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What changes in student loan forgiveness and am I eligible?

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A student debt forgiveness program with notoriously complex eligibility rules is being overhauled by the Biden administration, aiming to extend debt relief to thousands of officials.

The Department of Education announced Wednesday that it will lift some civil service loan relief rules while it works on permanent improvements through a rule-making process. The action will immediately make 22,000 workers eligible for forgiveness of an estimated $1.7 billion loan, and move more than 500,000 of them closer to debt relief.

Here are some questions and answers about the program and its redesign:

What is the PSLF?

Public Service Loan Forgiveness, known as PSLF, is a program created by Congress in 2007 to encourage more college graduates to pursue careers in public service. He promised that if employees of governments or nonprofit groups made 10 years of monthly payments on their federal student loans, the rest would be forgiven.

It is open to a variety of workers at all levels of government or any nonprofit, from teachers and postal workers to police and military.

But there are additional eligibility rules that were not always obvious to borrowers.

WHO IS ELIGIBLE AND WHO IS NOT?

Under the original rules, borrowers with certain types of loans were ineligible, including those in a now-defunct program that provided federally-backed student loans through banks. These loans, known as Federal Family Education Loans, were the most common when the program was created, and more than 10 million Americans still repay them.

Some reimbursement plans offered by the federal government were also ineligible, and any payments made while billing was halted by forbearance or deferral were not counted toward the required 120 monthly payments. Late payments or payments not paid in full have not been counted.

If borrowers met all the conditions and made 120 payments certified by an eligible employer, they could request cancellation of the rest of their debt.

WHERE IS THE PROBLEM ?

When borrowers started submitting applications in 2017, it became clear that there was widespread confusion. The vast majority of applications were denied, often because the applicants did not have the right type of loan or repayment plan.

Some borrowers said the rules were never clarified, while others said they were misled by loan servicers who work for the federal government.

Despite past attempts to repair the program, the problems persist. To date, only 5,500 borrowers have obtained loans through the program, totaling $453 million in relief.

WHAT IS CHANGED?

For a limited time, the Department of Education said payments that were previously ineligible can now count around the required 120. Borrowers can get credit for these payments if they apply for loan forgiveness before October 31, 2022, and as long as they were working in eligible jobs at the time the payments were made.

But there are two big caveats.

Borrowers with FFEL loans — those issued by banks — must have their student debt consolidated into new loans under the existing federal loan system. This can be done until October 2022. And while all loans taken out directly by students can now be counted, those taken out by parents through the Parent PLUS program remain ineligible.

Along with expanding payment eligibility, the Department of Education is making other changes to address past issues.

Starting next year, federal workers and the military will no longer need to have their employment certified to prove they worked in the public service while making their payments. Instead, the department will automatically track their payments using existing federal data.

The ministry will also create a process to review claims for errors and allow borrowers to appeal decisions.

WHY IS IT TEMPORARY?

To circumvent the program’s rules, the Department of Education invokes the HEROES Act of 2003, a federal law that allows the agency to waive certain rules during a national emergency. The department ties its action to the pandemic, which has been declared a national emergency, but the department has said it will lose that flexibility after October 2022.

Democrats applauded the move, while Republicans said the Biden administration was overstepping its authority. Republicans agree the program needs improvement, but they say it should be done by Congress, not the executive branch.

Groups that represent student borrowers say the changes are long overdue. Seth Frotman, executive director of the Student Borrower Protection Center, said the update is good news for millions of workers.

“For too long, those who give the most to our communities and our country have been pushed around and forced to take on debts that should have been forgiven,” he said in a statement. “The Biden administration is taking a crucial step toward easing this burden for our public service workers.”

AND AFTER?

The Biden administration has committed to making permanent improvements to the PSLF through a federal rulemaking process. Hearings for that process began this week, with the potential to make big changes to student aid programs.

The Department for Education said it was exploring a variety of changes, including possible partnerships with employers, to make it easier for civil servants to apply for loan forgiveness.

However, any changes are unlikely to happen quickly – the rule-making process can be slow and changes can take years to put into effect.