PSLF vs. TEPSLF vs. The PSLF Waiver

There has been a lot of confusion among student loan borrowers about the recent reforms to the Public Service Loan Forgiveness Program (PSLF), and specifically what President Biden recently announced for some borrowers.

As a result, borrowers are looking at programs that they may not qualify for, or they think again they are being left out and will never see loan forgiveness (which simply isn't true).

Today I want to break down what is really happening with PSLF, what each of the major PSLF reforms do, which ones you may qualify for or should look for, and what the deadlines are - if there are any.

Let's break it down.

How Public Service Loan Forgiveness Works

To start, let's cover how Public Service Loan Forgiveness (PSLF) is supposed to work.

The program has four components, and if you meet all of them, you'll receive federally tax-free loan forgiveness on any remaining balance of your loan. Note: some states may still levy a state tax on the loan forgiveness.

So, what do you have to do? Here's the 4 criteria:

1. Have Direct Student Loans
   
2. Be On A Qualifying Repayment Plan
   
3. Have Qualifying Employment Which You Certify
   
4. Do Steps 1-3 For 120 Payments
   

Let's break it down a little further.

Direct Loans: The only loan types that qualify for the program are Direct Student Loans. These are basically all Federal loans issued after July 1, 2010. If you have old FFEL Loans, Perkins Loans, or Private student loans, they DO NOT qualify.

Qualifying Repayment Plan: Second, you must be on a qualifying repayment plan. The qualifying repayment plans are Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (RePAYE), and the Standard 10-Year Plan. Note: both the Graduated and Extended repayment plan DO NOT qualify.

Qualifying Employment: Third, you need to have qualifying public service employment and you need to certify your employment via an Employment Certification Form (or the PSLF application). This is a pretty broad definition, but you need to work any job in government (federal, state, or local), public schools, or a non-profit. We have a full guide on qualifying PSLF jobs here.

120 Payments: Finally, you need to to steps 1-3 for 120 payments. These payments do not have to be sequential, you just need to add up to 120 payments. Each month during the Covid-19 student loan pause counts as a payment, as long as you certify your employment for that period.

The State Of PSLF And Why We're Here

So, this program sounds simple enough for a government program, why are there issues?

Well, put it simply, people are getting rejected for PSLF (and some shouldn't be), and there appears to be a significant amount of both confusion and mismanagement of the program. Plus, there are reports that loan servicers may have mislead borrowers into the wrong repayment plan, or advised them that their loan type qualified when it didn't. As a result, people are NOT getting the loan forgiveness they deserve.

The latest data from September 2021 shows the following:

• Only 2% of borrowers who applies for PSLF met the requirement (that means 98% were rejected for PSLF)
• 80% of the rejects were due to not meeting the 120 payment mark on Direct Loans (some of the borrowers may have had FFEL Loans)
• 6.8% of borrowers were rejected for having the wrong repayment plan
• The remaining 12.6% were rejected for not having qualifying employment

With these high numbers of rejection, both policy advocates and Congress focused in on what could be wrong. Yes, there are simply a large amount of people applying who don't qualify because they are seeking relief. But, there are also clearly systemic issues with the program.

As such, two "fixes" have been passed to try to address the situation - TEPSLF and The Biden Waiver.

Temporary Expanded PSLF (TEPSLF): TEPSLF is a program that was passed by Congress that is designed to help borrowers who've been in the WRONG REPAYMENT PLAN.

The Biden Waiver: The Biden Waiver is a set of Executive Orders that both are reviewing rejected PSLF applications for accuracy, and also allow those with the WRONG LOAN TYPE to potentially qualify if they take certain actions.

Here's what both of these fixes do in more depth.

TEPSLF - Help For Wrong Repayment Plan

Temporary Expanded Public Service Loan Forgiveness (TEPSLF) was a program passed by Congress in 2018 that provides $350 million in loan forgiveness funds for borrowers who qualify for the new "expanded" version of PSLF. Basically, TEPSLF allows for non-qualifying repayment plans to now qualify for PSLF.

So, what is the expanded version? Well, if you made payments under the graduated or extended repayment plan, you would have previously been rejected for PSLF. However, TEPSLF now makes those payments qualifying, as long as you meet all other criteria (Direct Loans, Qualifying Employment, 120 payments) AND your last 12 months of payments are equal to or greater than you would have paid under a qualifying income-driven repayment plan.

Sound confusing? The key here is TEPSLF fixes repayment plan disqualifications.

To get approved under TEPSLF, you simply need to switch to a qualifying repayment plan for PSLF (IBR, PAYE, or RePAYE) for the last 12 months of payments before you can be approved for loan forgiveness.

The downside to this program is that it's first-come, first-serve. And the budget is limited to just $350 million. That means you need to act now if you qualify for this program.

To Recap:

• TEPSLF fixes wrong repayment plan issues with PSLF
  
• You must make the last 12 payments under a qualifying repayment plan to qualify
  
• Deadline: when the money runs out (which is TBA as of writing)
  

Biden PSLF Waiver - Help For Wrong Loan Type

President Biden recently announced several PSLF reforms that are being called the "Biden Waiver". These reforms had several aspects, but the two biggest were a review of all rejected PSLF applications (which has been resulting in hundreds or thousands of borrowers getting loan forgiveness), and a new process for old FFEL loans to qualify for PSLF.

There are still about 10 million borrowers in the United States with old Federal Family Education Loans (FFEL). These loans DO NOT qualify under PSLF - only Direct Loans do. As a result, many borrowers have been rejected from PSLF simply due to having the wrong loan type.

President Biden is allowing a waiver for borrowers in this situation to consolidate their student loans into a new Direct Loan, and then apply for PSLF. In this scenario, the Department of Education will now count payments made under the old FFEL loan as long as the current loan is a Direct Loan. This is a huge win for borrowers with FFEL Loans.

To do this, you need to go to StudentAid.gov and consolidate your old FFEL loan by October 31, 2022 to take advantage of this waiver. You must still meet all the other requirements under PSLF - repayment plan, qualifying employment and certifications, and 120 payments.

Another added perk: if you're a teacher, your time period used for Teacher Loan Forgiveness can "double dip" for PSLF - this was previously not allowed.

To Recap:

• The Biden Waiver fixes wrong loan type issues with PSLF
  
• You must consolidate your old FFEL loan into a Direct Loan, then apply for PSLF
  
• Deadline: October 31, 2022
  

Final Thoughts

Navigating these programs can be confusing, and it doesn't help that student loan servicers like Fedloan and Navient have not always been the most helpful. However, these programs to help solve some of the complexity and reasons for rejection are much needed relief for borrowers who may have been misled or simply misinformed.

These programs do have deadlines and restrictions though. It's essential that you take action quickly so that you can get the loan forgiveness you may deserve.