The Biden Administration Overhauls the Student Loan Forgiveness Program
Public Sector Workers Get Relief
The Biden administration is stepping up efforts to relieve certain borrowers of their student loan debt, announcing an overhaul of the government’s student loan forgiveness program. The changes to the Public Service Loan Forgiveness (PSLF) program will make it easier for public sector employees to receive student loan forgiveness. The changes have the potential to help about 550,000 of the 1.3 million student debt holders who are enrolled in the program.
Borrowers hoping to take advantage of PSLF must work for a qualified government organization (municipal, state, or federal organizations count) or a qualified 501(c)(3) organization, and they must make 120 on-time loan payments to be eligible for loan forgiveness. Prior to the changes, the program was only available to borrowers who had Direct Loans from the government. And while borrowers were able to consolidate their debt into a Direct Loan, previous payments made on the pre-consolidation debt were not counted toward the PSLF program.
Now, all previous loan payments will be counted retroactively toward the program if borrowers consolidate their debt into a Direct Loan by the end of October 2022.
Education Department Discharging Debt
To ensure public sector workers take advantage of changes to PSLF, the Department of Education plans to contact debt holders directly to urge them to consolidate into a Direct Loan and apply for forgiveness. The Education Department already said it will discharge over $5.8 billion in loans for 323,000 disabled debt holders. The government agency has also forgiven loans for former students of ITT Technical Institute, the defunct for-profit school. The Department of Education also plans to forgive some student loans of other people who were students at for-profit schools.
Separately, Wednesday the FTC announced it is sending warnings to 70 of the country’s biggest for-profit colleges saying that they will face sanctions if they use deceptive practices to recruit students.
Challenges with the PSLF Program
Because the program was created in 2007, the first people to qualify to have their loans forgiven applied for forgiveness in September 2017. But while the Congressional Budget Office estimates that the program could cost just under $24 billion in the next 10 years, and the US Government Accountability Office believes that more than four million student loan borrowers qualify for the program, some aren’t aware that it exists. And even more graduates have gotten bad information from loan servicers that rendered them ineligible.
In 2018, just 1% of applicants were approved for loan forgiveness through PSLF. In November 2020, the US Department of Education released updated information indicating that only 2.4% of applicants have been approved for PSLF.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21100701
All your finances.
All in one app.
App Store rating
