Biden desires to expand student loan forgiveness for this group of borrowers

The Biden administration has taken a primary step toward expanding a key student loan forgiveness program for public sector employees to an often ignored group of borrowers: early childhood educators.

Public Service Loan Forgiveness is a preferred program that may relieve borrowers of their federal student debt after 10 years of repayment in the event that they work full-time for certain nonprofit or government employers. But because preschool educators are sometimes self-employed or work for small businesses that are not technically nonprofits — regardless that they supply essential services for relatively low wages — they typically don’t qualify for PSLF aid.

“Early childhood educators help young children learn, grow and thrive,” U.S. Assistant Secretary of Education James Kvaal said in a press release last month. “But they are often poorly paid and student debt is a problem. Giving these educators access to Public Service Loan Forgiveness will help us help our youngest children, their families and their communities.”

Here’s what borrowers must know concerning the planned expansion.

PSLF can provide student loan forgiveness to nonprofit and government employees

PSLF, a bipartisan program first created in 2007, allows borrowers to qualify for federal student loan forgiveness after making 120 qualifying payments, which is the equivalent of 10 years. The payments must meet certain eligibility criteria and the borrower should be employed full-time by an eligible employer.

PSLF-eligible employment includes 501(c)(3) nonprofit organizations, which include many groups that provide charitable, educational, or health-related services. Other nonprofit groups may give you the chance to qualify in the event that they engage in certain charitable activities. Most domestic government organizations can also qualify for PSLF, whether or not they are federal, state, local, or tribal. Public schools and personal nonprofit schools are typically PSLF-eligible employers.

But with a number of exceptions, self-employed individuals and employees at small businesses generally don’t qualify for PSLF. This is true even when the person or organization performs special-needs work or provides a public service. And it even applies if the borrower has minimal income.

Biden administration proposes extending student loan forgiveness for early childhood educators

Last month, the Biden administration took step one to increase PSLF advantages to for-profit educators, with the last word goal of giving them the chance to have their student loan forgiven.

“While many borrowers have received relief, under current PSLF program rules, hundreds of thousands of ECE educators, many of whom operate small businesses, are excluded from the program due to their employer’s tax status,” the Department of Education said in a opinion in June. “The workforce in ECE occupations, regardless of employer tax status, is almost entirely made up of women, including a disproportionate number of women of color and immigrants. In addition, the workforce in ECE occupations is among the lowest-paying occupational categories in the country.”

The Department of Education announced it could begin soliciting comments from leading experts within the early childhood education field to assist officials determine “employer eligibility and related considerations for whether for-profit early childhood education employers that provide the services listed in the Act are to be considered eligible employers” under the PSLF.

“Expanding PSLF eligibility to employers of ECE workers, regardless of their employer’s tax status, could potentially enable more than 450,000 ECE workers – about 68,000 in home-based jobs and 390,000 in center-based jobs – to make progress toward PSLF if those workers have federal student loans,” the department said.

The public comment period is 30 days, after which the department can begin drafting recent regulations that might allow people working in ECE under the PSLF program to have their student loans forgiven.

Precedent for expanding student loan forgiveness under PSLF

This wouldn’t be the primary time that the advantages of student loan forgiveness under PSLF have been prolonged to previously excluded groups of borrowers.

Under the Trump administration, the Department of Education issued recent regulations allowing religiously-based work to qualify for PSLF so long as the organization is a 501(c)(3) nonprofit. Previously, religious work was excluded from PSLF eligibility, even when the borrower worked for an otherwise eligible employer.

The Biden administration has enacted additional narrow but significant expansions of PSLF eligibility to incorporate self-employed individuals and employees of for-profit organizations that contract with qualified nonprofit or government organizations, regardless that state law prohibits those organizations from directly hiring employees.

“This occurs mainly in states where the law prohibits the direct hiring of health care workers. Therefore, they enter into contracts with medical associations to provide their services,” the ministry explains in a printed directive.

The Biden administration also modified the definition of “full-time employment” to a mean of 30 hours per week or more, without explicitly requiring the employer to Also considers the borrower to be a full-time worker in line with its own internal definition.

Biden’s student loan forgiveness initiatives face hurdles

Expanding PSLF to early childhood education employees is just not a sure thing and is just in its early stages at this point. Because the regulatory process takes many months, an expansion wouldn’t be finalized or implemented until November. As a result, the end result of the election could determine the fate of this effort to expand PSLF, as former President Donald Trump – and Republicans generally – have expressed hostility to President Biden’s student loan forgiveness initiatives.

The Biden administration also faces legal challenges from Republican-led states looking for to dam the SAVE plan, an income-driven repayment option that may individually result in eventual student loan forgiveness. SAVE can also be not directly a possible component of PSLF, as borrowers typically must repay their student loans under an IDR plan to make qualifying payments for PSLF.

The Department of Education is predicted to release a brand new student loan forgiveness plan later this October, but that plan can also be more likely to run into legal difficulties, so its ultimate fate is uncertain.