The Future of PSLF
October 28th, 2022
This week, the Dept. of Education announced permanent changes to the Public Service Loan Forgiveness (PSLF) program, some of which were featured in the temporary “Limited Waiver” that was announced last October. While some details are unclear, we’d like to summarize what we know. ALL of the following may be significant to you, so this list is not sorted in order of importance:
- An extension of the key components of the PSLF & IDR Waivers
The one-time account adjustment that was announced back in April for borrowers using any Income-Driven Repayment (IDR) plan has not been completed yet, and won’t be until July 2023. As a result, borrowers with non-Direct loans now have until May 1st, 2023 to consolidate to Direct and take advantage of this credit. Review our summary of the PSLF Limited Waiver here.
- Specific periods of Forbearance and Deferment will count towards PSLF
Economic hardship deferment as well as administrative and mandatory forbearances will now count towards PSLF. Additionally, non-qualified periods of deferment (such as In-school) or forbearance may now qualify if the borrower makes payments equal to what would be owed under an IDR or other qualified plan. This could positively impact those working towards PSLF while pursing advanced degrees.
- No more reset of the “PSLF clock” when loans are consolidated.
Instead, they will receive a weighted average of existing qualifying payments. This is a generous update, but the “maximum credit” offered under the temporary provisions is optimal.
- Definition of “full-time employment”
“Full-time” will no longer be based on the employer’s definition, A single standard of 30 hours per week (average) will be used. This has been a roadblock for many providers we’ve worked with and is a welcome change.
- Contractors working in qualifying environments may now qualify for PSLF
If an individual is providing services that by State law (eg. Stark law) cannot be filled or provided by an employee of that organization, an employer may certify their employment for PSLF even if they are an independent contractor. This change was specifically made on behalf of physicians working in California and Texas. The Department will publish a separate final rule addressing comments related to the definition of an eligible employer and its applicability to for-profit employers. We will continue to provide updates as this evolves.
- Reconsideration for PSLF denials
There will be a formalized reconsideration process for borrowers to have their applications reviewed again if they think errors were made on their PSLF decisions.
- Lump sum payments will count towards PSLF
This provision was already made back in 2020, but they are billing it as a new rule. For borrowers receiving bulk loan repayment through NHSC, state, or other repayment programs, this can help ensure that minimal overlap exists while you pursue PSLF.
Most of this will be effective beginning July 1st, 2023, and more details are due in November. Stay tuned for continued updates from our Advisory in the coming months. Here’s what to do next:
If you’re a BenElevate client seeking to update your strategy based on recent changes, LOGIN HERE.
If you’d like to learn if PSLF is applicable to you, and to develop a repayment strategy moving forward, register for Individual support HERE.
Employers… if you’re note already working with us, we can help your staff maximize PSLF benefit while streamlining the administrative requirements. Schedule a demo here.
Lastly, follow us on social media for weekly updates! We are diligent, not indulgent, with our updates here.