US Education Department Pauses Processing ofPublic Service Loan ForgivenessApplications

The US Department of Education has paused processing of Public Service Loan Forgiveness applications to transfer accounts from MOHELA to multiple companies. Borrowers can still submit applications, but processing will resume in July 2024, aiming to improve the student-loan repayment system.

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US Education Department Pauses Processing ofPublic Service Loan ForgivenessApplications

US Education Department Pauses Processing ofPublic Service Loan ForgivenessApplications

The US Department of Education has temporarily paused the processing of applications to the Public Service Loan Forgiveness (PSLF) program, effective May 1, 2024. The PSLF program forgives student debt for government and nonprofit workers after 10 years of qualifying payments. The pause is necessary to transfer PSLF accounts from MOHELA, the sole servicer managing the program, to multiple companies.

Why this matters: This pause affects thousands of borrowers who are relying on the PSLF program to manage theirstudent debt, and its successful implementation is crucial for the financial stability of these individuals. The outcome of this transition will also set a precedent for the management of other federal student loan programs, potentially impacting millions of borrowers nationwide.

During this transition period, borrowers can still submit PSLF applications, but they will not be processed until the pause ends, which is expected to be in July 2024. The transition aims to improve the student-loan repayment system and borrower experience. Once the transition is complete, borrowers will be able to check their PSLF status directly through studentaid.gov, rather than through servicers.

It is important to note that payments are still due for borrowers during this period. The Education Department has been working to update borrowers' accounts, and has recently canceled $300 million in student debt for 4,600 PSLF borrowers. This brings the total debt relief to $62.8 billion for 876,000 borrowers.

MOHELA, the current sole servicer for PSLF, requested to transition over a million borrowers to other servicers to provide better service with a lighter load. Federal Student Aid stated,"The Department takes very seriously its responsibility to oversee servicers and ensure borrowers have a smooth and successful repayment experience. "The Education Department has vowed to enforce oversight over servicers to ensure they fulfill their contractual obligations to borrowers.

The PSLF program, created in 2007, has faced criticism for poor communication and errors in tracking payment counts. As part of a larger revamp of the federal student loan system, the Biden administration has broadened the eligibility of the program to streamline debt processing and improve service for borrowers.

Borrowers who qualify for forgiveness during the pause can request a forbearance from their servicer. Any additional payments made will be refunded or applied to their other outstanding federal student loan debt. The Teacher Education Assistance for College and Higher Education (TEACH) Grant program will also be managed directly through Federal Student Aid as part of the transition.

The PSLF servicing transition began on May 1, 2024, and the Education Department expects it to be complete by July 2024. At that point, borrowers will regain access to their PSLF data. Later this fall, the department plans to transition Total and Permanent Disability discharge servicing from Nelnet to StudentAid.gov as well.

While the temporary pause in PSLF processing may inconvenience some borrowers, the Education Department emphasizes that the transition is a necessary step to improve the long-term management of the program and provide better service to those seeking student loan forgiveness through public service. Borrowers are encouraged to stay informed about the transition and continue making payments as scheduled to maintain their progress towards loan forgiveness.

Key Takeaways

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  • US Dept of Education pauses PSLF program processing from May 1, 2024, to July 2024.
  • Borrowers can still submit applications, but they won't be processed until July 2024.
  • Payments are still due during the pause; borrowers can request forbearance if eligible.
  • The transition aims to improve the student-loan repayment system and borrower experience.
  • The Education Dept has canceled $62.8 billion in student debt for 876,000 PSLF borrowers.