The Biden administration has updated the Public Service Loan Forgiveness Program, aimed at borrowers who took out student loans and then went on to work in jobs connected with public service, including teachers, the military, and firefighters. In its original form, the plan, which dates from 2007, allowed forgiveness after 120 qualifying payments, roughly ten years.
However, the program rules were difficult to understand, and most applications for it were rejected. The PSLF also applies only to federal loans. Borrowers who do not qualify for the PSLF do have other options, including refinancing.
Utilizing student loan refinancing with NaviRefi can reduce interest rates and monthly expenses, in some cases leading to a significant drop in the total amount the individual is required to repay. Eligible borrowers for the PSLF program were offered a year-long initiative known as the Limited PSLF waiver from October 2021, which expanded the parameters of payments that were considered qualifying.
Yes, courts paused the forgiveness plan, but the Biden administration also made changes to the Income-Driven Repayment plan, which reduces monthly payments based on income. As with the PSLF, the IDR Plan Adjustment allowed more payments to be considered qualifying and allowed periods to be qualified toward both programs if all other eligibility factors were in place. These both represent substantial aid for borrowers struggling with student loans, but the large-scale debt forgiveness program has encountered legal challenges.
Under that proposal, individuals with an income under $125,000 and couples with an income under $250,000 would qualify for as much as $10,000 in federal student loan forgiveness and $20,000 for Pell Grant forgiveness. Six states filed lawsuits to stop the plan being put into motion, arguing that it would damage their tax revenue and that it was an improper use of the Higher Education Relief Opportunities for Students Act. A second was filed by two people arguing that the plan would result in their ineligibility for full benefits.
The HEROES Act, which was passed in 2003, gave Congress the ability to make student loan forgiveness easier if there were a national emergency. President Biden did so as part of the nationwide COVID emergency. Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina objected. Both lawsuits will be decided by the Supreme Court.
The updates to the PSLF program have affected more than 600,000 people. On May 8, a press release from the Department of Education noted that it will represent a total in student loan forgiveness of $42 billion. A debt relief program for students stretches back to the Trump administration, which used emergency executive authority to pause payments, hold interest for federal loans and put a stop to collections for people who had defaulted on their loans.
President Trump was the first to use the HEROES Act to sustain the pause, and President Biden followed suit. The Supreme Court is expected to rule in June after hearing arguments in February. Even if the SCOTUS rules against forgiveness, the pause will still be extended for an additional 60 days either after the end of June or a court decision, giving households time to prepare for the potential additional expense.