Student Loan Forgiveness Program Gets Overhaul, Promises $1.74 Billion Relief for 22,000 Borrowers

Secretary of Education Miguel Cardona speaks during a Senate Health, Education, Labor, and Pensions Committee hearing at Capitol Hill in Washington, on Sept. 30, 2021. Greg Nash-Pool/Getty Images

The Biden administration on Wednesday unveiled details of a major overhaul of the Public Service Loan Forgiveness (PSLF) program, making it easier for long-time public-sector workers to qualify for student loan debt relief.

Congress created the PSLF program in 2007 to encourage college graduates to pursue public service careers. Borrowers who are employed 10 years in public service, including teachers, firefighters, law enforcement, and some nonprofit workers, while also making 120 qualifying monthly payments toward their student loans, could request to have the remainder of those loans wiped out.

The PSLF program, however, has spawned much confusion and frustration, largely because there are different types of federal student loans, but only those who take what’s known as Direct Loans can qualify. The Education Department has previously allowed borrowers to consolidate their debt into Direct Loans, but didn’t count payments made before the consolidation.

Just about 5,500 borrowers have received PSLF discharges since the program was launched, the department said in June.

Under the changes announced Wednesday, all federal student loan payments will be counted toward the PSLF program, regardless of loan type, if borrowers consolidate their student debt by Oct. 31, 2022. Previous monthly loan payments that were disqualified for being received late or different from the amount required will also be counted.

Military service members will also get credit toward PSLF. All months spent on active duty will now be counted toward the program, even if the borrower has paused payments during that period.

The changes, which are introduced as a time-limited measure, will make 22,000 borrowers who have consolidated loans immediately eligible for $1.74 billion in forgiveness without the need for further action on their part, the department said. Another 27,000 borrowers could potentially qualify for an additional $2.82 billion in forgiveness, if they certify additional periods of employment.

Overall, the Department estimates that over 550,000 borrowers who have previously consolidated their loans will be brought closer to being debt-free, with the average borrower receiving two years of progress toward loan forgiveness.

“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,” said Education Secretary Miguel Cardona. “Teachers, nurses, first responders, service members, and so many public service workers have had our back especially amid the challenges of the pandemic. Today, the Biden Administration is showing that we have their backs, too.”