Understanding the New Public Service Loan Forgiveness Guidelines

For many current and former students who work in the U.S. nonprofit sector, Public Service Loan Forgiveness (PSLF) has been a huge advantage. And temporary coronavirus-related relief legislation means the PSLF program can help even more. 

The U.S. Department of Education has expanded the type of loan payments that count toward forgiveness until October 31, 2022. Designed to make federal student aid more flexible during an ongoing national emergency, the program has the fancy name of Temporary Expanded Public Service Loan Forgiveness, or TEPSLF. 

The average borrower, according to Department of Education estimates, will earn “another two years of progress toward forgiveness” under the new rules. Borrowers enrolling in the PSLF program for the first time will see benefits too. 

Which payments now qualify for loan forgiveness? 

If you’ve worked toward PSLF for a while, you probably know the original requirements pretty well: after 10 years working full time in a qualifying public sector or nonprofit job, and 120 on-time payments toward federal Direct Loans, the rest of your loan balance is forgiven. 

Each qualifying payment adds to your “count” of 120 total installments. 

The new rules make more payments eligible for forgiveness retroactively— payments you’ve made in previous years can be added to your total count, even if they didn’t qualify before. The rules are also intended to be easier for borrowers to understand and follow. 

You can now get PSLF credit for: 

Payments that were incomplete. Any payment amount, even if it wasn’t the exact number required, will count. This is a big change from ordinary PSLF rules, which require payments to cover the full amount due, down to the dollars and cents. 

Payments that were late or past due. Late payments also get added to your count. 

Payments made on different repayment plans. Normally, PSLF only accepts payments made on certain federal repayment plans like income-based plans. The TEPSLF waives this requirement; if you made previous payments through another plan, you can count them. 

Payments on Perkins loans or Federal Family Education Loans (FFEL). These loan programs have, since, been discontinued for new borrowers. But borrowers who took out loans through Perkins or FFEL can get those payments added to their count, even if they hadn’t consolidated their loans into direct loans at the time of payment (another original PSLF requirement). 

Payments made before consolidating loans. One major PSLF guideline is that borrowers need to consolidate their loans into direct loans before they’re eligible for forgiveness. 

Under the new rule, any payments you made on non-consolidated federal loans before Sept. 30, 2021 will count toward your total. 

Deferment and forbearance periods due to active military duty. If borrowers in the military suspended payments while they were on active duty, these payment periods will still count toward PSLF. 

The Department of Education is trying to help the process go as smoothly as possible by reviewing the previous payments of anyone enrolled in the PSLF program and automatically updating their payment information based on the new rules. 

You’ll still have to submit an application for this enhanced loan forgiveness, even if you’re already working toward PSLF. 

Which guidelines are remaining the same? 

Some PSLF rules still apply during the TEPSLF period. 

• You still need 10 years of full-time employment before forgiveness. 
• The employment should still be certified by a qualifying employer, usually a nonprofit.
• You still need to hit a total of 120 payments before forgiveness. 
• Payments made before Oct. 1, 2007 (the date the PSLF program was established) don’t count. 
• Certain kinds of loans, like private loans or federal parent PLUS loans, are still ineligible. 
• Payments on defaulted loans don’t count. 
• Unless you’re on active duty in the military, deferment and forbearance periods don’t qualify. 

After the TEPSLF period ends, payments on federal direct loans will be the only type of loan payments that qualify for forgiveness. This means borrowers should consolidate any other federal loans into direct loans if they haven’t already. 

What this means for borrowers 

The good news is you have until Oct. 31  to make any changes that might bump up your total of qualifying payments. This might mean: 

• Applying for PSLF for the first time.
• Applying for TEPSLF, if you’re already enrolled in PSLF and think some of your prior payments might be newly eligible. The form for first-time applicants and current PSLF borrowers is the same. 
• Consolidating any federal student loans you have that aren’t direct loans.

Anyone who worked for a qualifying employer during 2008-10 but didn’t consolidate their loans until afterward should still submit a PSLF form to get those payments counted. 

October is the final time to submit your application, not the deadline to finish the process, but it’s still smart to act sooner, rather than later. 

Once you complete any necessary paperwork, the Department of Education will adjust your payment count. Some lucky borrowers may hit their 120th qualifying payment just by adding up retroactive payments, and many others will get closer to their goal. 

Even though the TEPSLF expansion is temporary, there are plans to make the loan forgiveness process better for borrowers on a permanent basis. The Department of Education hopes to communicate more frequently with PSLF-eligible borrowers about their repayment statuses, reach out to more borrowers who might qualify for PSLF but don’t know it, and reconsider denied applications for PSLF. 

Overall, the changes may make higher education and nonprofit careers more accessible to a wider range of people in the United States. 

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