Student loan forgiveness for thousands and thousands will resume after major program transition is complete

According to an update from the Department of Education, the Biden administration has resumed processing applications for a key student loan forgiveness program for civil servants.

Millions of borrowers were stuck in limbo for months throughout the servicing transition for the Public Service Loan Forgiveness program. PSLF allows borrowers to qualify for debt forgiveness after making 120 qualifying payments — the equivalent of 10 years — while working for eligible nonprofit or public organizations. MOHELA, one in all the department’s contracted loan servicers, had administered the PSLF program. But as a part of a long-planned transition, the Department of Education moved PSLF servicing from MOHELA to StudentAid.gov and suspended processing throughout the transfer.

More than 900,000 borrowers had student loans forgiven under PSLF before the processing pause began in May. With the transition now complete, PSLF borrowers began seeing qualified payments and receiving approvals for relief last week.

Here’s what borrowers have to know in regards to the updates.

The transition from PSLF payment credit to student loan forgiveness is now complete

Borrowers in search of student loan forgiveness through the PSLF program were in a position to view detailed details about their qualifying payments through their online MOHELA account. The Department of Education and MOHELA update the variety of qualifying PSLF payments after borrowers submit PSLF employment certification forms, allowing them to trace their progress toward eventual student loan forgiveness. In May, nonetheless, borrowers lost access to their PSLF data when the department began transitioning its servicing platform to StudentAid.gov.

As of last week, nonetheless, the transition is complete and borrowers eligible for PSLF can now view their payment information through their StudentAid.gov accounts.

“As of July 1, 2024, the PSLF program has successfully transitioned from the previous specialty service provider and is now fully managed by ED on StudentAid.gov,” said a Department of Education representative To update last week. “You can now see your progress toward PSLF in the ‘My Aid’ section of your dashboard when you log in to StudentAid.gov using your StudentAid.gov account username and password combination (sometimes called an FSA ID). The display will show your loan details, payment history (for PSLF months), and work certification.”

Student loan forgiveness processing for PSLF will resume

The Department of Education can also be resuming processing student loan forgiveness for borrowers who’ve reached the 120 payment threshold for PSLF. Student loan forgiveness processing had been paused throughout the three-month transition period that began in May.

“As we update PSLF payment numbers, we are also working to verify forgiveness approvals,” the update said. When borrowers are approved for his or her student loan forgiveness, “you will first receive a notification from ED that your forgiveness has been approved, followed by a separate notification from your servicer once the discharge is complete.”

It may take as much as 90 days for a borrower’s federal student loans to be forgiven after the variety of payments required for PSLF is updated to 120 or more.

Delays expected in processing student loan forgiveness for PSLF

Advocates had warned that there might be significant delays in processing student loan forgiveness and updating PSLF-qualifying payment numbers once the service transition is complete. While the Education Department’s latest update doesn’t directly address the delays, the announcement suggests officials are focused on tackling a possible backlog of PSLF applications.

“If you met the PSLF requirements for forgiveness before the processing pause that began May 1, 2024, we will prioritize approval of your forgiveness,” the department says. This means borrowers who’re eligible for student loan forgiveness based on qualified payments made during or after May 2024 could have to attend a bit longer for his or her PSLF forms to be processed and their student loan forgiveness to be approved. The department didn’t specify how long the method might take.

Borrowers can request a deferment while student loan forgiveness is being processed

Those who’re currently within the repayment phase but imagine they qualify for student loan forgiveness through PSLF because they’ve made 120 or more qualifying payments can apply for a forbearance. A forbearance application would suspend monthly payments while the loan stays in good standing. However, this could be dangerous because interest would proceed to accrue throughout the forbearance application and the period wouldn’t count toward PSLF if the appliance is ultimately denied.

“If you believe you have reached 120 qualifying payments but the updates are not yet reflected in your StudentAid.gov account, you may contact your federal student loan servicer directly to request a forbearance,” the Department of Education’s updated guidelines state. “However, if your PSLF form does not meet the program requirements and is denied, the forbearance period will not count and any accrued interest may be capitalized (added to the unpaid principal balance of your loan).”

Alternatively, borrowers can proceed making payments while they wait for his or her PSLF application to be processed and student loan forgiveness to eventually be approved. “If you continue to make payments, any overpayments will either be applied to another of your outstanding federal student loans or refunded to you,” the department says. Although the department has issued payment refunds prior to now, the means of actually receiving the refund can sometimes be lengthy.