The Department of Education (DoEd) last week announced that it will grant a limited-time waiver that retroactively approves federal student loan payments that had previously failed to meet the Public Service Loan Forgiveness (PSLF) program’s eligibility requirements. 

This initiative is a major step forward on the Biden administration’s promise to reform PSLF. But there’s still significant work to be done — and advocates urge that this and any further improvement will only be effective if borrowers receive support to navigate the still-complex program. 

If you’re an HR leader at a nonprofit, government agency, or other public service organization, here’s what you need to know about the PSLF waiver:

What the waiver does

Under the old rules, borrowers were eligible to have any remaining balance on federal Direct Loans forgiven after they made 120 on-time payments while enrolled in a qualified repayment plan and employed full-time in the public sector or at a nonprofit.  

But with the waiver, previously ineligible payments can count towards a borrower’s 120 payment requirement if they were:

  • Not made under a qualified repayment plan
  • Paid to other types of federal student loans (with the exception of Parent PLUS loans) 
  • Not paid on time
  • Slightly overpaid or underpaid

More than 600,000 public service employees stand to benefit from the waiver

Since PSLF launched in 2007, only 16,000 participants have received forgiveness — but that’s not for borrowers’ lack of trying. Only 2.1% of applicants have been approved in the program’s lifetime, which critics say is the result of rampant mismanagement, unfair review practices, and an inadequate program design from the start. 

But the waiver has the potential to reach hundreds of thousands more borrowers. With the waiver in place, the DoEd estimates that:

  • 22,000 previously ineligible borrowers stand to have a combined $1.74 billion in student debt forgiven immediately 
  • 27,000 previously ineligible borrowers could have their debt wiped after verifying that they met the employment requirements at the time payments were made
  • 550,000 borrowers who previously consolidated will fast-track their progress by an average of two years’ worth of payments

The waiver will apply to some borrowers automatically, but many will need to take action before the deadline

Borrowers who only have Direct Loans, have already submitted a PSLF application, and have already verified their employer’s eligibility are in the clear — the DoEd intends to automatically credit these borrowers for previously disqualified payments. 

But for many borrowers, the waiver requires that they take certain steps before October 31st, 2022. These steps will vary depending on the borrower’s specific circumstances, but can include submitting a PSLF application, submitting an employment certification form, or consolidating previously ineligible loans into a Direct Consolidation Loan. 

Employers can make a difference

The PSLF waiver has the potential to be life-changing, but only if borrowers understand the opportunity at hand and have the resources they need to leverage it.

That’s where employers can come in. If you’re an HR leader at a PSLF-eligible employer, now is the time to educate employees about what the waiver means for them and empower them to take action — and can help your workforce:

  • Manage their PSLF eligibility, track their payment history, and request employment certification from a central, hassle-free hub
  • Convert spare change and cash back rewards into payments for loans that don’t qualify for PSLF
  • Track their payoff progress — for all their student loans — on a single dashboard
  • Compare and apply for refinancing options for non-federal loans
  • Find educational resources about the waiver — and year-round financial wellness

Schedule a demo today to learn more.