Education Department Announces Major Public Service Loan Forgiveness Reform

The Biden Administration announced this month a comprehensive overhaul of the Public Service Loan Forgiveness program—a policy designed to attract young people to the federal workforce—to simplify the process.

The Education Department’s proposed rule spans 750 pages and removes “overly stringent” provisions, which include mandating full payment within 15 days of due date and allowing lump and partial sum payments to qualify for forgiveness. The new regulations further simplify eligibility criteria, defining full-time employment as at least 30 hours per week, and clarifying what kinds of employers qualify as public service employers.

Among other things, the department hopes to clarify how service-related deferments and forbearances will be calculated to ensure they count towards the borrower’s 10 years of service and repayment. Deferments that count toward completion include cancer treatment, economic hardship, administrative exemptions, military and National Guard service, Peace Corps service, AmeriCorps, and Defense Department forbearances.

“We are committed to fixing a broken system. If a borrower qualifies for student loan relief, it shouldn’t take mountains of paperwork or a law degree to obtain it,” said Education Secretary Miguel Cardona. “These proposed regulations will protect borrowers and save them time, money, and frustration, and will hold their colleges responsible for wrongdoing.”

As previously reported in FEDmanager, the Education Department announced a limited PSLF waiver in October 2021. Those provisions allow borrowers to count all their payments towards PSLF, provide automatic reconsideration processes for those whose payments or applications have previously denied, and allow some applied credit toward forgiveness automatically. To be eligible for the waiver, borrowers must apply before October 31, 2022.

The proposed regulations are part of the Education Department's ongoing effort to make student aid more equitable and stronger. After a series of public hearings in June 2021, the department began negotiations on affordability and student loan issues. The negotiating committee reached consensus on interest capitalization, total and permanent disability discharges, false certification discharges, and Pell Grant regulations. The committee's will release finalized regulations in a separate notice this summer.