Public Service Loan Forgiveness (PSLF) is a program that can allow federal student loan borrowers to get their federal loans forgiven after 120 “qualifying payments.” A qualifying payment is a payment made on a Direct federal student loan under an income-driven repayment plan (or the 10-year Standard repayment plan) while working as a full-time employee for a domestic public or 501(c)(3) nonprofit organization.
Because of the complexity of the Public Service Loan Forgiveness program, and the fact that many student loan servicers did a poor job communicating the program’s requirements, many student loan borrowers thought they were making progress, but were not. If a borrower made a payment on the wrong type of federal loan, or made payments under a non-qualifying repayment plan, they may not be eligible for loan forgiveness.
Congress recently passed a legislative fix to try to address some of these peculiarities. This new program is called Temporary Expanded Public Service Loan Forgiveness, or TEPSLF. TEPSLF is somewhat limited, and it has some serious flaws. But here’s how it works.
Requirements of Temporary Expanded Public Service Loan Forgiveness
- TEPSLF can allow student loan borrowers who made payments on the right type of loan (Direct loans), but under the wrong type of repayment plan, to potentially get those non-qualifying payments to count towards the 120 payments required for loan forgiveness.
- To qualify, borrowers must switch to an income-driven repayment plan for at least the final 12 payments of the program. Or alternatively, they must be making required payments that are at least as high as what they would otherwise have paid under an income-driven repayment plan during at least the last 12 months before applying for loan forgiveness.
- To apply, borrowers must first apply for “regular” Public Service Loan Forgiveness. They will be denied. Borrowers must then appeal that denial via the TEPSLF program.
- Unlike Public Service Loan Forgiveness, Congress set aside a finite amount of money to fund TEPSLF. Borrower eligibility is dependent on funding availability. Since it is still too soon for many borrowers to apply, there is a high degree of uncertainty as to whether borrowers will ultimately be able to get non-qualifying payments to count.
Is TEPSLF Working?
While TEPSLF has worked for some student loan borrowers (including at least one of my own clients), there are growing indications that the program is deeply flawed. The GAO recently issued a report stating that nearly 99% of borrowers applying for TEPSLF have been rejected. This is likely because TEPSLF, like PSLF, has complex, confusing, and poorly-communicated eligibility criteria. Servicers are also doing a poor job helping borrowers navigate the system.
Furthermore, TEPSLF only is addressing one part of the systematic problems with PSLF: borrowers who were on the incorrect repayment plan. TEPSLF does not address borrowers who were making payments on the wrong type of federal loan. A major bill has been filed in the Senate to address that problem, but so far, that bill has not gone anywhere.
Bottom Line for Federal Student Loan Borrowers
For now, federal student loan borrowers should familiarize themselves with the requirements of both PSLF and TEPSLF to determine whether they may be eligible.