What advisors need to know about the Public Service Loan Forgiveness waiver program

By Jason Anderson

An important change has come to the federal Public Service Loan Forgiveness (PSLF) program, but it requires action before the end of October 2022. PSLF was established in 2007 to relieve the burden of student loan debt for borrowers committing to public service, primarily focused on government or nonprofit occupations. Unfortunately, the PSLF program did not live up to initial expectations. Under the original program, applications for forgiveness were rejected at alarmingly high rates, at times reaching as high as 99%.¹

In October 2021, the Department of Education took a step toward fixing PSLF when it announced a temporary waiver program. This presents a unique opportunity for federal student loan borrowers. Advisors should engage with clients on this topic before the waiver ends on October 31, 2022.

Why the waiver matters

PSLF’s original four main requirements for forgiveness included the right loan type, the right repayment plan, full-time work for a qualifying employer, and 120 qualifying payments (which is why PSLF is often referred to as a “10-year program”). There are additional nuances, but these are the four main provisions.

The waiver program temporarily eases some of these initial rules and focuses on employment (full-time for a qualifying employer) and the correct loan type (direct loans through the William D. Ford Federal Direct Loan Program) requirements. The waiver is primarily a retrospective program that seeks to look back and give PSLF credit for payments that would not count under the original program requirements but now qualify under the new waiver program rules.

Three scenarios

Depending on your client’s situation, they may face a few time-sensitive hoops to jump through. The Department of Education outlines three scenarios and next steps for each:

• Scenario 1: Your client has already submitted PSLF paperwork. If your client has direct loans and has already submitted a complete set of PSLF paperwork, their servicer is likely already working on their case. They could get automatic credit for previously unqualifying payments, such as late payments or payments made under an unqualifying repayment plan. Make sure they update any PSLF paperwork if needed, for example, to verify qualifying employment after a job switch.
• Scenario 2: Your client needs to start the PSLF process. This client should first verify what type of student loans they have using their federal student loan dashboard at studentaid.gov. If they only have direct loans and want to pursue PSLF, make sure they fill out paperwork by the October deadline. PSLF forms can be accessed using the PSLF help tool at studentaid.gov/pslf.
• Scenario 3: Your client needs to consolidate. This client logs into their dashboard and has some type of loan outside of the Direct Loan Program. Perhaps they have a Family Federal Education Loan (FFEL) or Perkins Loan. In this case, the client needs to consolidate those loans into a direct loan and fill out PSLF paperwork by the waiver deadline.

To be clear, borrowers just need to have the right loan type (specifically, direct loans) by the end of the waiver program. If a client’s student loan dashboard shows a loan such as an FFEL or Perkins loan, they can consolidate into a direct loan by the deadline to qualify for the waiver benefits (see the action steps for Scenario #3 above).

Help your business while helping your clients

Bottom line: What does this mean for your business? Look at your client list and try to identify anyone who might work for a nonprofit, government entity, or the military. Does that individual have student loan debt? If so, make sure that client receives this information during meetings and through your firm’s various communication channels. After all, this program will not last forever. In the best case, the waiver program is worth thousands of dollars in savings for your client. The worst case is that they do not qualify, but you’ve gained a touch point with your client.

As you might imagine, one of the best references on the waiver program is published by the Department of Education. You can read more about the program here. In fact, the department’s publications on financial aid and student loan topics at studentaid.gov are truly excellent and worth a bookmark in your internet browser of choice. 

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Jason Anderson, CFP®, CPA, CSLP^®, is a lecturer at the University of Kansas School of Business and a doctoral student in personal financial planning at Kansas State University. He owns Gradmetrics LLC, a college and student loan planning firm.

1. Slomovics, M. (2021). “Mitigating the PSLF Disaster: Building a Borrower-Friendly Student Loan Forgiveness Program.” Cornell Law Review. Retrieved March 18, 2022.

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