Lawmakers propose bill to give public workers ‘second chance’ at student loan relief

Editor’s Note: This story has been updated to correct the state that the lawmakers represent.

(NEXSTAR) – A pair of New Jersey lawmakers have introduced a new bill that would make it easier for some previously ineligible public workers to qualify for loan relief under a federal program. This is the latest attempt to make changes to the 15-year-old program as Americans await a decision on widespread student loan forgiveness by the Biden administration.

Senator Bob Menendez and Representative Donald Norcross, both Democrats from New Jersey, introduced the “Second Chance at Public Service Loan Forgiveness Act” on Thursday. The bill proposes fixing “long-standing problems” with the Public Service Loan Forgiveness program, or PSLF, and allowing “millions of previously ineligible public servants” the chance to have their loans forgiven.

PSLF was created in 2007 to help certain workers in the public sector have their loans forgiven after 120 payments over 10 years. The number of applicants actually having their loans forgiven has been low: Just 1 in 5 of the 1.3 million borrowers pursuing debt discharge through PSLF are on track to see relief by 2026, according to a September report by the Student Borrower Protection Center.

In 2021, the U.S. Department of Education announced a change that temporarily waives specific PSLF requirements to grant borrowers credit toward loan cancellation regardless of their federal loan type or if they had been enrolled in a specific payment plan, as long as they consolidated their debt into a Direct Loan before the end of the waiver.

Prior to the waiver, borrowers needed to have a specific federal loan — a Direct Loan — to qualify for PSLF. Borrowers could consolidate their debt into Direct Loans for PSLF, but any payments made on the loans before consolidation didn’t count toward the required tally.

This waiver is currently set to expire after October 31, 2022, meaning eligible borrowers have less than four months to apply. 

The newly proposed bill calls for the provisions in the PSLF waiver to be codified and for issues raised by borrowers and advocacy groups to be tackled. That includes allowing public servants with loans or public service before the program was created to qualify for relief, replacing the 120-payments requirement with 10 years of public service, ensuring Parent PLUS Loans qualify, expanding eligibility to those working 30 hours a week, and providing additional definitions of public service employment.

The act would also allow for teachers to qualify for both PSLF and the Teacher Loan Forgiveness Program simultaneously.

Last week, Rep. Joe Courtney (D-Conn.) introduced a similar bill to make it easier for public workers to have their student loans forgiven. The proposal includes cutting the amount of time it takes to get relief in half by reducing the number of payments needed to qualify for PSLF relief from 120 over 10 years to 60 over five years for borrowers working with an eligible employer. It would also allow previous payments made to count toward the necessary payments, regardless of loan type, payment plan, or if the payments were made on time.

Courtney’s bill would expand PSLF access for active-duty military and Peace Corp volunteers who had their loans placed in deferment while they were serving. Currently, certain loan deferments are not eligible for PSLF relief.

Additionally, under Courtney’s bill, parents with PLUS loans — otherwise known as Parent Loan for Undergraduate Students — or couples who joint-consolidated their loans into a Federal Family Education Loan, or FFEL, would be allowed to re-consolidated their loans into a Direct Loan, which would then be eligible for PSLF.

Earlier this month, the Biden administration proposed sweeping changes to the federal student loan system, including a permanent change to PSLF that would allow more payments to qualify for the program, including partial, lump-sum and late payments. It also would allow particular kinds of deferments and forbearances to count toward PSLF, and it would create a formal reconsideration process for applicants who were denied access to the program.

President Biden, when questioned about student loans on Wednesday, said he would make a decision “by the end of August.” The current payment pause on federal student loans is set to expire on August 31.