Did the Education Department cancel PSLF via it’s student loan forgiveness memo to student loan … [+]
Was Public Service Loan Forgiveness Blocked By Education Department’s Student Loan Memo?
The student loan landscape has been thrown into uncertainty after a recent federal court ruling, which led the Education Department to halt applications for the four income-driven repayment plans and instruct loan servicers to stop accepting student loan forgiveness applications for three months. Some borrowers may still be left wondering what these actions mean for Public Service Loan Forgiveness and whether it has been effectively blocked.
The short answer is: it’s complicated. Here’s what borrowers should know if they are interested in PSLF.
Context For Education Department Student Loan Memo’s Impact On PSLF
The U.S. Court of Appeals for the Eighth Circuit recently expanded an injunction against the Saving on a Valuable Education plan and also included language questioning the Education Department’s authority to grant student loan forgiveness under most income-driven repayment plans. While the ruling stops short of completely overturning these programs, it signals that their most generous features — designed to lower monthly payments and accelerate forgiveness — may ultimately fall under judicial scrutiny. “This is a radical departure from how this statute has been interpreted and administered for nearly 30 years,” Michele Zampini, senior director of college affordability at the Institute for College Access and Success, told The New York Times.
In response, the Education Department shut down applications for all income-driven repayment plans—not just SAVE. That includes three other long-standing plans:
- Income-Based Repayment
- Pay As You Earn
- Income-Contingent Repayment
In a memo sent to “>student loan servicers, the Education Department instructed them “to stop accepting and processing all income-driven repayment and consolidation applications for three months.” The memo also explicitly bars student loan borrowers who are already enrolled in an IDR plan and are making payments on those loans from recertifying in the next three months. Here’s how PSLF fits into the Education Department’s guidance.
How Does Education Department Student Loan Forgiveness Guidance Affect PSLF?
According to the Education Department, the PSLF program is still open for eligible government and nonprofit employees, including public school teachers, librarians, and public defenders who have outstanding student loans. After making 120 qualifying payments under a PSLF-eligible repayment plan, borrowers can still receive loan forgiveness.
Education Department Student Loan Guidance: Which Eligible Borrowers Can Enroll In PSLF?
The answer here is tricky because of a quirk in the student loan forgiveness program: Most borrowers must be enrolled in an IDR plan to qualify for PSLF. With those applications paused, some borrowers cannot take the necessary steps toward forgiveness.
Student loan borrowers currently enrolled in IBR, PAYE, SAVE, or ICR who become eligible for PSLF would still be able to enroll. Eligibility could open if, for example, a student loan borrower changes jobs and starts working at an eligible employer.
Unfortunately, for student loan borrowers who are not currently enrolled in an IDR, there is no way to enroll. While PSLF is still technically available, those borrowers must wait until the Department of Education’s freeze ends or new guidance is issued.
Education Department Student Loan Guidance: Can Student Loan Borrowers Make Qualifying Payments Toward PSLF?
Student loan borrowers currently enrolled in IBR, PAYE, and ICR should be able to continue making qualifying payments that count toward PSLF.
However, for those enrolled in the SAVE plan, “where payments have been halted because of the ongoing litigation, your qualifying payments have also been put on hold — and you can’t make any progress toward forgiveness,” notes Tara Siegel Bernard in a New York Times article.
“Borrowers stuck in SAVE can either wait for the IDR applications to open back up and switch to another IDR plan,” Betsy Mayotte, president of the Institute of Student Loan Advisors, told Bernard. “Or ride out the SAVE forbearance and plan on using what’s called ‘buy back’ to get credit for those months once they have certified 120 months of eligible employment.”
The buy-back process would allow borrowers to retroactively make payments for months that were paused under the current legal uncertainty. However, this requires additional effort and documentation, making an already complex process even more burdensome.
Education Department Student Loan Guidance: What About Recertifying IDR Loans For PSLF?
IDR plan monthly payments are based on income, family size, and state of residence. Therefore, the Education Department has a recertification process, a yearly requirement for borrowers enrolled in an IDR plan to update their information to recalculate their monthly payments. The IDR recertification deadline is one year after a borrower starts or renews an IDR plan.
However, the Education Department’s memo gave student loan servicers guidance that explicitly bars student loan borrowers who enrolled in an IDR plan and are making payments on those loans from recertifying in the next 3 months. The applications for recertification are not available on the department website at the moment. According to The New York Times, that’s not something you need to worry about as “loan servicers have been instructed to push back those deadlines on a month-by-month basis, and will be in touch with borrowers when they receive more clarity from the Education Department.”
What Will Education Department Do Now With PSLF And Other Student Loan Income-Driven Repayment Plans?
Industry experts expect that the Education Department will make at least some student loan IDR plans—particularly Income-Based Repayment — available again soon.
Scott Buchanan, the executive director of the Student Loan Servicing Alliance, expects IBR applications to be restored “as soon as practical,” according to The New York Times. The IBR plan was established by Congress in 2007 through the College Cost Reduction and Access Act and became available to borrowers in 2009. In contrast, SAVE was introduced by the Department of Education under regulatory authority. This legal distinction could allow IBR applications to resume despite the court ruling.
While borrowers already enrolled in these plans can continue making payments, no new applications are being processed. This means that those seeking PSLF who aren’t already in an eligible repayment plan are temporarily stuck and must await further guidance from the Education Department.
President Donald Trump’s nominee to head the Education Department, Linda McMahon, was confirmed by the Senate on Monday. During her committee hearing and written testimony, McMahon affirmed that she would uphold the PSLF program, even if pressured by the White House’s newly formed Department of Government Efficiency to dismantle it. McMahon’s words offer hope for PSLF, but student loan borrowers should temper that hope, knowing that promises made during confirmation hearings don’t always translate into reality.
The Upshot On Education Department Impact On PSLF And Student Loans
- PSLF has not been eliminated, but the halt of IDR applications prevents some borrowers with student loans from progressing toward forgiveness.
- SAVE borrowers are particularly affected since their payments are paused, which means they are not making qualifying PSLF payments.
- Existing PSLF participants already enrolled in a non-SAVE IDR plan can continue toward forgiveness.
- The situation remains fluid, and some IDR plans (such as IBR) may be restored soon enabling new PSLF enrollment.
PSLF is still available for those who qualify and have outstanding student loans. However, the inability to enroll in an IDR plan, due to the Education Department’s guidance, has made it temporarily inaccessible to many borrowers not already in qualifying repayment plans.