One of the country's largest teacher unions has reached a "landmark settlement" with the Department of Education in the case Weingarten v. Devos over the federal government's failure to carry out the Public Service Loan Forgiveness (PSLF) program, according to a press release.
The lawsuit was filed in July 2019 against then-Secretary of Education Betsy Devos on behalf of eight teachers previously denied PSLF, who acted as plaintiffs in the case. In addition to providing nearly $400,000 in debt relief for the plaintiffs, the agreement will implement concrete guidance on how the Education Department must improve the PSLF program going forward.
In theory, the PSLF program — a bipartisan initiative — was created to reward public servants by discharging the remaining balance of their federal student debt after they made payments on their loans for 10 years. But in practice, just 2% of applications have been approved since the program began. A borrower could be denied PSLF simply because they don't have the right student loans or if they haven't filled out the employment certification form through a qualifying employer.
As a direct result of the settlement, thousands of public servants who were previously rejected for PSLF will have their cases automatically reviewed by the Education Department.
During a press briefing, AFT president Randi Weingarten called the settlement a "redeeming moment" for the Education Department.
Continue below to learn more about how the Weingarten v. Devos settlement will change the PSLF program. If you don't qualify for this student loan forgiveness program, keep reading to consider alternatives like private student loan refinancing. Depending on your personal financial situation, you may qualify for a great refinance rate.
What Weingarten v. Devos means for PSLF
The "historic agreement" reached in Weingarten v. Devos comes just days after the Education Department announced it was significantly overhauling the Public Service Loan Forgiveness program with a limited PSLF waiver, making it temporarily easier for 550,000 borrowers to qualify for student loan relief.
For a limited period of time, PSLF applicants will be able to count previously ineligible loans, including Perkins loans and Federal Family Education Loans (FFEL loans) toward their 120 qualifying student loan payments — as long as they combine their debt into a Direct Consolidation Loan by October 2022.
Weingarten said in a statement that the precedent set forth in the lawsuit settlement "gives muscle and teeth to the Education Department’s reforms to PSLF." Thanks to the settlement, the Department will be responsible for:
- Reconsidering the applications of borrowers who were denied for PSLF or Temporary Expanded Public Service Loan Forgiveness (TEPSLF), upon request.
- Automatically reviewing all applications for PSLF or TEPSLF denied prior to Nov. 2020 submitted within 90 days of the settlement for borrowers who made 120 payments on their Direct Loans.
- Giving borrowers detailed notices outlining why their PSLF or TEPSLF applications were denied.
The written notices will also include the number of remaining PSLF payments until the borrower meets eligibility and information on how to determine qualifying repayment plans through the Direct Loan program, as well as the contact information of an Education Department representative borrowers can speak with if they have questions.
What to do if you're not eligible for PSLF
Recent revisions to PSLF may make it easier for select borrowers to meet the strict eligibility requirements, but this program isn't available to everyone with student loans. The PSLF program is geared toward public servants like teachers, nurses, public defenders and military service members.
Plus, PSLF and other federal debt forgiveness programs won't apply to private loans. Private student loan debt accounts for 8.4% of the outstanding student loan debt, according to the Education Data Initiative.
Refinance your private student loans to a lower rate
Private student loans aren't eligible for PSLF, so these debts won't be discharged even if you do make 120 qualifying payments on your federal Direct Loans. Alternatively, student loan refinancing may be able to help you pay off your loans faster.
Private student loan rates are near all-time lows, according to data from Credible. That makes it a good time to refinance your existing private loans into a new loan with better terms. You may be able to lower your monthly payments, shorten your debt repayment plan and save money on interest over the life of the loan.
A recent Credible analysis found that borrowers who refinanced to a shorter-term loan were able to shorten their loan term by 41 months and save nearly $17,000 in interest. Those who refinanced to a longer-term loan lowered their monthly payments by more than $250 on average.
Research alternative student loan forgiveness programs
PSLF is just one student debt forgiveness program, so you may have alternative options if you don't meet the eligibility requirements. Here are a few:
- Borrower defense to repayment: Borrower defense is a federal debt forgiveness program available to students who went to a school that engaged in misconduct or defrauded them in some way.
- Closed school discharge: If your school closed while you were enrolled or shortly after you withdrew, you may be eligible to have your federal student loan debt discharged.
- Military student loan forgiveness: Active-duty service members may be eligible for up to $65,000 worth of student debt relief, depending on the branch of the military they serve.
This isn't an extensive list of the student loan cancellation programs offered for borrowers in the federal Direct Loan program. For example, there are student debt relief options for teachers, nurses and public defenders. There may be other programs offered based on your specific line of work.
Enroll in additional federal forbearance or income-driven repayment
Federal student loans are in COVID-19 administrative forbearance through January 2022, but not all borrowers will be ready to resume payments by then. In fact, 40% of borrowers said that a longer forbearance period is needed in a recent survey.
If you won't be able to resume your federal loan payments in a few short months, consider applying for unemployment deferment or economic hardship deferment. You may be eligible for up to 36 months of additional forbearance on your federal student loans.
Also consider income-driven repayment plans, which limit your federal student loan payment to about 10-20% of your income, depending on the type of loans you have. The application process is simple, and it's free to enroll on the Federal Student Aid (FSA) website.
You can learn more about student loan repayment plans, forgiveness and refinancing with Credible. Get in touch with an experienced loan officer who can help you decide what's best for your financial situation.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at firstname.lastname@example.org and your question might be answered by Credible in our Money Expert column.