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Student-loan forgiveness: This major program has only weeks left to apply

When to apply for student loan forgiveness
Application for student loan debt forgiveness to go live this month 03:54

Teachers, government workers and people employed by nonprofits have only days remaining to apply for a one-time waiver that could help them erase or reduce their student debt. 

The so-called "limited Public Service Loan Forgiveness waiver" was designed by the Biden administration last year to fix a major problem with a long-running program designed to ease the college debt of public servants. Under the waiver, public sector workers can apply to receive credit for past repayments that haven't previously qualified for loan relief. 

The deadline for applying for the waiver is October 31 — which means public workers have only about three weeks remaining to secure the relief. 

President Biden's student-loan relief effort, which will erase up to $20,000 in student debt for qualified borrowers, has received significant attention, but there's been less of a spotlight on the administration's efforts to help public servants with their college debt burdens. 

The Public Service Loan Forgiveness program was set up in 2007 with a noble goal: To forgive the student debt of Americans who work in public service jobs — as teachers, government employees or in nonprofits — for at least 10 years. But the program became notorious for its byzantine regulations, as well as misleading guidance from some loan-servicing companies that hampered the ability of many public servants to get relief. 

MoneyWatch: Debt cancellation and inflation 06:09

For instance, a 2018 report from the Government Accountability Office, a government watchdog, found that while 1 million people had applied for the program, only 55 people at that time had actually received debt relief. 

One reason for the dismal results: People who had consolidated their student loans learned that their payments didn't count toward the program, leaving them out of luck.

What does the waiver do?

The waiver reverses some of the restrictions on which types of loans and payments qualify for the program.

The Department of Education says that "any prior period of repayment will count as a qualifying payment, regardless of loan program, repayment plan or whether you made the payment in full or on time." 

For instance, people who consolidated their loans will now be able to count their payments toward the program. The Biden administration estimates this will help 550,000 workers who previously hadn't qualified due to loan consolidation.

Previously, some loan payments were disqualified if they were off by even a penny or paid a day or two late, the Education Department said last year. The waiver means that those payments will now count toward the program.

Still, there is one major type of loan that doesn't qualify for the waiver: Parent PLUS loans. These are loans taken out by parents of students to pay for their children's education. Only loans taken out by students qualify for the waiver.  

How many people have qualified for the waiver so far? 

Almost 190,000 public servants have had their student loans forgiven through the waiver, according to lawmakers citing government data. 

Many more borrowers could qualify for the program, but may not be aware of the waiver.

How do I find out if I qualify?

The Department of Education has a website where you can learn about the program's requirements, which remain complicated. 

One important restriction is that you'll have to have worked for a qualifying employer, such as a public school or government agency, to get approval for the waiver. Only payments that were made while you were working for a qualified employer will count. 

For instance, if you worked as a public school teacher for one year, but then switched to a for-profit school, only the repayments made while you worked for the public school will count toward the loan forgiveness. 

What happens after October 31?

Starting on Nov. 1, 2022, the Department of Education will revert to its regular program requirements for both the Public Service Loan Forgiveness and the Temporary Expanded Public Service Loan Program

The latter was created in 2018 to help people who were mistakenly enrolled in the wrong repayment plan and thus didn't qualify for the Public Service Loan Forgiveness program. 

Could the waiver be extended?

The Department of Education says the waiver will only be available until October 31, but a group of lawmakers are asking the administration for more time.

On Thursday, dozens of lawmakers asked U.S. Education Secretary Miguel Cardona to extend the waiver until July 1, 2023. 

In an October 6 letter to Cardona, the lawmakers, including House Majority Leader Chuck Schumer, a Democrat from New York; and Senator Elizabeth Warren, a Democrat from Massachusetts, asked for more time, noting that the data "indicates that only a fraction of the public servants who are eligible for PSLF have utilized the waiver."

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