Tens of thousands of U.S. service members are running out of time to potentially save money on their student loans by applying for the federal government's Public Service Loan Forgiveness (PSLF) program amid its new rules, the Consumer Financial Protection Bureau (CFPB) warned in a recent blog post.
An April 2021 report from the U.S. Government Accountability Office (GAO) showed that as of January 2020, more than 176,000 active-duty service members had federal loans that were eligible for the PSLF program. By that time, only 124 of these borrowers had received loan forgiveness. Additionally, about half of the active-duty service members who have federal student loans have balances of more than $13,000, according to the GAO.
The Department of Education expanded the PSLF program in October 2021 to allow more loans to qualify. But the changes are for a limited time only. Under the new rules, any prior payment made by a borrower eligible for the PSLF program will count as a qualifying payment. That's regardless of the loan type, repayment plan or whether the payment was made on time or in full.
Federal Family Education Loan (FFEL) Program loans, Federal Perkins Loans, or other types of federal student loans that are not Direct Loans must be combined into the Direct Loan program by Oct. 31, 2022 in order to qualify for forgiveness under PSLF. Missing the deadline means borrowers risk losing out on thousands of dollars in potential federal student debt credit.
If you have private student loans, then federal relief doesn't apply to you. If you're looking to lower your monthly payments and ease the burden of student loan debt, then you could consider refinancing your student loans. Visit Credible to find your personalized interest rate without affecting your credit score.
CFPB calls on servicers to use all tools available
In the blog post, the CFPB urged student loan servicers to take action, saying they are best positioned to help identify military borrowers and ensure they get the credit for their loan payments that they deserve.
"It is possible that tens of thousands of servicemembers could benefit if they get the right paperwork submitted by the deadline," the CFPB wrote. "But in order to do so, servicemembers must receive the information and support they need from their student loan servicer."
The loan servicers also have the added benefit of knowing which of their borrowers are in the military and are already paid to assist them, the CFPB said.
"Managing student loan debt is a serious issue—these are not trivial amounts of money. Many military borrowers have education loans that exceed the average mortgage for a home in America," the CFPB wrote. "For military borrowers, failing to get their PSLF application approved will force them to pay thousands or tens of thousands of extra dollars on their student loans unnecessarily."
If you have private student loans and aren’t eligible for federal forgiveness programs, you could consider refinancing to lower your monthly payments. Visit Credible to compare multiple student lenders at once and choose the one with the best interest rate for you.
Biden says he’ll make decision on student debt
Federal student loans are currently in COVID-related forbearance and payments have been paused until Aug. 31. During this time, borrowers are not required to make payments on their loans and interest rates have been set to 0%. The Department of Education has also stopped collections on defaulted loans.
President Joe Biden confirmed that he would decide on student debt by the end of August, although it wasn’t clear if he was referring to widespread student loan forgiveness or an extension to the student loan payment pause. Biden has previously indicated that he's considering canceling some student debt, though not the $50,000 debt reduction that some Democrats have called for.
More than half of Americans (55%) said they would support forgiving up to $10,000 in federal student debt per borrower, according to a recent survey from NPR/Ipsos. Howver, that support wavered when talking about higher amounts of debt forgiveness. Just 47% of Americans said they supported forgiving up to $50,000 in student loans and 41% said they supported forgiving all federal student loan debt.
If you are trying to pay down your private student loans, refinancing could help you lower your interest rate and reduce your monthly payment. To see if this is the right option for you contact Credible to speak to a student loan expert and get all of your questions answered.
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