Gary W. Pelletier, CLU, ChFC, AIF®

Northeast Planning Associates, Inc.

Corporate, Estate

& Financial Planning


Public Service Student Loan Forgiveness

| October 25, 2021
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Public Service Student Loan Forgiveness

While we wait for possible tax changes coming from Washington, one temporary modification already in place is the expansion of eligibility for the Public Service Loan Forgiveness program.

On October 6, 2021, the U.S. Dept. of Education announced sweeping changes to the loan forgiveness program. This comes after nearly all applications for forgiveness since the program’s inception 14 years ago have been rejected.

Here’s what you need to know:

  • The Public Service Loan Forgiveness program was enacted in 2007 to entice more college graduates into the public sector. As written, if employed in public service for 10 years and ongoing payments loan payments were made during this time, there was a promised forgiveness of any remaining balance. However, due to some fine print on the types of loan and repayment programs, only a paltry 16,000 borrowers have received forgiveness since the original enactment.
  • Currently, an estimated 1.3 million people have applied to have their loans forgiven through this program. The changes announced on October 6th should help 550,000 of those that have submitted.
  • The expanded eligibility will now include those who have made 10 years’ worth of payments while in qualifying service in federal, state, or local governments, non-profits, or military service. Payments made to private loans insured by the federal government or loans through the Family Federal Education Loan (FFEL) program will be eligible for forgiveness, as well as direct loans. While consolidation to direct loans was available, payments made before consolidation did not count toward the required 10 years of payments.
  • Consolidation of FFEL, Perkins, or other non-direct student loans into direct federal loans, as well as an application for the program, is required before October 31, 2022. Those already enrolled in the program and with direct federal student loans will not need to take action.
  • The Department of Education has reported they will immediately erase the debt of 22,000 borrowers. These changes should open the door to another 27,000 borrowers allowing them to prove and confirm eligibility immediately. This may result in approximately $4.5 billion of student loan forgiveness in the short-term.

Things are fluid and depending on when you read this, there may be updates/changes. To help determine eligibility, there is a tool on the Federal Student Aid website: https://studentaid.gov/pslf/.  This will provide guidance on employer and loan eligibility and supply appropriate steps to apply. The tool and the website will be updated as more details on this expansion of the program become clearer.

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