What employers need to know about the Public Service Loan Forgiveness waiver

The Public Service Loan Forgiveness (PSLF) Limited Waiver is working: More than 90% of all forgiveness granted has come through its expanded eligibility, with the US Department of Education granting more than $10 billion in debt relief to more than 175,000 student loan borrowers, according to the DOE.

It was disappointing, then, that the waiver was not extended as part of the Biden Administration’s sweeping actions around student loan debt last month, including forgiving thousands in loans for millions of borrowers. And even though HR leaders and their employees are left scratching their heads at the timing (extensions have practically become par for the course in our space), the good news is that many more individuals are aware of PSLF. Couple employee awareness and interest with employer support, and you have a recipe for forgiveness!

Despite the program’s efficacy, just 15% of eligible borrowers have even applied for the waiver, and we regularly hear from borrowers who don’t even know that they are eligible — many think the program is only for teachers, for instance, when the program really exists for a much broader set of the population working in public service.

As the October 31 expiration quickly approaches, it’s essential that borrowers work to get their applications in beforehand. From there, we should plan for the eventual wind-down of the waiver. In both instances, it’s crucial that employers recognize the ways in which they are uniquely poised to support these borrowers through resources and technology. HR leaders and their broker partners are fielding PSLF inbound left and right from employees already, from policy questions to signing employer certification forms. In fact, many leaders we connect with are in a plug-the-holes situation with PSLF. Luckily, when the right technology is applied to this broken system, doing less can actually mean doing more. More impact, more bandwidth for other wellbeing areas and more policy guidance without pulling nights and weekends on the Federal Student Aid website.

The PSLF wasn’t always a public service

While PSLF appeared to be a straightforward benefit for those who worked in the public sector and paid back their loans for 10 years, getting the rest forgiven tax-free was easier said than done. The pre-waiver days of PSLF were notorious for its 98% rejection rate.

Related: Student loan repayment pause extended to May 2022

Fortunately, the Department of Education recognized that the PSLF was an “important — but largely unmet — promise to provide debt relief to support the teachers, nurses, firefighters and others serving their communities through hard work that is essential to our country’s success.”

With the aim of further removing the burden of student debt on public service professionals, the PSLF Limited Waiver counted payments from all federal loan programs and repayment plans toward loan forgiveness while removing the requirement that borrowers still needed to be working full time in public service at the time they received loan forgiveness. Technicalities such as overpayments and underpayments — which previously did not count towards the program if they weren’t made in precise amounts on exact dates — were also removed to make the PSLF stronger and less complicated, and active duty military service was added.

The news of the updates was positive and promising; however, while there has been ongoing talk about longer-term changes to the program, nothing has been announced or implemented to date.

How can employers support eligible borrowers now and in the future?

With about 85% of eligible borrowers yet to apply for the waiver, it’s time to act.

Borrowers who have made 120 full monthly payments while working at a qualifying employer after October 1, 2007, when the PSLF program was launched, should be eligible for the Public Service Loan Forgiveness waiver through the all-too-scary Halloween deadline.

I always stress to HR leads that after the waiver expires, PSLF is still the best deal going for employers seeking a high ROI financial wellbeing activity. And with digital solutions like Summer that automate all aspects of PSLF enrollment, that ROI is realized faster with less administrative burden. Either as part of 2023 planning or a quick win before the year wraps, the biggest risk I see is inaction, which can mean different things for different employers.

There are operational hurdles to be on the lookout for as well. As the waiver deadline swiftly approaches, we are seeing student loan borrowers come up against massive operational challenges. The switch from FedLoan to MOHELA during the recent waiver period led to a wealth of confusion and inefficiencies. FedLoan continues to incorrectly reject borrowers while MOHELA is not equipped to handle the incoming volume of requests. Their phone lines are consistently down and, when they are working, borrowers often receive incorrect information, not to mention the scam Twitter accounts trying to access private borrower data. Likewise, it is currently taking upwards of four months for a borrower to get a response on a PSLF form, so many of them won’t even know if they have been accepted or rejected before the waiver period concludes.

For now though, the forgiveness application is still live and student loan borrowers have the opportunity for real loan forgiveness with fewer complications and more successful outcomes.

Bridget Haile is Vice President of Operations at Summer.