October brings first chance, final shot for debt relief programs

For Iowa State employees with student loan debt, October is a big month. 

The U.S. Department of Education on Oct. 17 opened up the process for eligible borrowers to apply to reduce their student loan debt by as much as $20,000. Also, Oct. 31 is the expiration date for temporarily relaxed requirements for a different federal loan relief program that eliminates student debt of public sector employees after a decade of service.

Here's what ISU faculty and staff need to know about the pair of loan relief programs.

New one-time relief

In August, the federal government announced a plan to reduce the student loan balances of borrowers who in either 2020 or 2021 had an annual income of less than $125,000, or $250,000 for spouses filing jointly or a head of household. The relief payments will be up to $10,000 for borrowers who did not receive a Pell Grant in college and up to $20,000 for Pell recipients. 

Most federal student loans are eligible, including all Direct and PLUS loans for parents and graduate students. Loans from discontinued federal financial aid options such as the Perkins and Federal Family Education Loan (FFEL) programs are eligible if the debt is still federally held. Loans that meet the criteria qualify for relief even if they're in default or consolidated.   

An estimated 8 million borrowers will be notified they are approved automatically for the relief because the Education Department already has their recent income data. Most people will need to apply to receive debt relief. Applications for the program will be online-only at first via a form available on the Education Department's program webpage, which also includes additional details and FAQs about one-time relief. The form is designed to be simple, available in English and Spanish, and doesn't require submitting any documents or providing loan account login information. Support is available by calling 833-932-3439.

Applications will be accepted through Dec. 31, 2023. Borrowers should expect to see loan relief applied within about six weeks, which means they should apply right away, by mid-November at the latest, to have relief payments processed before student loan repayments resume in 2023. Loan payments have been suspended since March 2020 due to the COVID-19 pandemic but will begin again in January.

To prepare to apply, log in or create an account at studentaid.gov and confirm that your contact information is accurate. Also make sure that your loan servicer has your updated contact information. To be notified when the application goes live, sign up for an alert.

Waiver ends Oct. 31

Public Service Loan Forgiveness (PSLF) is designed to eliminate federal student loan debt for employees working at least 30 hours a week for the government or certain nonprofits, after they've made 120 months of qualified payments. But in the four years after borrowers were first eligible for forgiveness in 2017, only about 2% of applications -- fewer than 20,000 -- were approved under the program's detailed rules.

In October 2021, the Education Department announced it would waive some of those rules for a year, temporarily making it easier to apply for PSLF. Through July 31, the waiver has paved the way for a wave of PSLF discharges, with nearly 190,000 borrowers successfully using the program -- relieving $12 billion in debt. In Iowa, 2,370 borrowers have received $120.7 million in student debt relief. 

The temporary changes include:

• Counting every month in a repayment plan counts toward the 120-month requirement, even if the borrower paid late, paid less than the amount due or didn't make a payment that month. The nearly three years of student loan payments paused during the pandemic may count toward the 120-month tally.
• Accepting forbearance periods of 12 or more consecutive months, forbearances of 36 or more cumulative months and some deferment periods toward the required 120 months. In-school deferments and months when a loan has been in default will not count.
• Allowing payments made toward federal loans that usually don't count. Under usual PSLF rules, payments made on FFEL and Perkins loans don't contribute to the 120-month mark. Applicants must consolidate them in a Direct Loan first. Under the waiver, pre-consolidation payments toward FFEL and Perkins will get PSLF credit.

The program still requires applicants to certify their employment and consolidate into a Direct Loan before applying.

For more information and FAQs, including how to meet the Oct. 31 deadline even if your application isn't finished and submitted by then, see the Education Department's PSLF waiver webpage.

Editor's note: This story was updated after the application for one-time student loan relief went live Oct. 17.

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• Even with relaxed rules, help is useful for loan forgiveness program, June 23, 2022
• Student loan forgiveness temporarily easier for public workers, Jan. 6, 2022
• New benefit program finds relief for student loan repayment, June 3, 2021