PSLF: What is the issue?

The PSLF Program was established by Congress in 2007. Under this program, if the individual with the loan has worked a minimum of 10 years of full-time work (defined as a minimum of 30 hours per week) for a designated 501c3 nonprofit organization or government entity (state, local, federal, or tribal), AND if student loan payments are made for 120 months (10 years), then all remaining student loan debt is forgiven.

Why do nonprofits care?

This program offers an important benefit for recruiting staff into the nonprofit sector. It is a means for nonprofits to compete, or at least offset, the higher salaries offered in the private sector. Of course, it only works as an incentive if it is made known, both to nonprofits and to potential candidates to work in the nonprofit sector.

What is the current situation with the PSLF Program?

There is currently $1.6 trillion of outstanding student loan debt owed by 44 million individuals — an enormous amount of money owed by a very large portion of the American population of 332 million.

Although launched back in 2007, the program saw very little debt being forgiven during its first 13 years, with only 7,000 individuals having had their loans forgiven. The difficulty with the program has been attributed to a number of factors, including failure of applicants to properly verify their employment at either a nonprofit or governmental entity, having not made all of the required 120 monthly student loan payments on time, and confusion about eligibility.

The situation dramatically changed when the Biden Administration took office in January 2021 and made the program a priority. The program streamlined the application process and may include the Federal Perkins Loan Program and the Federal Family Education Loan to become eligible for forgiveness if consolidated.

Since January 2021, 144,000 borrowers have had their loans forgiven (increasing the number more than 20 times what had been forgiven in the previous 13 years).  This represents in aggregate approximately $8 billion dollars of loans forgiven. 

Additionally, since January 2021, 1.1 million loans have been reclassified bringing these 1.1 million borrowers closer to forgiveness. These numbers will continue to grow as the Department of Education continues to process paperwork and with the expected increased volume of borrowers seeking reclassification of their loans to “forgiveness eligible” as the October 31, 2022 deadline for submitting reclassification approaches.

Are there threats on the horizon to the PSLF Program?

Yes, from time-to-time there have been efforts by various Members of Congress to shut down the program. This is most likely through the congressional appropriations process, where funds for the program could be cut off or “zeroed out.” However, given the strong support of the Biden Administration, as well as the ability of the Administration to veto any effort to reduce student loan forgiveness funds (requiring a 2/3 vote of both houses of Congress to override a veto), the program seems to be secure until at least the end of the current Administration’s term in January 2025.

What can we do now?

In Congress, TNPA is watching and prepared to protect this policy.

For making the most of this incentive to work in the nonprofit sector, the next few months will be critical. The  paperwork to make a current loan eligible for forgiveness must be submitted by October 31, 2022. We encourage our nonprofit members, college counselors, and anyone who has debt to utilize this important program and seek eligibility for loan forgiveness by October 31.