Personal finance

What borrowers need to know as the Public Service Loan Forgiveness program goes on a partial processing pause

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The popular Public Service Loan Forgiveness program began a partial processing pause on May 1, which will likely run through July, the U.S. Department of Education recently said.

The temporary suspension comes as the Biden administration overhauls the once-troubled federal student loan program.

Here’s what borrowers should know.

Why the pause is happening

The PSLF program, signed into law by President George W. Bush in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of on-time payments.

However, the program has been plagued by problems, making people who actually get the relief a rarity.

Borrowers often believe they’re paying their way to loan cancellation only to discover at some point in the process that they don’t qualify, usually for confusing technical reasons. Lenders have been blamed for misleading borrowers and botching their timelines.

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The Biden administration has been trying to reform the program. As part of that overhaul, it is changing how loan servicing works for public servants, and some of the customer service will soon be handled by the government itself.

“After the improvements, PSLF borrowers will have all of their PSLF information centralized on StudentAid.gov so that the Department can provide real-time and more accurate information on payment counts and form processing,” the Education Department wrote in a recent blog post.

Previously, only one company managed the servicing for PSLF borrowers on behalf of the government: first, FedLoan, and more recently, Mohela, or the Missouri Higher Education Loan Authority. Going forward, a number of different companies will service the accounts, along with the Education Department.

What borrowers can expect during the transition

The Education Department will not review PSLF form submissions for roughly a two-month period, it says. (The exact dates will depend on how long the changes take place to complete.)

Meanwhile, from May 1 through July, it says, “borrowers will not be able to see their PSLF payment counts on MOHELA’s website.”

“During the transition, PSLF forgiveness will be suspended,” said higher education expert Mark Kantrowitz.

Borrowers will be able to continue making their loan payments, and these months will count on their timeline to loan forgiveness. Borrowers should also be able to submit a form to certify public service employment and to apply for loan forgiveness if they are at the 10-year mark.

“Forms will be reviewed as soon as the transition is complete,” the Education Department says.

If you qualify for debt cancellation during the transition, you can request a forbearance from your servicer in the meantime, it says, adding that any overpayments should be refunded.

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