Public Service Loan Forgiveness just got easier for 550,000 borrowers: Who qualifies and how to apply

The Biden administration announced a temporary overhaul to the Public Service Loan Forgiveness program (PSLF) that will make it easier for certain applicants to have their federal student loans discharged. 

Under the new rules, which are changed "for a limited time as a result of the COVID-19 national emergency," any prior payment made by a borrower eligible for the PSLF program will count as a qualifying payment. That's regardless of the loan type, repayment plan or whether the payment was made on time or in full. 

Borrowers who either have federal Direct Loans or who have already consolidated into the Direct Loan Program will be eligible for this program change. Public service workers who have Federal Family Education Loan (FFEL) Program loans or Federal Perkins Loans will need to move their federal student loan debt into a Direct Consolidation Loan by Oct. 31, 2022, in order to qualify.

The Department of Education estimates that 22,000 borrowers with consolidated loans will be immediately eligible for $1.47 billion in student loan forgiveness under the limited PSLF waiver, according to an Oct. 6 press release. 

"Another 27,000 borrowers could potentially qualify for an additional $2.82 billion in forgiveness if they certify additional periods of employment," the department also said.

In total, the department estimated that more than 550,000 borrowers who previously didn't qualify for PSLF will be two years closer to student loan cancellation, on average.

"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, but that is about to change for many borrowers who have served their communities and their country."

- U.S. Secretary of Education Miguel Cardona

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The announcement comes weeks after the Department of Education opened a public inquiry into how PSLF could better serve borrowers. The "broken" PSLF program has come under fire recently for its "confusing" eligibility criteria, with 98% of applications rejected since the program was put in place. 

"Teachers, nurses, first responders, servicemembers, and so many public service workers have had our back especially amid the challenges of the pandemic," Cardona added. "Today, the Biden Administration is showing that we have their backs, too."

Still, this time-limited waiver won't benefit all federal student loan borrowers. Keep reading to learn more about applying for PSLF and what to do if you don't qualify, including income-driven repayment plans and private student loan refinancing.

If you decide to refinance your private student loans, be sure to compare rates across multiple lenders on Credible's online marketplace.

How to apply for Public Service Loan Forgiveness

Previously, the vast majority of PSLF applications were rejected. But with these temporary relief measures, it should be easier for public servants like teachers, active-duty members of the military and federal employees to meet the eligibility requirements. Here's how to apply:

1. Consolidate your student loans. To qualify for PSLF, you must have federal Direct Loans or Direct Consolidation Loans. It's free to consolidate your federal loans, like FFEL loans and Perkins loans, on the Federal Student Aid website.
2. Determine whether you work full-time for a qualifying employer. You'll need your most recent W-2 or your employer's Federal Employer Identification Number (EIN) to determine eligibility.
3. Fill out the PSLF Form on the FSA website. Most people complete the process in less than 30 minutes, according to the FSA.

If your application is approved, the remaining balance of your federal student loan debt will be forgiven after you make 120 qualifying payments. 

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What to do if you don't qualify for PSLF

Even with these changes to the PSLF program in the coming months, not all student borrowers will qualify for student loan forgiveness. For example, private student loans are not eligible under PSLF. Here are a few things you can do with your federal and private student loans if you don't meet the eligibility requirements:

• Lower your monthly student loan payments by refinancing
• Utilize federal benefits like income-driven repayment and hardship forbearance
• Research alternative student loan forgiveness programs

Compare your options for student loan repayment in the sections below.

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Lower your monthly student loan payments by refinancing

Private student loans are not eligible for the PSLF program, even if they're held by public service workers or active-duty service members. Any payments toward your private student loans are considered ineligible and won't count toward your 10 years of loan payments.

Because private student loans are separate from the PSLF program, you'll have to find another way to reduce your student loan debt, such as refinancing. Private student loan refinancing can help you lower your monthly payments, pay off your debt faster and even save money over the life of the loan, thanks to lower interest rates.

Keep in mind that if you refinance your federal loans into a private loan, you'll be ineligible for federal programs like PSLF. 

Private student loan rates are near historic lows, according to data from Credible. Thanks in part to low rates, borrowers who refinanced to a shorter-term loan on Credible were able to save nearly $17,000 over time and pay off their loans 41 months faster. Those who opted for a longer-term loan were able to reduce their monthly payments by more than $250 on average — all without adding to the cost of borrowing.

Browse student loan refinancing rates in the table below, and visit Credible to see your estimated interest rate without impacting your credit score. Then, use a student loan refinancing calculator to see if this option is right for you.

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Utilize federal benefits like income-driven repayment and hardship forbearance

Federal student loan borrowers who still don't qualify for PSLF — including part-time employees and those who aren't public servants — might consider other federal protections like income-driven repayment plans and additional federal forbearance.

It's free to enroll in an income-driven repayment plan for your federal student loans on the FSA website. This limits your monthly payments to about 10-20% of your disposable income, depending on the type of loan you have.

Federal student loans are currently in administrative forbearance through January 2022, but some student loan borrowers may not be ready for their payments to resume. When the federal payment pause expires, consider applying for up to 36 months of additional federal forbearance through unemployment deferment or economic hardship deferment.

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Research alternative student loan forgiveness programs

PSLF isn't the only student loan forgiveness program offered by the federal government. The Biden administration has discharged nearly $10 billion worth of student loan debt so far under the following programs:

• Borrower defense to repayment. If your school misled you or engaged in another form of misconduct, you may be eligible to have your federal student loan debt forgiven under the borrower defense program.
• Closed school discharges. If you attended a school that closed while you were enrolled or soon after you withdrew enrollment, you may be eligible to have your federal student loans forgiven.
• Total and permanent disability discharges. The Biden administration recently automatically discharged the federal student loan debt for 323,000 borrowers with a total and permanent disability (TPD).

To learn more about your student loan forgiveness and repayment options, get in touch with an experienced loan officer at Credible.

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