By Andrew Paulson, CSLP, Lead Student Loan Consultant and Co-Founder of our partner site StudentLoanAdvice.com
The Public Service Loan Forgiveness (PSLF) waiver has been life-changing for many borrowers. But remember, it expires on Halloween this year, so if you were planning to take advantage of this limited-time offer, make sure to get it done before October 31.
Early on, when the waiver was first announced in October 2021, we thought the waiver would be pushed back again because many borrowers would not hear about it in time or would be doubtful of the implementation. However, it seems extremely unlikely the PSLF waiver goalpost will be moved again, especially with President Biden's Student Loan Forgiveness (application now available) plan now at the forefront. Also, I am beginning to see the IDR waiver implemented for student loan clients.
Let’s talk about the PSLF waiver first, because it's the highest priority with the upcoming deadline. Then, we’ll cover IDR.
What Is the Public Service Loan Forgiveness Waiver?
The PSLF waiver is a temporary waiver that relaxes a number of rules for the PSLF program until October 31, 2022. The PSLF program has been riddled with complexity, and many believe the waiver was passed to help offset some of the damage done to older borrowers with regard to the PSLF program.
More information here:
Does PSLF Work? PSLF Success and Why the Current Changes Matter
Who Does the PSLF Waiver Apply To?
This waiver mainly applies to those who were making payments on Family Federal Education Loans (or FFEL) loans. It also affects borrowers who made payments in ineligible repayment programs, such as the extended or graduated repayment program. Further, I’ve seen borrowers who have different monthly payment credits for PSLF on their federal student loans benefit when they consolidate their loans together. In doing so, they will take the loan with the longest repayment history and apply it going forward, so if you consolidate two loans together, they’ll take the loan with the highest payment credits. Let me illustrate with an example.
A doctor who borrowed for undergraduate and medical school is now beginning PGY-2. They graduated in May the year prior and began residency July 1. They complete their first PSLF certification form by having their program director sign it and then send it to the loan servicer. The loan servicer will send them an email with how many payments count to PSLF. Their undergrad loans would show 12 months or one year of PSLF credit, and their med school loans would have 5-6 months of credit. The discrepancy in payments is due to the time the med school loans were in the grace period. The borrower most likely used up the grace period on the undergraduate loans before med school. Grace periods don’t count toward PSLF even if you make a payment.
As a result, medical school loans and undergrad loans will often have a difference in payment credits. Thus, if this borrower stays on track to PSLF, they will receive forgiveness twice. First, in 108 months, and the second one in 114-115 months.
The PSLF waiver allows a borrower to consolidate loans with different payments together and have the loan with the longest repayment history applied to all loans. The result would be this doc receives forgiveness at 120 payments from med school and likely recoups five to six months of future payments.
Please note: this strategy will not work when the waiver expires on November 1. The old rules pertaining to consolidation will revert, and consolidation erases ALL prior payments.
More information here:
How to Ensure Student Loan Forgiveness Through the PSLF Program
What Has Been the Impact of the PSLF Waiver?
Since the PSLF waiver, the overall number of borrowers who have seen their loans forgiven via PSLF has increased exponentially. PSLF was created in October 2007, and borrowers first began to receive forgiveness 10 years from that point in October 2017. From October 2017-September 2021, about 16,000 borrowers received forgiveness. As of mid-August 2022, there have now been 211,000 borrowers who have received forgiveness. That’s a percentage increase of 1,219%. The vast majority of the nearly 200,000 who have received forgiveness in the last year has been a direct result of the PSLF waiver.
So, if you are on the fence, it has never been a better time to throw in an application to get this time-limited forgiveness.
Do I Still Have Time to Apply for the PSLF Waiver?
Yes, you do. Sure, this should have been done yesterday, but many of us procrastinate—and perhaps people wanted to see how this all played out. I don’t know if it could have turned out better now that more than 200,000 borrowers have received forgiveness.
If you have FFEL/Perkins loans and would like to apply for PSLF, you need to consolidate your student loans now. The absolute last day you can send in this application is October 31, but I know for a fact that studentaid.gov is going to be inundated with requests so don’t wait until the 11th hour. If you already have direct loans, you probably don’t need to consolidate your loans now unless you just graduated this spring/summer or have loans with different PSLF counts.
After you submit your consolidation, you need to complete your PSLF certification form. That is the employer certification form which must be signed by your current or past employer(s). This is to be sent only to employers that would qualify as a nonprofit or 501(c)(3). Studentaid.gov has a PSLF help tool that allows you to check employer eligibility. These also need to be submitted by October 31 to qualify under the limited waiver. The process of having these forms signed can take time. So, don’t wait until the last minute to have them signed and submitted.
Please note: even if you completed a direct federal consolidation and it is not yet processed by your loan servicer, you can still submit your PSLF certification forms. You probably won’t be able to use the nifty file upload, but you can send it via fax or mail. My recommendation is to use certified mail if you can’t use the file upload.
More information here:
Is Public Service Loan Forgiveness Worth It for Doctors?
Do Commercially Held FFEL Loans Change My Eligibility for the PSLF Waiver?
No, this only pertains to Biden student loan forgiveness. You had to consolidate your commercially held FFEL loans by September 29 to be eligible for the $10,000-$20,000 of forgiveness.
Income-Driven Repayment Waiver
I’ve written about the IDR waiver sporadically over the last year but want to highlight what it means for borrowers, because I've started to see client accounts FINALLY changing due to the waiver. The IDR waiver, unlike the PSLF waiver, is not just impacting a small segment of federal borrowers who are in public service. This waiver impacts all federal borrowers with some eligible for immediate forgiveness, not only through PSLF but also those on taxable (20- to 25-year) forgiveness. This waiver is set to expire end of 2023.
What Does the IDR Waiver Do?
The Department of Education (ED) will conduct a one-time adjustment to count long-term forbearances to PSLF and IDR forgiveness. The ED has said this will be implemented by fall 2022.
Here are the criteria for what counts as credit:
- Forbearances for 12 consecutive months or longer OR more than 36 months in total.
- Any months in repayment, regardless of the payments made, loan type, or repayment plan.
- Any month in deferment prior to 2013, excluding in-school deferment. Additionally, months in economic hardship deferral on or after January 1, 2013 would be included.
With forbearances shorter than the criteria provided above, contact the student loan ombudsman, and file a complaint to have them review your situation.
This means if you put your loans into forbearance for four years during residency, you could be eligible to receive four years of payment credit to IDR and PSLF forgiveness.
PSLF has a tracker on the PSLF servicer’s site which shows your progress, and it will automatically update when the IDR waiver is applied. IDR forgiveness will automatically be updated, but there isn’t a built-in tracker yet. However, the ED has mentioned as part of the IDR waiver that a tracker for IDR forgiveness will be created.
How Will I Know the IDR Waiver Is Applied to Me?
In your payment history on your loan servicer's website, you should be able to see certain forbearances/deferment periods of time where “Special Waiver” will be visible. Here’s an example in MOHELA (federal loan servicer)
Here are some other questions regarding the IDR waiver:
How long does it take for my servicer to implement my new payment count after the IDR waiver is applied?
I have seen it implemented for some borrowers already. Other borrower accounts are being updated as we speak. I don’t have a definite timeframe on how long it will take for this to happen to all borrowers, but I anticipate it could be weeks or even months to be completely rolled out.
If I'm pursuing PSLF, do I need to submit PSLF certification forms for periods under the IDR waiver to count?
Yes, to receive PSLF credit, you have to submit PSLF certification forms for your periods of forbearances that you would like to have counted.
Do commercially held FFEL loans qualify for the IDR waiver?
No, they don’t. You need to complete a direct federal consolidation for the loans to qualify. Also, it's been said that you must have this completed prior to implementing the waiver. The estimated date of implementation is January 1, 2023, so don’t delay on consolidation if you’d like these loans to qualify as well.
The PSLF waiver has demonstrated that loan forgiveness can work for borrowers if they are working in public service. If you’re trying to complete this last minute and want to ensure you’re doing it right, our expert team at StudentLoanAdvice.com has helped hundreds of borrowers this year with the PSLF waiver. We are well-versed in both waivers, and we can project exactly when you’ll have conquered your loans. Don’t delay and set up a time with them today!
Have you applied for either student loan forgiveness waiver? How has it worked out for you? If not, are you still planning to take action before the deadline? Comment below!
I’ve heard IDR total forgiveness is at 20-25 years. That range is a big difference. If I consolidate I’d get 18 years of credit based on the criteria you mention even though I haven’t been in IDR. Is the difference between 20-25 years just based on income?
20 years is PAYE. 25 years is REPAYE for graduate loans. 20 years is REPAYE for undergraduate loans.
So my understanding is that the “grace period” for the first 6 months of residency will not qualify automatically be credited for PSLF and I do not qualify for the IDR waiver. Correct?
Brett,
The grace period doesn’t count towards the PSLF waiver or IDR waiver. The only way you are able to sidestep this is if you had an other loan that was in repayment during that time and you consolidate them together prior to the October 31st deadline.
Andrew SLA
I have two separate consolidated direct loans. One was consolidated right after med school and one after the grace period (so about 8 months behind in number of eligible payments). Should I consolidate my two separate already consolidated loans? I really don’t want to lose my 70 months of repayment on these.
Thanks!
Ben
Ben,
This is precisely the scenario I wrote about in my post. The “extra credit” would be applied to the loans which didn’t enter repayment until six months after medschool if you consolidate your together loans AND submit your PSLF forms prior to the 10/31 deadline.
Andrew SLA
I just got a letter from Mohela that my loan falls way short of the 120 months.
Started FFEL in 2010 at graduation.
Worked for a qualifying employer since 7/2012
Made monthly payments throughout.
Consolidated to a Direct loan in 8/2020.
Mohela is only crediting me for the months AFTER I consolidated to Direct, and ignoring the 8 years of FFEL payments prior to that. Not by choice, I’ve changed loan servicers 4x (sallieMae, navient, fedloans, mohela). As far as I can tell, Mohela has no knowledge of the FFEL loan history prior to me consolidating to a Direct loan with the ED. Anyone else have this issue? How do I fight this and get credit my full 120 payments over the last 10 years? Maybe they will still do it retroactively? Spent 2hr 48 min on hold waiting for Mohela today.
I would start gathering your own records of those payments. It’s probably also worth booking an appointment with Andrew to make sure you’re crystal clear on how this works in your particular case. I think you should qualify for PSLF as I understand the waiver.
I had undergraduate loans from 2006 and 2007 which I consolidated together in March/ April 2020 and my med school loans are from 16,17,18. I did NOT consolidate my undergraduate loans with my med school loans because I didn’t want to lose my lower undergraduate interest rate. I did have qualifying employment for a few years on my undergraduate loans. I was told that (1) I am not eligible to consolidate again now because I don’t have NEW loans and (2) that the payments made on my undergraduate loans were nullified from consolidating them in 2020, as well as the IDR counter on those older loans.
If i knew I could consolidate all 5 loans together now and the fact that they would all be “back dated ” to 2006+7 as far as having that many month of idr and pslf counting toward them all, I would have considered it. Spent hours on the phone with Mohela and previously myfedloans but never understood this. Very disappointing. Seems too late to fix it?
I’m not sure that’s true, but some professional help seems appropriate. I’d call up Andrew at StudentLoanAdvice.com and spend an hour with him. I think it’ll be well worth your time and money.
My article explains this. Borrowers who could never qualify have been qualifying in droves due to the PSLF and IDR waiver. There is still time but you need to consolidate your loans and generate your PSLF forms by tomorrow.
Andrew SLA