This article has been updated.
A new bill tabled in the Senate would expand the Public Service Loan Program (PSLF) for members of the military. And it has bipartisan support. Here are the details.
Background to Public Sector Lending (PSLF)
PSLF allows borrowers to use their state loan Student Loans awarded after 120 “qualifying payments”. That is 10 year payments if they are made consecutively, although the payments do not necessarily have to be consecutive. There are three main eligibility criteria that define a qualifying PSLF payment:
- Payments on Direct student loans from the federal government qualify for PSLF. Other government student loan programs, including the Perkins federal loan program and the Family Federal Education Loan (FFEL) program, do not qualify. Unqualified federal loans can be consolidated through the Direct Consolidation Loan Program to effectively convert those loans into a qualified direct loan, although doing so could have serious consequences and should not be done without examining the pros and cons. Private student loans do not qualify for PSLF under any circumstances.
- Payments must be made under one Income-based repayment plan like IBR, PAYMENT, or REPAYMENT. Payments under the standard 10-year plan also qualify, although that would repay the underlying federal loan in full within 10 years. Deferred, deferred and delayed payments do not count as a matter of principle; An exception to this is the currently applicable suspension of the CARES Act for direct federal student loans.
- Payments must be made on time while the borrower is a full-time employee of a public or 501 (c) (3) nonprofit organization. This includes the military and government agencies.
The PSLF program has been plagued by problems since it was launched in 2007. Student Loans Borrowers were not given complete, clear, or accurate information about program requirements, and loan service providers sometimes became Actively misled borrowers. In the past few years, PSLF has had an extremely high rejection rate of 98% or more. More recently, borrowers who applied for student loan waiver under the PSLF program have been with long, frustrating delays, in some cases for six months or more.
New Bipartisan Public Service Loans Act (PSLF)
The new bill, sponsored by Senator Marco Rubio (R-FL) and Maggie Hassan (D-NH), would relax the PSLF’s requirements for military personnel. The bill, referred to as Recognition of Military Service in the PSLF Act, would allow periods of military deferment and deferral to be counted as qualifying months for the 120 “payments” required to receive PSLF. A recent GAO report found that only 124 active military service members were granted student loan waiver under the PSLF program, although over 176,000 people are eligible for relief.
Other sponsors of the bill include Senators Tim Kaine (D-VA), Kevin Cramer (R-ND), Jack Reed (D-RI), Lisa Murkowski (R-AK), and Tammy Duckworth (D-IL). The bill is also supported by Veterans Education Services and Student Veterans of America.
The Military Service Recognition Act in the PSLF Act is the latest attempt to reform the ailing PSLF program. Last month, nearly 100 student loan borrower organizations sent one letter to Education Minister Miguel Cardona, urging him to use the Emergency Pandemic Authorities to conduct an immediate review of the “broken” public loan program and cancel the student loan debt of all student borrowers who completed ten or more years of public service have “Regardless of the type of loan, credit status or repayment schedule of the borrower”. The Biden government has not yet taken any steps to address the issues with PSLF.
“Communities across our country rely on passionate people who are dedicated to public service,” said David Stern, executive director of Equal Justice Works, one of the organizations that signed the letter. “Student loan debt is a huge barrier to accepting relatively poorly paid public services, and PSLF promises forgiveness after 10 years of public service. Hundreds of thousands of people relied on this program only to be rejected. … We believe that our country must deliver on its promise to cancel public servants’ debts after 10 years of service, sacrifices and contributions. “