Senators Propose Major Changes To Student Loan Forgiveness

Two U.S. senators have proposed major changes to student loan forgiveness.

Here’s what you need to know — and what it means for your student loans.

Student Loans

U.S. Senators Sheldon Whitehouse (D-RI) and Jeff Merkley (D-OR) introduced new legislation — the Simplifying and Strengthening PSLF Act — to “streamline and improve” public service loan forgiveness. This proposal comes on the same day that the Biden administration announced $5.8 billion of student loan cancellation, which is the largest amount in U.S. history. If passed by Congress, this new legislation would:

• Get student loan forgiveness faster: Reduce the number of student loan payments needed to qualify for public loan forgiveness from 120 payments over 10 years to 60 payments over 5 years;
• Count more student loan payments: Allow any prior period of student loan repayment to count as a qualifying student loan payment, regardless of federal loan type, student loan repayment plan, or whether student loan payments were made in full or on time.
• Increase eligibility: Count as a monthly student loan payment any month in which an active duty military member or a Peace Corps volunteer is serving, regardless of whether their student loans were in student loan forbearance or student loan deferment during their service; and
• Consolidate student loans again: Permit Parent PLUS Loan borrowers and couples who previously joint-consolidated their FFEL federal student loans to re-consolidate their student loans into one Direct Loan to become eligible for public service loan forgiveness.

“The Public Service Loan Forgiveness program promised loan relief to Americans willing to pursue a career in public service,” Whitehouse said. “Instead, they landed in a bureaucratic nightmare with no loan forgiveness in sight.”

Student loan forgiveness: proposal would change landscape

The biggest change in this proposal is to grant student loan forgiveness in half the time. Rather than get student loan forgiveness after 10 years, student loan borrowers could get their federal student loans canceled after only five years. As a presidential candidate, President Joe Biden proposed shortening public service loan forgiveness to five years, with $10,000 of student loan forgiveness for each year of service. In contrast, this new proposal would not cap the total amount of student loan forgiveness.

Created by Congress in 2007, the Public Service Loan Forgiveness program grants complete federal student loan cancellation for student loan borrowers who work for a qualified public service or non-proft employer. Private loans, however, are ineligible for this student loan forgiveness. Currently, student loan borrowers must make 120 monthly student loan payments and enroll in an income-driven repayment plan such as IBR, PAYE, REPAYE or ICR. However, in some years, the program has been plagued by a 99% rejection rate. The Biden administration has sought to fix the troubled program by instituting major changes to student loan forgiveness that will provide more student loan forgiveness to borrowers. For example, the U.S. Department of Education, led by Secretary Miguel Cardona, relaxed the requirements for public service loan forgiveness. Among other changes:

• Student loan repayment plans: count student loan payments made under any student loan repayment plan or student loan type;
• Student loan consolidation: count student loan payments made prior to student loan consolidation, even if you were on the wrong repayment plan;
• Late payments: count student loan payments that were late or were partial student loan payments;

Student loan borrowers can complete a limited waiver by October 31, 2022 to get credit for all these changes. However you choose to pay off student loans, know that you have options. With student loan payments restarting soon, make sure to learn the best ways to save money and become debt-free:

Student Loans: Related Reading

Navient agrees to cancel $3.5 million of student loans

Education Department announces major overhaul of student loan servicing

How to qualify for $17 billion of student loan forgiveness

Why $50,000 of student loan cancellation could still happen