$74 Billion In Student Loan Forgiveness Approved As Key Program Faces Several Tests

The Biden administration announced last week that $74 billion in student loan forgiveness has now been approved for borrowers under a key program, offering a borrowers a rare bright spot during what has been a turbulent few months.

The Public Service Loan Forgiveness program crossed a major milestone last week, said administration officials. More than a million borrowers have now received a discharge of their federal student loans under PSLF — a remarkable improvement compared to when President Biden first took office.

“Before President Biden and Vice President Harris entered the White House, the Public Service Loan Forgiveness program was so riddled by dysfunction that just 7,000 Americans ever qualified and countless public servants were trapped making payments on debts that should have been forgiven,” said Secretary of Education Miguel Cardona in a statement last week. “From Day One, the Biden-Harris administration made fixing this broken program a top priority, and today, I’m tremendously proud that over one million teachers, nurses, social workers, veterans, and other public servants have received lifechanging loan forgiveness.”

But PSLF has been facing new challenges, and its ultimate fate could be decided in just a matter of weeks.

Student Loan Forgiveness Under PSLF Has Skyrocketed Under President Biden

The PSLF program was established through bipartisan legislation, signed by President George W. Bush, in 2007. Intended to incentivize employment in underserved and often underpaid nonprofit and public sector jobs, the program allows borrowers to qualify for federal student loan forgiveness after 120 qualifying monthly payments, the equivalent of 10 years.

But for a long time, PSLF was plagued by problems. Complex rules and misinformation led some borrowers onto the wrong repayment plan or into non-qualifying deferment and forbearance periods, causing them to lose progress toward student loan forgiveness. And even for borrowers who were making their payments under the right plan and doing everything right, poor loan servicing practices and inadequate oversight by the Education Department caused many people to lose credit and give up on loan forgiveness altogether. By the time President Biden took office, the program had a 98% denial rate, with only a few thousand borrowers approved over the course of PSLF’s existence.

But the Biden administration took several steps to address PSLF’s shortcomings and improve the program. These included the following:

• The Limited PSLF Waiver temporarily relaxed program rules and allowed borrowers to get loan forgiveness credit for many past periods that would otherwise not have counted toward PSLF. The waiver ended in 2023.
• The IDR Account Adjustment extended many of the benefits of the Limited PLSF Waiver, allowing borrowers who missed the first opportunity to still potentially benefit. The account adjustment is winding down now and is in the process of final implementation.
• New PSLF regulations went into effect last year which relaxed some of the rules for qualifying payments and employment, and ended the practice of loan consolidation erasing a borrower’s loan forgiveness credit.

Taken together, these improvements have yielded very real, tangible results. Approvals for student loan forgiveness under PSLF have now skyrocketed from just a few thousand to more than a million borrowers within the last three years.

Recent Hurdles Are Complicating Student Loan Forgiveness For PSLF Borrowers

But PSLF has hit some turbulence in recent months, just like many other elements of the federal student loan system.

The program recently went through a servicing platform change, which caused widespread disruptions. PSLF had been handled by MOHELA, one of the Education Department’s loan servicing contractors, and before that, FedLoan Servicing. But in the spring, the department initiated a long-planned overhaul which transferred PSLF tracking and servicing from MOHELA to StudentAid.gov. That transfer was completed in July. Processing of PSLF qualifying payment counts and loan forgiveness had been halted for several months during the transition, and borrowers subsequently experienced processing delays due to backlogs. But processing has now resumed and the backlog appears to be getting cleared out, suggesting normal PSLF operations are within sight.

But PSLF borrowers are also facing hurdles due to recent legal challenges involving the SAVE plan. SAVE is a new income-driven repayment plan launched by the Biden administration last year, but the program was blocked in August after a federal appeals court issued an injunction. As a result, millions of borrowers who had enrolled in SAVE are now in a forbearance, which doesn’t count toward loan forgiveness under either IDR plans or PSLF.

PSLF itself is not being challenged in court. But since repaying loans under an IDR plan is typically a required component of PSLF, many borrowers hoping for loan forgiveness through PSLF who were enrolled in SAVE are now being impacted by the litigation. These borrowers have options — such as changing repayment plans or subsequently pursuing PSLF Buyback — but the options are far from ideal.

Student Loan Forgiveness Under PSLF Faces Biggest Test In November

But perhaps the most significant threat facing the PSLF program is upcoming national elections. PSLF was enshrined into law by Congress in 2007, so it can’t simply be eliminated by a new president. But if former President Trump returns to the White House, he could roll back several recent regulatory improvements to PSLF established by the Biden administration (such as the new PSLF Buyback program), and put up other hurdles that could hinder access to loan forgiveness. Trump has criticized the Biden administration’s student loan forgiveness policies on the campaign trail.

If Republicans take full control of Congress and the White House, PSLF could be further at risk. Project 2025, a sweeping conservative policy manifesto, explicitly calls for the repeal of PSLF in this scenario. Such an outcome is by no means guaranteed even if Republicans sweep the November elections, and Trump himself has tried to distance himself from Project 2025. But there would undoubtedly be pressure on GOP lawmakers to make substantial changes to the PSLF program, and possibly repeal it entirely, should they take full control of Washington.

Meanwhile, Vice President Kamala Harris has been outspoken in her support of PSLF and other Biden administration loan forgiveness initiatives. It’s unlikely that PSLF would be in any significant peril under a future Harris administration.