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The Public Service Loan Forgiveness (PSLF) program is a United States government program that was created under the College Cost Reduction and Access Act of 2007 signed into law by President George W. Bush to provide indebted professionals a way out of their federal student loan debt burden by working full-time in public service. [1]
The program permits Direct Loan borrowers who make 120 qualifying monthly payments under a qualifying repayment plan, while working full-time for a qualifying employer, to have the remainder of their balance forgiven. [2] The earliest time in which borrowers could receive forgiveness under the program was after October 1, 2017. The Department of Education reported that 2,215 borrowers had the remainder of their respective student loans forgiven under the program as of April 30, 2020 for a denial rate of 98.5%. [3]
The PSLF program has received criticism and has been the subject of litigation by loan-holders trying to discharge their student loans.
Government organizations or agencies (federal, state or local), 501(c)(3) organizations as defined by the IRS, [4] and some other types of not-for-profit organizations providing designated public services qualify for PSLF.
The nature of the individual's job responsibilities is not a determining factor in whether the employment qualifies. Rather, only the employer's status as a qualifying employer determines whether the employment qualifies.
With limited exception, the individual must be directly employed by the qualifying employer. Therefore, government contractors will not qualify on the basis of their government contracts. Instead, they must independently be a qualifying employer. Another example is the national labs. Employees at national labs such as a Department of Energy or National Nuclear Security Administration Lab, do not qualify on the basis of managing a lab for the government; rather, the managing entity of the lab must be a qualifying employer.
Any loan made under the Direct Loan Program can qualify for PSLF. In particular, Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Federal Direct Consolidation Loans qualify for PSLF.
Loans in the FFEL program or Federal Perkins Loans can be consolidated into a Direct Consolidation Loan to become eligible for the program. [5] Private student loans are ineligible to be consolidated into a Direct Loan and thus cannot be discharged under the PSLF program.
An individual qualifies for PSLF after making 120 on-time, monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. After the borrower has made 120 qualifying payments, any remaining balance of the borrower's eligible student loan is forgiven without any tax implications. Currently, there is no cap as to the amount of forgiveness a borrower can receive.
Those interested in receiving PSLF should regularly submit the "Employment Certification Form" for PSLF. This form will be used by the Department of Education's contractor, Higher Education Loan Authority of the State of Missouri (MOHELA), (formerly FedLoan Servicing), to determine whether an individual's employment and payments qualify for the program. [6]
Multiple plans are available to those interested in the PSLF program. Those wishing to seek forgiveness under the PSLF should make payments under one of the income-driven repayment plans, including Income Contingent Repayment, Income Based Repayment, Pay As You Earn, or Revised Pay As You Earn.
On May 23, 2018, the U.S. Department of Education announced a second-chance plan for people in public service jobs who were denied loan forgiveness because they chose the wrong repayment plan. The DoED will use $350 million set aside by Congress in a fix-it fund to help people seeking reconsideration. The money will be distributed on a first-come, first-served basis. [7]
The earliest date that public servants could qualify for full cancelation of their loans was October 1, 2017, ten years after PSLF existed. Problems soon emerged. Of the first 28,000 public servants who applied for forgiveness, only 96 were approved. [8] This is a denial rate of 99 percent. In March 2018 Congress attempted to fix PSLF by passing the Temporary Expanded Public Service Loan Forgiveness program (TEPSLF). According to a Government Accountability Office report of the 54,184 who applied for TEPSLF 53,523 got denied. [9] These denials are the result of many problems, including servicers who provided false or misleading information about whether an account had the right loan type and payment plan to qualify for PSLF. [10] On October 6, 2021, the Biden administration announced a temporary waiver allowing past payments to qualify even if they had the wrong loan type or payment plan. [11] As of March 2022 100,000 people have had over $6.2 billion of student loans canceled as a result of the waiver, [12] however, many problems still persist. The government estimates that 1.3 million public servants qualify for PSLF. [13] FedLoan Servicing continues to incorrectly tell people that they do not qualify for PSLF when in fact they do. [14] FedLoan has also been sending automated messages with inaccurate payment counts. The CFPB has issued a warning to FedLoan. [13] The Department of Education's PSLF help tool will not allow people to select that they have made over 120 payments, forcing people to fill out the form with inaccurate information or find workarounds. Applicants who have reached 120 qualified payments have reported long processing delays of three months or more after submitting PSLF forms to loan servicer, Higher Education Loan Authority of the State of Missouri.
For his 2015 budget proposal to Congress, President Barack Obama proposed capping Public Service Loan Forgiveness at $57,500 for all new borrowers. [15] Analysis at the website Educated Risk, however, details the difficulty of modifying PSLF: [16]
The 2016 Republican budget resolution proposed to eliminate the PSLF program to all new student loan borrowers. [17] [18] A recent GAO report found that the cost of loan forgiveness has been underestimated, leading many commentators to speculate that a new Republican administration and Congress will take steps to curb the problem. [19]
President Donald Trump proposed eliminating the PSLF in his 2018 budget proposal. Similarly, the Republican-proposed PROSPER Act would have eliminated the PSLF. Any changes would have only applied to new borrowers as of July 1, 2019. [20] The PROSPER Act is considered "dead" with Democrats retaking control of the House of Representatives in 2019. [21]
President Trump's 2019 budget proposed eliminating the PSLF. The elimination would have only affected new borrowers as of July 1, 2020. [22] Trump's 2021 fiscal budget made a similar proposal that would only apply to new borrowers. [23]
In December 2016, it was reported that some employees who had been previously told by the government that their jobs were eligible for the program were later told that their jobs were not eligible. [24] In response, the American Bar Association joined four individual plaintiffs who were denied eligibility under PSLF in a lawsuit against the United States Department of Education to stop the department's decision to retroactively refuse to honor loan forgiveness commitments it made to individuals who "have dedicated their careers to public service." [25] The ABA argued the Department of Education "substantially changed its policy on PSLF-eligible employers" which directly contradicts statutory procedures for modifying regulations requiring public notice and comment periods. [26] On February 22, 2019, a New York federal district court found the Department of Education's actions "arbitrary and capricious." The court found: "In adopting the new standards, the Department failed to display awareness of its changed position, provide a reasoned analysis for that decision and take into account the serious reliance interests affected." [27] The court vacated the department's denial letters and remanded the matters to the Department of Education for reconsideration. [28] Such ruling could lay the groundwork for borrowers who were denied loan forgiveness after being told they were eligible to appeal. [27] The court classified the department's position as "nonsense". The department elected not to appeal the ruling. [29] The Department of Education subsequently stated that all full-time ABA employees are employed in "a public service job" for a "public service organization" as part of a settlement between the ABA and the department. [30] The Education Department further stated that its decision does not restrict the agency from changing the definition of a public service organization in new regulations in the future.
A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in the fact that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school. It also differs in many countries in the strict laws regulating renegotiating and bankruptcy. This article highlights the differences of the student loan system in several major countries.
EdFinancial Services is a financial company which provides student loans servicing for 15 of the top 100 lenders in the USA, including regional and national banks, secondary markets, state agencies and other student loan providers. It is headquartered in Knoxville, Tennessee.
A Federal Perkins Loan, also referred to as a Perkins Loan, was a need-based student loan offered by U.S. Department of Education from 1958 until 2017. Created as part of the Federal Direct Student Loan Program, the Perkins Loan served to assist American college students fund their post-secondary education. The program was named after Carl D. Perkins, a former member of the U.S. House of Representatives from Kentucky.
The Higher Education Act of 1965 (HEA) was legislation signed into United States law on November 8, 1965, as part of President Lyndon Johnson's Great Society domestic agenda. Johnson chose Texas State University, his alma mater, as the signing site. The law was intended "to strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education". It increased federal money given to universities, created scholarships, gave low-interest loans for students, and established a National Teachers Corps. The "financial assistance for students" is covered in Title IV of the HEA.
The Federal Family Education Loan (FFEL) Program was a system of private student loans which were subsidized and guaranteed by the United States federal government. The program issued loans from 1965 until it was ended in 2010. Similar loans are now provided under the Federal Direct Student Loan Program, which are federal loans issued directly by the United States Department of Education.
The William D. Ford Federal Direct Loan Program provides "low-interest loans for students and parents to help pay for the cost of a student's education after high school. The lender is the U.S. Department of Education ... rather than a bank or other financial institution." It is the largest single source of federal financial aid for students and their parents pursuing post-secondary education and for many it is the first financial obligation they incur, leaving them with debt to be paid over a period of time that can be a decade or more as the average student takes 19.4 years. The program is named after William D. Ford, a former member of the U.S. House of Representatives from Michigan.
The Higher Education Loan Authority of the State of Missouri, also known as the Missouri Higher Education Loan Authority or MOHELA is one of the largest holders and servicers of student loans in the United States. Its headquarters are in St. Louis, Missouri.
Government sponsored Student Loans in Canada was designed to help post-secondary students pay for their education in Canada. The federal government funds the Canada Student Loan Program (CSLP) and the provinces may fund their own programs or be integrated with the CSLP. In addition, Canadian banks offer commercial loans targeted for students in professional programs.
Student loans and grants in the United Kingdom are primarily provided by the government through the Student Loans Company (SLC), an executive non-departmental public body. The SLC is responsible for Student Finance England and Student Finance Wales, and is a delivery partner of Student Finance NI and the Student Awards Agency for Scotland. Most undergraduate university students resident in the United Kingdom are eligible for student loans, and some students on teacher training courses may also apply for loans. Student loans also became available from the 2016/17 academic year to postgraduate students who study a taught Masters, research or Doctoral course.
In the United States, student loans are a form of financial aid intended to help students access higher education. In 2018, 70 percent of higher education graduates had used loans to cover some or all of their expenses. With notable exceptions, student loans must be repaid, in contrast to other forms of financial aid such as scholarships, which are not repaid, and grants, which rarely have to be repaid. Student loans may be discharged through bankruptcy, but this is difficult. Research shows that access to student loans increases credit-constrained students' degree completion, later-life earnings, and student loan repayment while having no impact on overall debt.
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Income-based repayment or income-driven repayment (IDR), is a student loan repayment program in the United States that regulates the amount that one needs to pay each month based on one's current income and family size.
Pay As You Earn (PAYE) is a federal student loan relief program signed into law on December 21, 2012, by President Barack Obama. It is one of four income-driven repayment plans.
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American Bar Association v. United States Department of Education, 370 F. Supp. 3d 1, was a case filed in December 2016 in the United States District Court for the District of Columbia that reached its final resolution in February 2020, in which the ABA and four individual public interest lawyers succeeded in preventing the United States Department of Education from denying individuals employed by certain "public service organizations" eligibility to participate in the Public Service Loan Forgiveness (PSLF) program. Following an initial victory on summary judgment for three of the individual plaintiffs in the district court's February 2019 ruling, the ABA and the fourth individual plaintiff settled the outstanding issues with the department. As a result, the four individual plaintiffs and all employees of the ABA, as well as other similarly situated individuals, are eligible to participate in the PSLF program.
The Paycheck Protection Program (PPP) is a $953-billion business loan program established by the United States federal government during the Trump administration in 2020 through the Coronavirus Aid, Relief, and Economic Security Act to help certain businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses continue paying their workers.
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The Student Borrower Protection Center is a nonprofit organization aimed at protecting borrowers of student loans and improving the student loan system.
Biden v. Nebraska, 600 U.S. 477 (2023), was a United States Supreme Court case related to the forgiveness of federal student loans by the Biden administration in 2022, challenged by multiple states. The Supreme Court's ruling was issued on June 30, 2023, ruling 6–3 that the Secretary of Education did not have the power to waive student loans under the HEROES Act.
actions taken by the committee of jurisdiction to streamline, reform, and simplify the current system could include ending the Public Service Loan Forgiveness Program.