Senators propose major changes to student loan forgiveness

Two US senators proposed major changes to student loan forgiveness.

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

Student loans

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

  • Get student loan forgiveness faster: Reduce the number of student loan repayments needed to qualify for public loan forgiveness from 120 repayments over 10 years to 60 installments over 5 years;
  • Count more student loan repayments: Allow any the previous period of student loan repayment counts as an eligible 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 Peace Corps volunteer is on duty, whether their student loans were subject to a student loan forbearance or a student loan deferral while in service; and
  • Consolidate student loans again: Allow Parent PLUS loan borrowers and couples who have previously jointly consolidated their Federal FFEL student loans to reconsolidate 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 wanting 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: the proposal would change the landscape

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

Created by Congress in 2007, the Public Service Loan Forgiveness Program grants full federal student loan forgiveness to student borrowers who work for a qualified public service or nonprofit employer. Private loans, however, are not eligible for this student loan forgiveness. Currently, student borrowers must make 120 monthly student loan payments and enroll in an income-based repayment plan such as IBR, PAYE, REPAYE, or ICR. However, in some years the program has been plagued with a 99% rejection rate. The Biden administration has sought to fix the ailing 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, has relaxed requirements for the cancellation of civil service loans. Among other changes:

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

Student borrowers can complete a limited waiver by October 31, 2022 to get credit for all of these changes. Whichever way you choose to repay student loans, know that you have options. With the upcoming restart of student loan repayments, be sure to learn the best ways to save money and free yourself from debt:


Student Loans: Related Reading

Navient agrees to forgive $3.5 million in student loans

Department of Education Announces Major Overhaul of Student Loans Service

How to qualify for $17 billion in student loan forgiveness

Why $50,000 Student Loan Forgiveness Could Still Happen

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