New options for student loan forgiveness

Experts, for example, counsel borrowers who can afford it to keep paying their loans during the pause, since they’ll save on interest. The government is also fully canceling billions of

dollars worth of federal loans held by people who are permanently disabled or who were defrauded by institutions that misled them or closed before they got their degrees, such as ITT

Technical Institutes and Westwood College. These so-called borrower-defense-to-repayment claims had been limited previously. One of the most promising routes to reducing federal student

loan debt is a program known as public service loan forgiveness, or PSLF, which was designed to encourage people to take public service jobs, such as being a teacher or a first responder, in

exchange for having their remaining debt wiped out after making 120 consecutive payments. In practice, however, as of last year, only 16,000 applicants had had any of their debt forgiven

during the program’s more than a decade in existence. That was a tiny fraction of the number who applied, and due not only to indecipherable rules but to documented errors by loan servicers.

The Biden administration in October relaxed certain requirements for PSLF, qualifying 70,000 more borrowers for relief from remaining loans worth nearly $5 billion. It’s still a complex

process — there were 391,000 applications, but 8 out of 10 applicants hadn’t yet made the required 120 payments — and the widened eligibility also has a time limit: It ends in October.

PARENT PLUS LOANS Many over-50s who have student loan debt borrowed for their kids through Parent PLUS. In addition to having worked in public service, to qualify for PSLF, they have to

first consolidate their loans (it’s free, and can be done on the federal student loan website) into an income-contingent repayment plan. “You need to know about the program, and you need to

know that you have to consolidate,” says Winston Berkman-Breen, deputy director of advocacy and policy counsel at the Student Borrower Protection Center. “You have to be in the right

repayment plan, have the right loan type and be in qualifying public service work.” Before October, consolidating a loan would reset the clock on those 120 required repayments; for now, and

until October, it won’t. (Even if the consolidated loan is rejected for PSLF, switching to income-contingent repayments can reduce the monthly balance for people with low incomes.) If all

that seems like superfluous paperwork, it pretty much is. That’s because holders of Parent PLUS loans “are one of the most neglected categories of borrowers,” says Whitney Barkley, senior

policy counsel at the Center for Responsible Lending. “We don’t even think about them when we talk about things like income-driven loan forgiveness and other ways that other borrowers get

help.”