Biden Rolled out New Flexibility for Student Loan Payments This Week. Here's What to Know

Many student loan borrowers will soon have an easier path toward debt forgiveness, after the Biden Administration announced several changes to income-driven repayment plans.

The changes, announced earlier this week, include permanent updates to the Public Service Loan Forgiveness (PSLF) program and payment count adjustments for millions of borrowers on income-driven repayment plans.

About 30% of all student loan borrowers are enrolled in income-driven payment plans, which are supposed to protect borrowers from unaffordable debt by tying monthly payments to income. After 20 or 25 years of payments, depending on the plan, any remaining debt is canceled. Through Public Service Loan Forgiveness, borrowers working in public sector jobs can have their loans wiped out quicker — after 10 years of payments.

But both programs have been difficult for borrowers to navigate, with many missing out on the benefits because of complicated rules. These changes aim to address those issues.

The updates announced this week are totally separate from the one-time student loan forgiveness program President Joe Biden announced in August, which aims to provide up to $20,000 in student debt forgiveness for eligible federal borrowers (you can learn more on how to apply for that program here).

They also only apply to student borrowers — not Parent PLUS loans.

Here’s everything you need to know:

Public sector workers should submit their paperwork for loan forgiveness ASAP

The temporary Public Service Loan Forgiveness waiver — a series of rule changes implemented a year ago to help borrowers by streamlining an arduous, complicated process — will expire on Oct. 31.

Under the temporary waiver, loan payments that were previously considered ineligible for the PSLF program (because the borrower held the wrong loan type or was in the wrong type of payment plan) count toward forgiveness.

The Education Department says that so far, some 236,000 borrowers have received more than $14 billion in forgiveness under the limited waiver. Last year, the agency estimated that more than half a million borrowers could benefit from the program.

If you have student loans and have been working for a qualifying employer (this includes all levels of government, as well as schools and non-profit agencies), you should fill out the paperwork for the waiver as soon as possible. Borrowers with older, privately held loans will need to consolidate their loans first, and then all borrowers need to fill out what’s called the Employment Certification Form. Read this guide from the Education Department for a breakdown of the steps.

While many of the benefits of the limited waiver will be extended through the changes announced this week (more on that below), the Education Department says there are two reasons why public sector workers should act before the Monday deadline.

First, borrowers will no longer be able to count the same period of public service work for Teacher Loan Forgiveness and Public Service Loan Forgiveness after the waiver expires.

Second, borrowers will need to be employed by a qualifying employer to be eligible for their loan discharge after the waiver expires. In other words, the waiver makes borrowers eligible for forgiveness right now even if they’ve left their qualifying job (so long as they worked and made loan payments for the necessary 10 years). After Monday, that flexibility expires and borrowers will need to apply for their loan discharge while they’re still employed at a qualifying job.

Finally, to get the benefits of the waiver, note that you only need to start, not complete, the process by midnight on Monday.

Borrowers on income-driven repayment plans will get a big boost

Starting later this year, the Education Department will revise the payment counts of millions of borrowers to move them further along the path toward forgiveness — potentially years ahead of schedule. In some cases, the changes will lead to immediate loan forgiveness.

Under the recount, borrowers will get credit toward forgiveness for any month they were in active repayment status, regardless of whether their payment was late, the type of loan they had or the repayment plan they were in. The revisions also are designed to give borrowers credit for time their loans were in forbearance: Periods of more than 12 consecutive months or periods of 36 cumulative months will count toward forgiveness after the adjustment.

This one-time change was announced back in April, but the Education Department only released details about how it will work this week: some borrowers will see their loans discharged as early as next month, but most borrowers on income-driven repayment plans (who don’t qualify for immediate forgiveness) will see their payment counts adjusted in July.

Borrowers working toward PSLF are also eligible for the payment count revisions — an expansion of what was available under the temporary waiver.

The key? You must have federally held loans to be eligible. If you have privately held Federal Family Education Loans (FFEL) or Perkins loans, you’ll need to apply to consolidate them no later than May 1, 2023.

Permanent changes to the PSLF program aim to simplify the program

Rather than extend the limited PSLF waiver, the Education Department is making permanent changes (some of which were part of the waiver) to the program that will take effect in July 2023.

“We’re taking bold steps that will automatically move more hardworking public service workers closer to forgiveness and making permanent changes to reduce the red tape that riddled the PSLF program,” U.S. Secretary of Education Miguel Cardona said in a news release this week.

These changes include new rules that will allow borrowers to receive PSLF credit on late pay payments, installment payments and lump sum payments. They will count more periods of deferments (including for cancer treatment, military service and economic hardship) toward PSLF credit, and they’ll also make it easier for contractors to certify their employment to qualify for the program.

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