Education Department Issues More Rules to Simplify Public Service Loan Forgiveness

The Education Department on Tuesday will publish a second set of regulations aimed at reforming a series of government student loan programs, including another round of rule changes aimed at making the Public Service Loan Forgiveness program more accessible to applicants.

Public Service Loan Forgiveness offers college graduates the chance to have their student loan debt forgiven if they spend 10 years working for government or a qualifying nonprofit organization and make regular loan payments over that time period. But applicants reported that prior to last October, the program was cumbersome at best, and a frustrating time-sink at worst, thanks to stringent rules governing loan payments and inconsistent information provided by the government, contractors and lenders.

For the last year, the Biden administration has worked to make that process easier to navigate, first with a series of temporary waivers, which expire on Oct. 31. Since the temporary program changes were announced a year ago, the Education Department proposed a series of regulatory changes that would make many of those temporary fixes permanent. Those reforms are slated to be implemented next July.

In addition, the department last week announced more temporary tweaks to the program, including one-time adjustments to how the government counts income-based repayments toward forgiveness. And the Office of Personnel Management streamlined the process by which former and current federal employees can seek certification of their employment from the agencies that employed them.

The latest round of regulatory changes, which will be published in the Federal Register Tuesday and also go into effect next July, will allow Public Service Loan Forgiveness applicants to count additional loan payments that previously did not qualify for the program, in installments or via lump sum as well as certain instances where applicants were in deferment or forbearance because the borrower “may have faced confusing choices” regarding how those statuses might affect their eligibility for the program.

The rules, separate from the previously proposed regulations, allow borrowers to receive credit toward loan forgiveness for payments that were made late, in installments or in a lump sum, as well as devise a method to count qualifying payments that occurred prior to the applicant consolidating their student loans into Direct Loans.

“Borrowers will receive a weighted average of existing qualifying payments toward PSLF when they consolidate their Direct Loans,” said a fact sheet explaining the new rules. “Under current rules, borrowers lose all progress toward forgiveness when they consolidate. Under the new regulations, for example, a borrower with 60 qualifying payments on a Direct Loan with a balance of $30,000 who consolidates their loan with another Direct Loan with a balance of $30,000 with zero qualifying payments will have a new payment count of 30 payments.”

The new rules also ensure that a variety of instances where an applicant may have had their loans placed into deferment or forbearance are counted toward the program, including cancer treatment, military service and post-active-duty student deferments. Also included will be economic hardship deferments, which also include when an applicant was enrolled in the Peace Corps, as well as forbearances stemming from AmeriCorps or National Guard service, enrollment in the Defense Department’s Student Loan Repayment Program and other administrative or mandatory administrative forbearances.

And the rules will allow borrowers who had periods of deferment not covered by the new changes to be “held harmless,” provided that they continued to make payments equivalent to what they would have owed at the time, including “for periods when the borrower would have had a $0 payment.”

This week’s regulatory changes also include an effort to standardize what types of employment qualify for Public Service Loan Forgiveness, headlined by the adoption of a single standard of at least 30 hours per week to qualify as full-time employment.

“Prior rules required borrowers to either work 30 hours per week at multiple jobs or whatever their employer defined as full time,” the department wrote. “This created confusing and varying standards. A single 30-hour-a-week requirement will make it easier for borrowers and employers to establish what it means to be full-time.”

The new rules also require educational employers to certify credit for at least 3.35 hours of work per every credit hour taught by an adjunct or contingent faculty member, and opens the door for some employees of government contractors to qualify for the program.

“[The new rules] allow a qualifying employer to certify employment or a contractor if that individual is providing services that by state law cannot be filled or provided by an employee of that organization,” the department wrote. “The department is aware of specific circumstances where existing state laws generally prevent doctors at nonprofit hospitals in California and Texas from working for the hospital directly. This change would cover those individuals as well as any other contractor whose employment is similarly barred by state law.”