The Clock is Ticking on the CARES Act Payment Halt and the PSLF Limited Waiver

We hope this message finds you well and enjoying your summer. As the student loan marketplace continues to evolve, we’re dropping in here to provide an update relevant to both borrowers and qualified employers for the PSLF program (I hope at this point the acronym “PSLF” will suffice…).

For this update, let’s break down what’s happening into three separate categories: Temporary, Permanent, and Proposed.

Current Student Loan Programs with Pending Expirations

CARES Act: Federal student loan borrowers have not had to make payments or accrue interest since March of 2020. This relief is scheduled to end on August 31^st, and it’s time for borrowers to prepare to enter an affordable repayment plan. The excellent news for borrowers working in Public Service (AND their employers!) is that the $0 “payments” in CARES count towards PSLF. If you’ve been working full-time in a qualified role since then, you’ve already made nearly 28 qualifying monthly payments towards the 120 required (10 years) for loan forgiveness. Make sure you count all of your months working in an eligible role, including during the CARES Act, as qualifying payments already made towards PSLF.

PSLF Limited Waiver: This generous update to the core PSLF requirements immediately made PSLF either available, or more valuable, to over 1 million borrowers. You can read our summary of the changes here. Suffice it to say, anyone with student debt who’s been working full-time in a PSLF-qualified role in years past should evaluate if PSLF can deliver forgiveness. This program, for as much media cover as it’s getting of late, remains highly underutilized.

PSLF Servicer Change: As you may have heard (or seen), FedLoan, who has been the contracted servicer for the PSLF program, is being replaced by MOHELA this year. Some of you have already experienced the (hopefully seamless) transition. Others will before the end of the year. As of July 1st, all PSLF forms (formerly called the Employment Certification Form) should now be sent to to MOHELA (here are the ways to do this), even if FedLoan is still your servicer.

Permanent Changes

Earlier this month, the Biden Administration announced several permanent “fixes” to existing programs that will go into effect no later than July 1^st, 2023. While these changes aren’t confirmed until they take effect, we see no reason they would differ substantially from the following:

• Public Service Loan Forgiveness will get a minor facelift, but the limited waiver is the real doozy here in terms of value to borrowers, and those pursuing (or who should pursue) it need to take action by the October 31^st deadline. That said, changes slated for 2023 include: Allowing certain deferments (eg. Military), redefining the 30-hour per week requirement (for non-tenured teachers), and counting lump-sum and partial payments. We’ll provide more detail as the changes are confirmed.
• Interest Capitalization would be eliminated in cases where borrowers change repayment plans or miss recertification dates in Income-Driven Repayment plans. No matter your level of understanding around how capitalization works… or what it is… we can all agree that eliminating it will reduce the cost of student loan debt, and we welcome this overdue change to policy.
• The Borrower Defense to Repayment process is being streamlined. We’ve already seen billions in loan forgiveness for those who were defrauded by for-profit schools in years past, and these schools are facing tighter regulations. It’s about time.

Pending or Proposed Changes not yet Enacted

The biggest question mark looming here is around some level of broad loan cancellation. The President campaigned on forgiving $10k for all borrowers (under income thresholds), and he appears to remain steadfast in this desire (hence, the lone loan Ranger). The trepidation lies around using Executive Authority to do it. We hope to have an answer on this by the time the CARES Act expires on August 31^st. Most pundits, myself included, believe that student loan repayment won’t begin again until there is a firm decision on student loan cancellation.

Those expecting or hoping for up to $50k in broad cancellation should know that Biden has expressly come out against this on more than one occasion. THAT said, a brief examination of available repayment plans today should provide some comfort that affordable repayment options and loan forgiveness remain broadly available.

Available Resources

The mission of BenElevate is to serve as a resource and advocate to borrowers and employers to ensure that student loan programs are leveraged to maximize savings and improve recruiting and retention. We provide enterprise-level education, assessment tools, and manage participation in available programs to ensure all requirements are met.

Let us know how we can help.

About Author

Jason DiLorenzo

Jason is the Founder of BenElevate, an early stage fintech company working to address the student debt crisis by bringing to bear tools, expertise, and bespoke solutions to streamline student debt management for borrowers and employers.