Student Loan News
Taking one of the most significant actions around student debt in a generation, the Biden-Harris Administration announced today a plan to extend the COVID payment pause through December 31, 2022 and provide targeted student debt cancellation to millions of federal student loan borrowers.
Some borrowers will see one-time debt cancellation of up to $10,000 – $20,000. Your eligibility and the amount of forgiveness depends on your income and whether you received a Pell Grant in undergrad.
- Borrowers with incomes under $125,000 (individuals) or under $250,000 (households), who received a Pell Grant in college, and who have federal student loans held by the Department of Education with a remaining loan balance, can receive up to $20,000 in loan forgiveness.
- Borrowers with incomes under $125,000 (individuals) or under $250,000 (households), who did not receive a Pell Grant in college, and who have federal student loans held by the Department of Education with a remaining loan balance, can receive up to $10,000 in loan forgiveness.
The changes apply to borrowers with federally-held undergraduate, graduate, and Parent PLUS loans disbursed by June 30, 2022. All student debt forgiven between December 31, 2020 and January 1, 2026 is not considered federally taxable income, so any debt canceled under the new proposal will not affect your federal tax return. Depending on your state, debt cancellation may be subject to state income taxes.
The Department of Education will use your income from 2020 or 2021. If your income was below the limits for one or both of these years, you will be eligible for forgiveness. For those who are currently in Income-Driven Repayment plans, or recently filled out a FAFSA, the Department of Education may use the income information already on hand. For others, there will be a short application released by early October.
More questions? Visit Federal Student Aid’s debt relief FAQs.
The White House has just released a new PSLF Waiver website aimed at making the changes easier to understand for borrowers and eligible employees. Check out the website to see if you’re eligible, review the explainer documents, and spread the word about the waiver.
The Department of Education announced last week that it will begin transferring PSLF student loan accounts from FedLoan Servicing to MOHELA. The first group of borrowers can expect the transition to occur in early July, with transfers happening through the summer.
Borrowers will receive five notices as their accounts are transferred to prepare for and monitor the transfer. For your PSLF records, make sure you download and save everything from FedLoan Servicing’s website before the transfer, including:
- IDR plan approval letter
- Full payment history details
- PSLF Forms and employment records
- Correspondence with your servicer
As of July 2022, MOHELA is now the servicer accepting and processing new PSLF Forms. Please submit all new PSLF Forms to MOHELA, per the Department of Education’s instructions.
On April 19, the Department of Education announced more changes to IDR and PSLF to “remedy years of administrative failures that effectively denied the promise of loan forgiveness to certain borrowers enrolled in IDR plans.” The fixes will allow for immediate debt cancellation for at least 40,000 borrowers under PSLF and several thousand more borrowers under IDR forgiveness.
The fixes include:
- Ending “forbearance steering,” a practice where loan servicers advised borrowers facing financial difficulties to enter a forbearance instead of lowering their IDR monthly payment. The Department of Education will work with the Consumer Financial Protection Bureau to increase oversight into servicers’ forbearance usage.
- Adjusting payment counts for PSLF and IDR forgiveness for borrowers placed in long-term forbearances for 12+ months at a time or 36+ months cumulatively.
- Adjusting payment counts for IDR forgiveness for all borrowers, counting all payments made toward 20-to-25-year IDR forgiveness regardless of payment plan. Months spent in deferment prior to 2013 will also count toward IDR forgiveness.
- Improving IDR payment counting and tracking by easing rules and including a new IDR payment tracker on the studentaid.gov website starting in 2023.
Continue to watch for more improvements to PSLF and IDR over the coming months.
In October 2021, the Department of Education announced new improvements to the Public Service Loan Forgiveness program to restore the promise of PSLF.
The Dep’t of Ed is calling the new improvement a “Limited Waiver Opportunity.” Made under the Department’s executive authority during an emergency, the waiver will be in place until October 31, 2022. The waiver will allow borrowers to receive PSLF credit for all payments made while working full-time for a PSLF-qualifying employer, regardless of federal loan type or payment plan. This includes loan types and repayment plans that were previously not eligible for PSLF, and payments that were late or not made in the full amount due.
The waiver alone will benefit over 550,000 borrowers. As of February 28, 2022, already over 80,000 borrowers have received PSLF under the new waiver, discharging over $5.6 billion in student debt. Around 60% of borrowers who submit PSLF Forms have ineligible FFEL loans–this waiver will help those borrowers become eligible.
For distilled information about the changes, check out this handy Consumer Protection Guide by the Berkeley Center for Consumer Law and Economic Justice.
FedLoan Servicing, Granite State Management & Resources, and Navient recently announced they will not renew their contracts with the Department of Education. If your loans are managed by one of these servicers, they will be transferred to a different servicer by the end of the year.
If your servicer is FedLoan Servicing, your loans will be transferred to MOHELA. If your servicer is GSMR, your loans will be transferred to Edfinancial. And if your servicer is Navient, your loans will be transferred to Maximus / Aidvantage.
To prepare for the transition:
- Update your contact information now so you can receive emails and letters about the transition to the correct address.
- Download and save everything you can from your loan servicer’s website–payment histories, billing statements, income-driven repayment plan documents, PSLF/Employer Verification Form acceptances and approvals, notices about the federal forbearance, etc.–before the transfer occurs. Keep all of those documents saved for your PSLF records. Some borrowers have had problems after previous transfers, with new loan servicers claiming some payments didn’t count toward PSLF. You’ll want to make sure you have proof of all your payments so you’re able to refute any claims like that if they arise.
- Take note of your loan balance at the time of the transfer. Once your transfer is complete, make sure the loan balance is correct.
- Your existing repayment plan should transfer over with your loans, but make sure your monthly payment amount is correct after the transfer is complete.
Have questions about how to prepare for the transfer or ensure sure your PSLF records are complete? Email us at lrap@law.berkeley.edu.
On August 19, 2021, the Department of Education announced that it was automatically discharging student loan debt for some borrowers with a total and permanent disability (TPD). Borrower identification will occur through a matching program with the Social Security Administration. The discharge is expected to affect over 323,000 borrowers and discharge over $5.8 billion in student debt.
LRAP Updates
Worried about meeting the 3.5 year LRAP deadline? You can now apply to pre-qualify for 120 months of LRAP funding without having to submit an LRAP application.
To pre-qualify, you need to be 1) in greater-than-half time and paid law-related, public interest work making under $100k; 2) be in repayment (not in school, in a grace period, or in a forbearance or deferment (the automatic COVID forbearance doesn’t count)); 3) be enrolled in an income-driven repayment plan; and 4) have a $0 monthly payment.
You must submit both an Employer Verification Form and documentation of your $0 payment to apply.
One of Berkeley Law’s defining characteristics is its public mission and commitment to supporting our students and graduates pursuing careers in public service. Our Loan Repayment Assistance Program is crucial in this regard. We are pleased to announce a programmatic change to Berkeley Law’s Loan Repayment Assistance Program to make it more generous for our graduates. Effective August 1, 2021, LRAP’s out-of-pocket contribution income threshold will increase from $70,000 to $80,000. In short, this change will allow more graduates to receive a greater amount of LRAP support, consistent with Berkeley Law’s commitment to public interest and public service graduates.
Starting August 1, LRAP will cover 100% of all eligible loan payments for LRAP participants with annualized full-time incomes of $80,000 or less. For participants making over $80,000, LRAP assistance will be prorated, with participants expected to make an out-of-pocket contribution equal to 35% of their marginal income above $80,000. As a result, more participants will be able to have 100% of their eligible loan payments covered, and more participants with incomes above $80,000 will be eligible for LRAP support with a smaller out-of-pocket contribution.
To calculate your LRAP eligibility, use our LRAP Calculator.