. 

If you have already certified employment for PSLF, this will automatically take effect for you. If you have not yet certified employment for PSLF, in order for any of these types of payments to be counted, you must submit the PSLF form (mentioned above) before October 31, 2022.

Another adjustment included in the special exemption was making it easier for military service personnel to qualify for PSLF. Prior to this limited exemption, months of deferment or forbearance due to being on active duty were not taken into account when calculating PSLF totals. These months will now be factored into the calculation of PSLF.

Lastly, and perhaps most importantly, the Department of Education has issued a directive to review all previously denied applications. They will look to identify and correct any mistakes so that borrowers who were previously determined ineligible may now be considered eligible.

How to Know If The PSLF Program is Right for You

The PSLF changes will undoubtedly benefit a large number of individuals, perhaps even you. 

But is PSLF something that you should consider?  

The answer to that question depends on a number of factors, including your specific loan situation and whether you think you will meet all the requirements. 

However, if you need some assistance making sense of it all, we can help!

Our financial planning services consider every level of your financial life, including student loans, career objectives, and retirement savings, to see how they might work together to help you achieve the lifestyle you want.

To learn more, schedule a free introductory call with our team today. 

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