More Details on Loan Cancellation; Servicer and Refinancing Strategies

As we navigate the ever-evolving student loan marketplace for borrowers and employers, we’ve got some helpful updates for you regarding loan cancellation, servicer changes, and action items to prepare for the January 1 (purported) end of the student loan payment and interest halt.

Broad Loan Cancellation

Federal Student Aid has added more information to their original announcement page to clear up some unanswered questions. Most notably, they shared a timeline for when the application would be ready (early October) and who will likely get forgiveness automatically (hint: those enrolled in Income-Driven Repayment plans who have submitted recent tax filings). They also clarified exactly which loans are eligible, how they choose which loans to cancel within a portfolio, and what happens with any remaining debt. Read the details for yourself here. As the new IDR plan still leaves some remaining questions and concerns, we’ll share a summary and expectations later this year; the expectation is that the plan won’t be available until 7/1/23 and could be subject to modifications from its current form.

PSLF Form Issues and Help Tool Strategies (also referred to as (Employer Certification Form, or ECF)

If you didn’t know this already, MOHELA is taking over loan servicing for all 1.3 million PSLF participants by year’s end. Our sources tell us that in addition to the 400k backlogged PSLF forms they received from Fedloan, they’re getting thousands more daily. Needless to say, this has created a backlog in processing for most applicants. Additionally, we’ve seen some forms being approved, but payment counts not being updated. It’s imperative for the PSLF Limited Waiver that Mohela has your completed PSLF form on file by October 31^st.

The PSLF Trophy

It’s not a term ED uses, but trophies appear once a PSLF candidate hits 120 payments (and therefore isn’t required to make further payments) and until there’s a zero balance. If you’re in this status, congratulations… loan forgiveness is close. Remember that you still need to use the PSLF form to apply for forgiveness, and also, if FedLoan is still your servicer and you see a zero balance, it could be that the PSLF review is still pending and your loans were transferred to MOHELA.

Is it finally time to refinance?

If you’re not a loan PSLF candidate (use our quick PSLF salary tool if you’re not sure), you may consider refinancing once the 0% interest and no payments period expires on January 1^st. We’re not expecting another extension of CARES, so with interest rates rising at a record pace, and the FED expected to announce another rate hike very soon, we highly recommend revisiting the marketplace if refinancing is suitable for you.

IDR recertifications pushed to July 2023 or later

Due to the final extension of the CARES Act no one will be required to recertify their IDR plan before July 2023. If your recertification date (from way back when CARES started) falls between January and June, it will be pushed out one full year. If it is July or later (2023), it will stay the same. If you see a recertification date earlier than July 2023 on your account Aid Summary, it’s expected that it will be updated to a later date.

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.