Student Loan Relief Fact Sheet

Student Loan Relief Fact Sheet

(Current as of 11-28-2022)

Student borrowing and debt relief initiatives dominate the news in recent weeks.  To assist students, staff members, and families in navigating the plethora of material, the various initiatives are explained and summarized herein to the best of Midland’s understanding. Access https://studentaid.gov for additional detail. As further information and clarification are provided, we will attempt to update this webpage.

Loan repayment pause

Just Announced: The student loan payment pause is extended until the U.S. Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 — payments will resume 60 days after that. The U.S. Department of Education will notify borrowers before payments restart.

Student Loan Debt Cancellation

A federal judge in Texas has struck down the Biden administration’s student debt relief plan. The Department of Justice has already filed an appeal.  In the interim, the U.S. Department of Education is no longer accepting applications for the program, according to the federal student aid website.  If you have already applied, the Department of Education will hold your application.  Watch the news for a final decision. Prepare for repayment on all loans not canceled when the repayment pause ends December 31, 2022. [PSLF and Fresh Start are not impacted by the court challenge.]

• Debt cancellation relief is available for eligible current students and former students who have federally held undergraduate, graduate, and Parent PLUS loans where the first disbursement was on or before June 30, 2022.  Loans held by colleges and lending institutions do not qualify unless they were consolidated into the Federal Direct Loan program. Clarification from the Department of Education indicates that, as of 9-29-2022, borrowers can no longer obtain one-time debt forgiveness by applying to consolidate non-federally held loans into Direct Loans. Applications for consolidation prior to that date appear to be eligible.
• To be eligible, annual income must be below $125,000 for individuals or $250,000 for married couples or heads of household. Borrowers who are dependent students will have eligibility determined based on parental income.
• Students who received a Pell Grant in college and who meet the income threshold will be eligible for up to $20,000 in debt cancellation, capped at the amount of outstanding debt.  (No guidance has thus far been given that further clarifies timing or extent of Pell Grants received.)
• Students who did not receive a Pell Grant in college and who meet the income threshold will be eligible for up to $10,000 in debt cancellation, capped at the amount of outstanding debt.
• The official application to request loan forgiveness is now available at https://studentaid.gov/debt-relief/application. Borrowers could expect relief within four to six weeks after they submit their applications. ED is recommending that borrowers submit the application before November 15 to receive relief before the payment pause ends on December 31, 2022. 
• Eligible borrowers who paid off all or part of their federal student loans since March 13, 2020, will qualify for student loan forgiveness.  Additionally, any amount paid after August 24, 2022, that brings an eligible borrower below the $10,000 or $20,000 threshold will automatically be refunded without the borrower requesting it. Borrowers can request a refund by calling their loan servicers directly, according to the Federal Student Aid website.
• Nearly 8 million borrowers may be eligible to receive debt relief automatically because relevant income data is already available to the U.S. Department of Education.  Borrowers whose income data is not available to the U.S. Department of Education and those who don’t know if income data is available to the U. S. Department of Education should complete an application.
• Per the American Rescue Plan, debt relief received will not be treated as taxable income for federal income tax purposes. Borrowers should check state requirements where they file to determine if the borrower’s state will treat the amount of debt relief received as taxable income for state tax purposes.
• Students, former students, and staff may sign up on StudentAid.gov/debtrelief, the Department of Education subscription page, to learn more as information is available and to be notified when the application is open.

Public Service Loan Forgiveness (PSLF)

• Separate from the loan cancellation program summarized above, the Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on federal student loans after 120 payments for borrowers working full-time for federal, state, Tribal or local government; military; or a qualifying non-profit.
• Temporary changes, ending October 31, 2022, provide flexibility that makes it easier to receive forgiveness by allowing borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF. 
• After the October 31, 2022, deadline, regular PSLF rules will apply (see below).  Borrowers must request PSLF by completing the PSLF form and certifying employment to be considered for loan forgiveness per the regular PSLF rules.
• The Department of Education has proposed regulatory changes to ensure more effective implementation of the PSLF program moving forward.
• Visit PSLF.gov to learn more and apply.  Additional information is available regarding PSLF and loan consolidation at https://studentaid.gov under the Manage Loans dropdown.  You must submit a PSLF form and consolidate your non-Direct federal student loans [Federal Family Education Loan (FFEL), Federal Perkins Loan, Federally Insured Student Loan (FISL), National Defense Student Loan (NDSL), or another type of federal loan that is not a Direct Loan] by October 31, 2022, to qualify for the Limited PSLF Waiver.  Enrollments/applications on or after November 1, 2022, will not be eligible for these temporary changes.  Borrowers should sign up now to meet the deadline. 
• Past periods of repayment will now count whether or not you made a payment, made that payment on time, for the full amount due, or on a qualifying repayment plan.
• Forbearance periods of 12 consecutive months or greater, or 36 cumulative months or greater will count under the waiver.  In fall 2022, ED will begin making account adjustments to include these periods.
• Months spent in deferment before 2013 will count under the waiver.  Additionally, ED will include economic hardship deferment on or after January 1, 2013.  ED will apply these periods of deferment to your account in fall 2022.
• Periods of default and in-school deferment still do not qualify.
• The NEA and AFT are promoting the use of PSLF and also have resources available on their websites for members: nea.org/student-debt-support and aft.org/benefits/summer.

Step 1. Determine the types of loans you have.

• Visit Aid Summary (create an account and/or log in to your existing account in order to view this page).
• Scroll down to the Loan Breakdown section.  View the loans you took out, even those you paid off or consolidated into a new loan.
• Expand “View Loans” and select the “View Loan Details” arrow next to a loan to see the detailed name for that loan. Direct Loans begin with the word “Direct.” Federal Family Education Loan Program loans start with “FFEL.” Perkins Loans include the word “Perkins” in the name. (Parent PLUS loans are not eligible under the limited PSLF waiver.)

Step 2. Act based on the type(s) of loans you have.

• If all your loans are Federal Direct Loans, no consolidation is necessary, but you must still apply for PSLF by completing the PSLF form.
• If you have at least one outstanding Federal Family Education Loan (FFEL), Federal Perkins Loan, Federally Insured Student Loan (FISL), National Defense Student Loan (NDSL), or another type of federal loan that is not a Direct Loan, you must consolidate those loans into a Direct Consolidation Loan at https://studentaid.gov/app/launchconsolidation.action. You can’t receive credit for time in repayment or payments on non-Direct loans if you don’t consolidate by the October 31, 2022, deadline.
• If you have not submitted a PSLF form to MOHELA, do so now. After consolidation, use the PSLF Help Tool to generate a PSLF form to submit to MOHELA (the new PSLF servicer) by October 31, 2022.  Instructions in the PSLF form tell you how to submit the form.  You must use the appropriate Federal Employer Identification Number (EIN).
• If you have had some but not all of your employment certified, or if you previously submitted an ECF or PSLF form and were denied, you must submit a PSLF form to MOHELA, even if FedLoan is currently your servicer.  By October 31, 2022, you must submit at least one PSLF form that is later approved.
• If you took out only Direct Loans or previously consolidated other federal loans into a Direct Loan, and you’ve already submitted an ECF or PSLF form to MOHELA, you may automatically receive credit for prior periods of repayment. Automatic credit will be granted only if the employer listed on your form was determined to be a qualifying employer, but you originally did not receive credit because you (1) didn’t have the right kind of loan, (2) weren’t in the right repayment plan, (3) made the payment late, or (4) did not pay the full amount due.
• When you have consolidated into the Direct Consolidation Loan program–if non-federally held loans existed–and submitted a PSLF form, you will be opted automatically into the waiver. This means that, if you qualify, you will lock in the benefits of the waiver and start accruing credit towards PSLF.
• FSA is working with MOHELA, the PSLF servicer, to make updates to borrower accounts, but these adjustments will not be applied until late fall 2022. Continue to monitor your account on the PSLF servicer borrower portal for any adjustments.

Full-time Employment for All PSLF

You must have worked full-time for a qualifying employer during the calendar month you were also in repayment on your loan.  You can receive credit only for periods of repayment after October 1, 2007, when the PSLF Program began. If you haven’t done so already, you must file a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF form) for any period where you are seeking additional credit toward PSLF.

Which PSLF Requirements Are Waived

Here’s what’s changed and what’s unchanged as of October 6, 2021.

Unchanged Requirements

• Making 120 qualifying payments or the equivalent
• Being employed by government, 501(c)(3) not-for-profit, or other not-for-profit organization that provides a qualifying service*
• Working full time (for PSLF, borrowers are generally considered to work full-time if they meet the employer’s definition of full time or work at least 30 hours per week, whichever is greater)
• Having Direct Loans or consolidating into Direct Consolidation Loans
• Certifying qualifying employment for the periods when credit toward PSLF is requested

*Employment at a for-profit organization does not qualify

Fresh Start Initiatives

• On April 6, 2022, the U.S. Department of Education (ED) announced an initiative called “Fresh Start” to help eligible borrowers in default.
• Fresh Start will continue through one year after the COVID-19 payment pause ends.
• If loans are eligible, borrowers will temporarily regain several student aid and credit reporting benefits and could get out of default and keep the benefits for the long term.
• Some Fresh Start benefits are available now, but other benefits won’t be available until later this year.
• Students eligible for Fresh Start can access federal student aid again and can apply for federal grants and loans if they want to go back to school, which could help borrowers complete unfinished degrees, possibly making it easier to repay loans.
• Most borrowers with Fresh Start eligibility must make long-term payment arrangements with the U. S. Department of Education or their guaranty agency.  Borrowers who do not make payment arrangements will again be subject to default collections one year after the payment pause ends.
• Borrowers who make payment arrangements will be transferred to a non-default loan servicer.
• Collections relief borrowers have gotten during the COVID-19 payment pause will continue during Fresh Start, including the following collections relief:
  • Tax refunds (and child tax credits) will not be withheld.
• Wages will not be garnished.
• Social Security payments (including disability benefits) will not be withheld.
• Collection calls will not be made.

Which loans are eligible?

If borrowers are not sure whether loans qualify, they can call the Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923).  Payment arrangements can be made by contacting the Default Resolution Group, by visiting myeddebt.ed.gov or by contacting the loan holder by phone or in writing.

• Later this year, the Department of Education will begin reporting defaulted loans as “current” rather than “in collections” to credit reporting agencies.
• At that point, borrowers will have the opportunity to get out of default. If they choose to do so, borrowers will get to keep the benefits listed above and receive access to the benefits listed below.
  • Access to Income-Driven Repayment (IDR) Plans
  • Access to Student Loan Forgiveness Programs
  • Access to Short-term Relief (Forbearance and Deferment)
• If borrowers accept new federal student aid or choose to keep the benefits, here’s what will happen:
• The U.S. Department of Education will transfer the borrower’s defaulted loans from the Default Resolution Group (or from a guaranty agency) to a loan servicer.
• They will return those defaulted loans to “in repayment” status.
• They will remove the record of the default from the borrower’s credit report.
• Borrowers will lose access to all the benefits listed above if they don’t act before the Fresh Start period ends.

What do defaulted borrowers need to do?

• The U.S. Department of Education will reach out to eligible defaulted borrowers in the coming months with info about what they need to do.
• In the meantime, a defaulted borrower must make sure the loan holder has the borrower’s most up-to-date contact information so important messages about Fresh Start are not missed.
• Borrowers who don’t know who holds their loan(s) should reach out to the Default Resolution Group.

Proposed Rule to Reduce Monthly Payments Via a New Income-Driven Repayment Plan

The proposed regulations will be published in the Federal Register in coming days, and the public is invited to comment on the draft rule for 30 days, the Department of Education (ED) states. ED intends to issue a final rule—as stated herein or further amended–by November 1, 2022. Unless ED authorizes early implementation, the new plan would be effective as of July 1, 2023.

Proposal as currently stated:

• Borrowers would pay no more than 5% of their discretionary income monthly on undergraduate loans.
• The amount of income that is considered non-discretionary would be raised and protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level would have to make a monthly payment.
• Loan balances would be forgiven after 10 years of payments instead of 20, for loan balances of $12,000 or less.
• A borrower’s unpaid monthly interest would be covered to prevent the loan balance from growing as long as required monthly payments are made—even when the payment is $0 due to low income.
• Starting in the summer of 2023, borrowers who enroll in the new income-driven repayment plan can avoid recertifying income annually by allowing the Department of Education to automatically pull their income information year after year.