Student Loan News
Today the Department of Education announced that borrowers will not need to recertify their income for existing IDR plans until September 2024 at the earliest (with existing plans expiring in November 2024 at the earliest).
March 2024 or earlier recertification date? The Department of Education may put you in an administrative forbearance to ensure you continue on your current plan. Already recertified? If you payment went up, they’ll revert you back to your old plan. Recertified and your payment went down? You’ll continue on your new plan.
How does it work?
In most cases, this will benefit borrowers who have undergrad loans, worked at a 501(c)(3) nonprofit or in government after undergrad, and then borrowed loans for law school (or another post-grad program).
This could also benefit those who have Perkins or FFEL loans that they haven’t consolidated yet.
What’s the process?
Borrowers must apply to consolidate eligible loans by April 30, 2024 to benefit from the one-time account adjustment. Apply to consolidate after that and the regular PSLF rules will apply (i.e. the new consolidation loan will have a weighted average number of PSLF qualifying payments).
If you have periods of employment you haven’t yet certified–especially those post-undergrad but pre-law school–submit a PSLF Form documenting that time ASAP (and definitely before 4/30/24). If you haven’t submitted a form in a while, you can now fill out, sign, and submit the form entirely online using the PSLF Help Tool and your employer’s email address. Either an HR person or your supervisor are capable of signing your form.
Your new consolidation loan may temporarily have a PSLF payment count of 0. It will be adjusted as described above in 2024. As always, keep your existing records and download your MOHELA PSLF Payment Tracker before the consolidation occurs should any errors happen.
What are the downsides?
Consolidation comes with a couple downsides, like capitalization of any unpaid interest (i.e. your interest being added to your principal balance) and the interest rate on your new loan being a weighted average of the underlying loans, rounded up to the nearest 1/8th percent. Weigh these potential downsides with the possibility of getting to PSLF faster.
The Department of Education has proposed draft regulations regarding student loan cancellation. After the Supreme Court struck down the administration’s more broad-based student debt cancellation plan in summer 2023, the Department is proposing narrower regulations through the negotiated rulemaking process. The draft regulations target four groups of borrowers who could be provided debt relief. Those include: 1) borrowers who have outstanding federal student loan balances that exceed what they originally borrowed; 2) borrowers who have loans that first entered repayment 25 or more years ago; 3) borrowers who took out loans to attend programs that provided insufficient earnings for graduates or have high student loan default rates; and 4) borrowers who are eligible for programs like IDR, PSLF, or closed school discharges but have not yet applied. Stay tuned as the rulemaking process continues.
Some loan servicers have placed borrowers into an administrative forbearance while they process their IDR applications and return them to regular repayment. Thankfully, this administrative forbearance will count toward PSLF. The Department of Education announced that it will count these months toward PSLF, and new PSLF regulations that will be implemented July 1, 2024 also state that administrative forbearances of up to 60 days can count toward PSLF.
Federal student loan payments are back on after a 3.5 year moratorium. To prepare for repayment, review our COVID-19 and your student loans webpage.
Last week, the Department of Education announced the first round of loan cancellations under the IDR account adjustment program, initially announced last spring. So far 804,000 borrowers have been notified that they have a total of $39 billion in federal student loan debt that is being discharged in the coming weeks.
The account adjustment is intended to fix past mistakes by awarded IDR and PSLF forgiveness credit to borrowers who were in repayment status regardless of payment made, loan type, or repayment plan. Borrowers in 12 or more consecutive months of forbearance or 36 or more months of cumulative forbearance are also receiving credit toward PSLF and IDR forgiveness, as are some borrowers with deferments.
More borrowers will continue to see their payment counts updated under these rules throughout 2024.
The Department of Education has announced a new Income-Driven Repayment plan to replace the existing REPAYE plan. The plan is called Saving on a Valuable Education (SAVE) and is the most generous repayment plan yet.
SAVE will increase the amount of protected income from 150% to 225% of the federal poverty standard, reducing the size of borrowers’ monthly payments. The plan will also eliminate unpaid interest accrual; the payment you make will go toward interest, but unpaid interest will not accrue. The plan eliminates the fear of exponential loan growth.
There are other plan benefits, like excluded spousal income for married borrowers who file separately, reduced monthly payments for borrowers with undergraduate loans, and a shorter time to forgiveness for borrowers with low loan amounts. Some of these changes will go into affect in summer 2023, whereas others will take plan in summer 2024.
Borrowers who want to join the SAVE plan should apply for or switch to the REPAYE plan until the SAVE plan application becomes available. Borrowers who are already enrolled in REPAYE will be switched automatically. The PAYE and ICR plans will no longer be available to join after July 1, 2024.
Disappointingly, the Supreme Court struck down Biden’s $10k – $20k debt forgiveness plan this morning.
While the plan is out of the picture for now, there’s some room for hope. The Department of Education is finalizing a new Income-Driven Repayment plan that will reduce monthly payments, prevent unpaid interest accrual, and reduce the time to loan forgiveness for some borrowers. Now is also the ideal time to consolidate your loans if you have any FFEL or Perkins loans that aren’t eligible for PSLF or IDR. Federal student loan borrowers–and those who consolidate their FFEL and Perkins loans by the end of 2023–will be evaluated for the IDR & PSLF account adjustment next year, which could reduce your time to IDR or PSLF forgiveness.
While this particular plan is out of the picture, there are other avenues to broad-based debt cancellation. The Department of Education has already announced its intent to conduct negotiated rulemaking on debt cancellation under the Higher Education Act. You can read more about the Department’s plans here.
Federal student loan borrowers haven’t made payments or had interest accruing in over three years. Finally, the payment and interest pause is coming to an end later this year. In June 2023, the Department of Education clarified that interest on federal student loans will resume accrual in September and payments will resume in October.
To prepare for the resumption of payments, follow these steps:
- Log into studentaid.gov to take an accounting of your loans and review your loan servicer.
- Log into your loan servicer’s account, update your contact information, and reauthorize or set up autopayments.
- Review your payment details and plan. If you’re planning on LRAP and/or PSLF, make sure you’re enrolled in an Income-Driven Repayment plan (see more details below).
- If you need LRAP support, you should apply in August or September. We’ll update you with more details as we learn more about the resumption of repayment.
- Make sure you’re taking action early and not waiting until the last minute. You could miss a payment or end up in an unaffordable payment plan.
- Review your budget and prepare for an increase in expenses now.
- Getting ahold of your loan servicer can be challenging right now. Be patient; you may need to call multiple times or use the live chat feature. If you need to get ahold of your servicer, set aside some time to account for long holds.
- Keep documentation of your payment plan, payments, PSLF and IDR applications, and correspondence with your servicer.
The Department has also announced a three-month grace period for missed payments once payments become due in October. This “safety net” will prevent borrowers who fall behind from getting penalized on their credit reports until 2024, and any prevent delinquent borrowers from falling into default until 2025.
To mark Public Service Recognition Week, the U.S. Department of Education (Department) today announced that, as of the beginning of May 2023, it has approved a total of $42 billion in Public Service Loan Forgiveness (PSLF) for more than 615,000 borrowers since October 2021. This is a result of the temporary PSLF changes made by the Biden-Harris Administration that made it easier for borrowers to reach forgiveness. At the end of the previous Administration, only about 7,000 borrowers had been approved for the PSLF program. Read more about the latest improvements on Department of Education website.
As of Spring 2023, borrowers and their employers can now sign and submit PSLF Forms digitally via DocuSign using the PSLF Help Tool. These updates will, for the first time, let borrowers complete the entire PSLF application process online, and borrowers will no longer need to fax or mail in their application with a wet signature, which will hopefully reduce processing time. In addition, borrowers can now digitally track the status of their PSLF form in the My Activity section of their StudentAid.gov account, where they can see updates such as whether their employer has digitally signed their PSLF form and when their form has been processed.
In April 2022, the Department of Education announced changes that will allow borrowers to reach forgiveness under the Income-Driven Repayment (IDR) plans and Public Service Loan Forgiveness (PSLF) sooner. The Department has continually updated this guidance over time, with changes announced in October 2022 and beyond.
Under the new guidance, borrowers will now receive credit toward PSLF and IDR 20-25 year forgiveness for:
- Any month in which a borrower was in a repayment status, regardless of loan type, repayment plan, or whether payments were partial or late;
- Any month in which loans were in repayment, deferment, or forbearance status prior to consolidation;
- Months while a borrower spent 12+ months of consecutive forbearance;
- Months while a borrower spent 36+ cumulative months in forbearance; and
- Any month spent in deferment prior to 2013 (exception for in-school deferment).
Borrowers who have commercially-held FFEL loans, Perkins loans, or HEAL loans who want to benefit from these changes should apply for Direct Loan Consolidation by the end of 2023.
Borrowers who have 20 – 25 years of qualifying IDR payments, and/or 120 months of qualifying PSLF payments under the new guidelines will start to see their loans forgiven in spring 2023. All other borrowers will see their accounts update in 2024.
On November 1, 2022, the Department of Education announced new regulations governing the Direct Loan program and PSLF that will go into effect on July 1, 2023. The big changes include:
- Unpaid interest will no longer capitalize in when not statutorily required, including when borrowers enter repayment, exit a forbearance, annually after periods of negative amortization under the alternative or ICR plans, when a borrower defaults, and when borrowers on the PAYE or REPAYE plans fail to recertify their income or exit the plans.
- Partial, late, and lump sum payments now qualify for PSLF. Payments can qualify for PSLF if borrowers: pay at least the full scheduled payment amount, or; pay in multiple installments that equal the full scheduled amount, or; pay a lump sum equal to or greater than the scheduled amount in advance of the due date. Borrowers paying in lump sums can now be “pre-paid” up to 12-months in advance or their next IDR annual certification date, whichever is earlier. Previously, payments had to be on-time, made each month, and in the correct amount to qualify, and borrowers who paid more were penalized.
- Full-time employment for PSLF will now be just 30 hours a week. Previously, borrowers had to either meet their employers’ definition of full-time or work 30 hours a week, whichever was greater. Employers can implement this provision before 7/1/23 at their discretion.
- Borrowers must receive a W-2 from a qualifying employer to qualify for PSLF. This is a change from the previous “hired” and “paid by” language.
- Payments can qualify so long as a borrower was employed at any point during the month the payment is credited. Previously, borrowers had to be employed on the exact date they made a payment.
- Borrowers will no longer lose all credit toward PSLF after loan consolidation, but the new consolidation loan will be awarded the number of qualifying payments equal to a weighted average of the loan balances. For instance, if a borrower has 60 qualifying payments on a $20,000 loan and consolidates that loan with $40,000 in loans with no qualifying payments, then the consolidation loan would be assigned 20 qualifying payments. This is a change from the prior rule which would reset all new consolidation loans’ qualifying payments to 0.
- Borrowers in certain deferments and forbearances can receive credit for PSLF. The cancer treatment deferment, economic hardship deferment, military service deferment, post-active-duty student deferment, AmeriCorps forbearance, and National Guard duty forbearance now qualify for PSLF assuming borrowers are working full-time in PSLF-qualifying employment. For all other forbearances and deferments, borrowers can receive credit as part of a new “hold harmless” option. Borrowers will be able to go back and make payments equal to or greater than what they would have paid to count that time toward PSLF.
- For NGOs that are not 501(c)(3)s, employers must have a majority of their full-time equivalent employees be working in one of the following areas: emergency management, civilian service to military personnel, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities or the elderly, public health, public education, public library services, school library, or other school-based services. This is a clarification from the prior “primary purpose” rule the Department used to use when determining whether a non-governmental organization qualified for PSLF.
- Teachers and instructors will be considered full-time employees for PSLF if they are contractually employed at least 8 months over a 12-month period. Non-tenure track faculty will be considered full-time employees for PSLF if: they teach at least 9 credit hours per semester, 6 credit hours per trimester, or 18 credit hours per calendar year, or; if they multiple each credit hour taught by 3.35 hours and that number is 30+, or; if they have 30+ student-contact hours by self-attestation substantiated by the employer.
- Independent contractors can now qualify for PSLF under narrow circumstances. Borrowers working as contracted workers for a qualifying employer in a position or providing services which, under applicable State law, cannot be filled or provided by a direct employee of the qualifying employer, can now qualify for PSLF.
- Borrowers can request reconsideration of their PSLF denial within 90 days of notice.
You can read the final proposed rules here.
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 and fall.
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. Reach out to FedLoan Servicing by mail if you need old records.
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
One of the defining characteristics of Berkeley Law is its public mission. Integral to this goal is supporting our graduates working in public interest after law school. Over the past few years, we’ve made a number of programmatic improvements to our Loan Repayment Assistance Program (LRAP), in addition to increased outreach and communications. Today, we’re pleased to announce our most impactful policy change yet.
Starting October 1, eligible graduates earning up to $120,000 can now receive LRAP support, up from our previous $100,000 income cap. This change means more graduates can now take advantage of LRAP’s support. Additionally, our out-of-pocket contribution formula is changing. Graduates making $80,000 a year receive 100% LRAP support for their income-driven student loan payments, resulting in no out-of-pocket costs. Graduates making over $80,000 and up to $120,000 will now pay just 25% of their income over $80,000 toward their loans out-of-pocket, a reduction from our previous formula requiring a 35% contribution. This change means public interest graduates will now receive more LRAP funding and will need to spend less of their own money on student loan expenses.
With these improvements, Berkeley Law’s LRAP is assuredly the best program of any public institution and now has one of the lowest out-of-pocket contribution formulas of any LRAP, even among private institutions. Our LRAP excels in other ways, too. Compared to other LRAPs, Berkeley Law’s program has broad eligibility requirements that allow anyone working in law-related, public interest employment to qualify for funding. Our LRAP gives participants the flexibility to enter and exit the program at will, allowing graduates to follow their ideal career paths. And Berkeley Law maximizes LRAP support by not considering assets, allowing for dependent deductions, and protecting a limited amount of side job income.
For an overview of all of LRAP’s policies, please read the latest LRAP Handbooks. Should you have any questions, please contact Berkeley Law’s LRAP team at lrap@law.berkeley.edu.
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 the LRAP income cap; 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. 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.