A letter to federal student loan servicers includes best practices to ensure borrowers and applicants in the Public Student Loan Forgiveness Program understand their options before a waiver on loan forgiveness ends in October.
08/08/2022 11:15 A.M.
2.5 minute read
The New York State Department of Financial Services (NYDFS) is urging federal student loan servicers to adopt best practices to increase awareness about the Public Service Loan Forgiveness (PSLF) Program before waived rules that make it easier to have loans forgiven expire on Oct. 31, 2022.
“As the primary contact for borrowers, student loan servicers are in the best position to ensure eligible individuals are made aware of and apply for the PSLF program, particularly during this critical period when borrowers can receive credit for past periods of repayment under the waived rules,” said NYDFS Superintendent Adrienne Harris.
Through the federal PSLF Program, full-time government and certain non-profit employees may be eligible to have federal Direct Loans forgiven after making 120 qualifying monthly payments, according to a news release from the NYDFS.
In 2007, Congress enacted legislation to provide loan cancellation for borrowers working in an eligible public service job. For public service employees with Direct Loans, PSLF cancels the remaining balance on those loans after they make 120 loan payments while working for a qualifying employer, ACA International previously reported.
In October 2021, the Department of Education and Biden administration announced the PSLF waiver, which extended benefits to borrowers who had previously been shut out of the program—including due to not getting the information they needed about how they could become eligible for PSLF.
Under the waiver, any past payment on a federal student loan by a borrower working in public service can count toward PSLF, regardless of payment plan, loan type or whether the payment was made in full or on-time. This includes payments made through the Federal Family Education Loan (FFEL) and Federal Perkins Loan Programs, which did not previously count under the old PSLF rules.
In order to benefit under the waiver, many borrowers will need their student loan servicer to take action by consolidating their loans, filing a PSLF application, or both, before the waiver ends on Oct. 31, 2022.
In March, the Consumer Financial Protection Bureau issued a compliance bulletin and policy guidance detailing student loan servicers’ obligation to halt unlawful conduct regarding borrowers’ eligibility and benefits under the PSLF waiver.
PSLF Best Practices
The NYDFS letter encourages federal student loan servicers to adopt eight best practices to promote awareness of the potential benefits of the PSLF Program and waived rules in effect, according to the NYDFS news release. The best practices include enhanced trainings for customer service staff, proactive communications with borrowers, and increased promotion of the PSLF program on servicer websites and on borrower account pages.
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