3 Big Student Loan Forgiveness Updates Borrowers Should Know

There have been several important new developments for student borrowers this week as the Biden administration begins to roll out various new student loan forgiveness initiatives. Here’s what you need to know.

Biden administration updates guidelines on applying for student loan forgiveness under temporary waiver

The Department of Education recently updated official guidelines for the PSLF Limited Waiver Initiative, a temporary scheme that relaxes the rules governing the Civil Service Loan Waiver Scheme. The waiver initiative can allow borrowers working in the public service to obtain significant retroactive credit for loan forgiveness for periods that otherwise might not have been taken into account in the 10 years of service required.

The PSLF limited waiver program expires on October 31, 2022, and advocates are growing increasingly concerned about the looming deadline. Many borrowers will need to submit applications or documents to qualify for the waiver. For example, borrowers with FFEL loans must consolidate those loans into a direct consolidation loan to qualify – a process that can take 30-60 days. And borrowers who have not certified their employment by submitting the completed PSLF Employment Certification Forms will also need to do so before the deadline.

The Ministry of Education has since clarified, however, that it is the submission of these application documents before the deadline which is critical – not the Processing of these documents by federal student aid officials.

“If you have FFEL, Perkins, or other types of loans that are not direct loans, your consolidation request must be submitted online through StudentAid.gov before 11:59 p.m. Eastern Time on October 31, 2022, so that you can take advantage of the limited PSLF waiver,” the Department of Education says in updated guidance.

The guidelines also suggest that borrowers “use [online] PSLF Helper Tool before October 31, 2022, to generate a PSLF form that will ultimately be approved” to obtain credit for meeting the deadline. “[We] will keep a record if you complete all the steps in the [online] PSLF Help Tool by October 31, 2022, but you must still print, sign, have your employer(s) sign and submit the PSLF form to MOHELA, the PSLF repairer. Borrowers must submit all required documents before the deadline.

Congress Passes Legislation to Split Joint Spouse Consolidation Loans

Yesterday the House passed the Joint Consolidation Loans Separation Act of 2021, which will allow borrowers who have spousal consolidation loans to separate them.

Spouse consolidation joint loans were offered until 2006. They allowed married borrowers who both had federal student loans to combine their loans into one consolidated loan. Both spouses were then legally responsible for the entire balance.

Spousal consolidation loans, however, have proven to be very problematic. Married borrowers who eventually divorced were still responsible for each other’s federal student loan debt because the joint loan could not be split under federal law. And spousal consolidation loans issued under the FFEL program could not be reconsolidated into a direct consolidation loan, blocking access to major student loan relief programs, including civil service loan forgiveness. (PSLF).

The bill, which already passed the Senate last summer, will allow borrowers with these types of loans to break them, paving the way for direct loan consolidation and access to federal programs. cancellation of student loans that were previously unavailable. The bill is now heading to President Biden’s office for his signature.

The next step is for the Department of Education to implement a procedure for borrowers to request the splitting of these spousal loans. Time is running out, as borrowers wishing to apply for the limited PSLF waiver must do so by October 31, 2022.

Republicans seek to sue Biden administration over student loan forgiveness

The Biden administration is working frantically to roll out the unique new student loan forgiveness initiative that will forgive up to $20,000 in federal student loan debt. The Department of Education estimates that 40 million borrowers in all 50 states will receive student loan forgiveness under the initiative, with up to 20 million becoming completely debt-free.

But Republican lawmakers, right-wing think tanks and attorneys general in red states are actively take steps to pursue legal action against the administration to try to stop the loan forgiveness initiative before it even started.

Earlier this month, a group of Republican governors wrote to President Biden, urging him to reverse course on enacting large-scale student loan forgiveness. “At a time when inflation is skyrocketing…your plan will encourage more student loans, incentivize higher tuition, and drive up inflation even further, negatively impacting all Americans,” they wrote. they wrote, claiming that Biden “lacks authority.” to largely cancel student debt.

But finding a plaintiff who has standing to bring such a lawsuit — that is, a person or entity who suffers a recognizable injury as a result of Biden’s new student loan forgiveness plan — could be tricky. prove difficult. And borrower advocacy groups argue that Biden’s plan rests on a solid legal footing.

The Biden administration has criticized the developments. “Let’s be clear on what they would try to do here,” a White House official said. said to Axios. “The same people who voted for a $2 trillion tax giveaway for the wealthy and got hundreds of thousands of dollars of their own small business debt forgiven would be trying to keep millions of working Americans out of middle class in mountains of debt.”

Still, a lawsuit — which could be filed within weeks if Republicans get a viable plaintiff — could disrupt Biden’s plans. If a federal court issues a nationwide injunction that suspends implementation of the initiative while the legal process unfolds, millions of borrowers could find themselves in limbo.

Further Reading on Student Loans

Millions of student borrowers to get payments back under Biden’s loan forgiveness initiative

When can borrowers expect student loan forgiveness under Biden’s new plan?

Student loan borrowers should note these critical dates for loan cancellation and repayment

Biden’s student loan forgiveness could be taxable in some states

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