NEW PSLF Updates 2021 | Will it Affect our Plans?

We did a post about Public Service Loan Forgiveness just a few short weeks ago. This program is back in the news headlines, but this time it's actually for a good reason, so we're back again with a video to give you all the updates.

Earlier this month, the Department of Education announced some exciting new changes regarding this program. They estimate these changes will impact hundreds of thousands of borrowers. You're going to want to know about this, so keep reading! We're going to cover what the new changes are, how they might affect you, and how they affect our student loan journey.

If you’re more of the video type, check out the YouTube video above!

What is Public Service Loan Forgiveness (PSLF)?

If you're unfamiliar, public service loan forgiveness or PSLF for short is a program that the federal government has that allows for a portion of a federal student loan borrower's loan balance to be forgiven. 

Initially, to qualify for loan forgiveness under this program, there were five requirements:

You must be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization. You must work full-time for that agency or organization, have Direct Loans, repay your loans under an income-driven repayment plan; and make 120 qualifying payments.

What's changing?

The Department of Education has now instituted a temporary change to the last two requirements. There are many different federal student loan repayment plans to choose from, and we made a YouTube video explaining all of the plan options. Before these changes, you needed to have made payments under an income-driven repayment plan - not the standard, not the graduated, not the extended plan, but an income-driven repayment plan.

With the new temporary waiver, the department of education will retroactively count any payments you made while on another repayment plan toward student loan forgiveness as long as you'd met all of the other requirements for public service loan forgiveness.

The second significant change relates to the requirement of making 120 qualifying monthly payments. Historically, a qualifying monthly payment was a payment you make under a qualifying repayment plan for the full amount due as shown on your bill, no later than 15 days after your due date and while you are employed full-time by a qualifying employer.

You can make qualifying monthly payments only during periods when you're required to make a payment. So payments made while your loans are in an in-school status, grace period, deferment, or forbearance do not count. One notable exception is the forbearance that we were all in from March 2020 through January 2022. Even if you haven't been making payments during this time, the Department of Education counts it as if you did. Now, if you want to make qualifying payments but you're in a deferment or forbearance, contact your federal student loan servicer to waive the deferment or forbearance.

Another thing to note is that your 120 qualifying monthly payments don't need to be consecutive. For example, if you work for a qualifying employer and then go into the private sector for a little while and then go back to working for a qualifying employer again, you will not lose credit for the prior payments you made. Late and partial payments will now be considered toward your public service loan forgiveness progress with the new changes.

If you're interested in pursuing public service loan forgiveness, the Department of Education has created a tool called The PSLF Help Tool, which will be updated shortly to reflect these new changes. This tool will help you determine whether you work for a qualifying employer, suggests actions you can take to become eligible for PSLF, and guides you through the PSLF form and submission process, which we will link to below.

Now, some important notes. These updates to the public service loan forgiveness program are TEMPORARY. The provisions expire in October of next year, so they are giving us one year to get ourselves together. Also, know that parent plus loans are not eligible to take advantage of these temporary benefits.

What should I be doing?

So you might be wondering: I'm on the Public Service Loan Forgiveness track, or I want to be. What should I be doing?

Maybe you've been working for a qualifying employer or worked for one in the past but never signed up for the PSLF program and want your payments to count. Now's the time to get yourself signed up. If you're eligible, submit a PSLF form using the PSLF Help Tool by Oct. 31, 2022. If you have FFEL and/or Perkins loans, you'll also need to consolidate your loans before submitting the form.

If you're already in the program, you have qualifying loans, your employment has been verified, and you may have payments that may not have counted, you might automatically receive credit for prior payments. Double-check your Fedloanservicing account and see. Note that sometimes, these things take a little while to update but, if in doubt, give Fedloan Servicing a call and see what information they can provide you.

How do these changes affect our student loan journey?

Now, as you all know, Meshack is on the PSLF program, and we're on a joint mission to pay down $90,000 of our student loan debt within three years of getting married, which was officially one year ago now. We're making fantastic progress. However, do these changes affect our debt repayment plans?

The debt we tackled first on our repayment journey was Akeiva's parent plus loans. While her parent works for a qualifying employer, we believe and has for a very long time; unfortunately, the new temporary waiver does not apply to parent plus loans. So even if there were some benefits there, we wouldn't be able to take advantage of that. They left Parent borrowers out in the cold with this one.

Now when it comes to Meshack's loans, he's been on the public service loan forgiveness program from day 1 of working at a qualifying employer in 2018. He's always been on the right repayment plan and never made a late payment, so we don't expect his progress count to advance. He also hasn't recertified his income since getting married. However, when he inevitably does, we expect his monthly payments to skyrocket. We were prepared that at that point, he would likely switch to a more affordable payment plan and not pursue public service loan forgiveness any further. However, with this new temporary waiver, he might be able to hold on just a bit longer, even with a new repayment plan. Time will tell.

We dive deep into tackling debt repayment and so much more in our program, MONEY 180™, so if you’re interested in learning more about that, go on and check it out!