(NerdWallet) — Beth Bourdon, an assistant public defender with the Orange County Public Defender’s Office in Orlando, Fla., was used to her student loans not qualifying for relief unlike other federal loans.
She had loans from the Federal Family Educational Loans Program, or FFEL. This is an old type of federal student loan that can be owned by the federal government or a private company. This type of loan generally does not qualify for the benefits of federal direct loans. These benefits include income-contingent repayment, loan forgiveness, or more recently, federal student loan payment pausing.
“When everyone’s student loan payments were put on hold for COVID, mine weren’t put on hold. I paid every month,” explains Bourdon. “When everyone’s interest rate went down to zero, mine didn’t go down.”
She eventually took a break with the help of a temporary waiver for the Civil Service Loan Forgiveness Scheme. The waiver, which includes FFEL loans, counts past payments toward the total needed to cancel debt that otherwise would not have qualified.
Through the waiver, Bourdon had his remaining debt of $57,000 in law cleared.
A dismally successful debt forgiveness program
For years, most borrowers who applied Cancellation of civil service loans were rejected. The approval rate since the program’s inception in 2007 has hovered around 2.4%.
A full debt discharge requires 120 qualifying payments made while working full-time for an eligible employer such as a public school, public hospital, qualified nonprofit, or government. But most borrowers had been floundering, sometimes for years, in their attempts to argue for the payments to be considered for forgiveness.
Following public criticism, the Biden administration made temporary changes to fix some of the flaws in the program’s execution. Hence the PSLF waiver, which offers borrowers the option of receiving credit for past payments that did not meet the program’s strict rules. Since the waiver was implemented in October 2021, federal data shows PSLF approvals through June 2022 have climbed nearly 10%.
A short window of forgiveness
Bourdon had about $75,000 in student loans, including $20,000 in undergraduate debt that she used to attend the University of Central Florida. She had already paid off her undergraduate debt when she learned of the PSLF exemption. That left only her debt to law school — originally about $55,000 — which she had held since 2004 when she earned her Juris Doctor degree at Stetson University College of Law in Gulfport, Florida. .
Bourdon says she posted on Twitter last fall that she was not eligible for a rebate because of the type of federal loans she had taken. In response, she received a direct message regarding the waiver from a member of the Debt Collective, a membership-based, non-profit debtors’ syndicate. Discovering that she could see her debt erased prompted her to apply, not without some trepidation.
“I was really afraid of spoiling something,” says Bourdon. “But I thought, ‘This is the only chance I have and it’s just an open window for a year.’ I didn’t know how long the process was going to take.
She does not recommend applying for the PSLF while working on a first-degree murder trial in another county, as she did. But, the most typical aspect of his application process went like this:
First, Bourdon used federal government policy employer search tool for PSLF, a database of all employers eligible for the benefit. But the PSLF Helper Tool proved temperamental and less friendly to Bumblebee, so she dumped him.
Next, Bourdon called for consolidation, a necessary step for borrowers who don’t have direct loans. However, she says she was afraid to consolidate her debt because of the strict rules of civil service loan forgiveness and income-contingent repayment forgiveness – if you consolidate, your countdown to reset is reset.
Bourdon took the leap in good faith. In the process, she opted to have her loans serviced by the only student loan servicer that handles debt for borrowers seeking PSLF (at the time it was FedLoan Servicing, but those loans are going through in MOHELA by the end of the year).
Finally, she submitted the combined PSLF/employer certification form. She initially had two separate waiver forms due to a job lapse. But her employer’s human resources department sent her back a single form and told her that even though she had split work periods, the federal student aid office would process it on one form.
This turned out to be a mistake.
Bourdon submitted the single request in November 2021. However, in early January 2022, she received a letter stating that she only had one eligible payment under the waiver and that she still had to make 119 additional payments.
“I started to panic,” Bourdon said. She was advised by the Debt Collective to submit two forms to certify her employment which accurately indicated the different periods of employment in the civil service in her history.
Then she waited and checked her account every day.
“Nothing seemed to change. I was getting anxious,” says Bourdon. Then she saw an anticlimactic $1,000 drop in her total balance. “It was like, ‘Oh, thank you so much,'” she said.
On February 15, Bourdon logged into her account and saw that her debt was at zero. But, instead of instant relief, she says she was filled with doubt.
“For a second, I was like, ‘That’s a thing,'” Bourdon said.
But two days later, she had a message on her account, a letter from her repairman confirming that her debt had been cleared.
How to obtain the PSLF exemption
More than 146,000 borrowers have seen a collective $9 billion in debt forgiven thanks to the temporary waiver, according to federal data from June. The average balance discharged through the waiver is $61,408. If your employer qualifies you for the PSLF, you must apply even if previous payments have been declined.
The PSLF waiver counts past payments that were not previously eligible, including:
- Late payments.
- Payments less than total amount due.
- Payments made on the incorrect reimbursement plan.
- Payments made on loans that were not previously eligible, such as FFEL loans or Perkins loans.
- Payments not made during forbearance periods of 12 consecutive months or more.
- Months spent in adjournment, other than academic adjournment, before 2013.
Use the PSLF Helper Tool to search for an eligible employer and generate a form. It has been updated to align with the waiver.
To qualify, borrowers must already have direct loans or consolidate their federal debt into a new direct loan. The consolidation step is essential: borrowers can submit a combined PSLF/employer certification form prior to consolidation, but they must consolidate to be eligible for the forgiveness.
To find out if you are entitled to additional payments and to find out more about the exemption, log on to federal student aid website. Be sure to submit it before the waiver expires on October 31.