October 31 Deadline For Relaxed Student Loan Relief Rules

Time is running out on relaxed student debt relief rules available to many ministry employees. However, even as borrowers scramble to beat an October 31 deadline to take advantage of a waiver on certain Public Service Loan Forgiveness (PSFL) program qualification requirements, the U.S. Department of Education signaled this week that more permanent reforms are coming.

Created in 2007, the PSLF program is intended to support individuals who are serving their communities in the nonprofit and public sectors. Qualifying borrowers can benefit from the elimination of their federal student loan balance if they log a decade of payments while serving in such roles.

While hours spent on some faith-based work — specifically religious instruction, worship services, and proselytizing — were previously excluded from counting towards the PSLF requirements, the Trump administration moved to fix those rules after finding they “discriminate against religious groups” and “likely amount to a substantial burden on those entities' exercise of religion.” A reformed regulation took effect last summer, and the Biden administration has signaled no intention to change course on ministry workers’ PSLF eligibility.

Nevertheless, the PSLF program has been criticized for not fulfilling its promises. The New York Times reported this week that prior to a temporary relaxation of qualification rules last year, only 16,000 applicants had ever received relief. Most came up against red tape roadblocks somewhere in the process.

U.S. Secretary of Education Miguel Cardona told reporters this week, “The idea was simple. Qualifying for forgiveness was not…. As one teacher told me, the system was full of trap doors. If you walk through the wrong one, you're out of luck."

In contrast, since the Education Department began waiving certain PSLF payment and present employer requirements for borrower accounts in good standing, more than 200,000 individuals have received billions of dollars in debt relief. That waiver, however, expires on Monday, October 31.

In the midst of the resulting scramble to meet the deadline, the administration announced that it intends to cement many of the main benefits of the temporary waiver, including its relaxed process for crediting qualifying payments over the course of 120 months. On the other hand, among provisions not continuing will be the current allowance for applications from borrowers who have served in government or nonprofit positions for 10 years but are not currently employed by such an organization.

The new regulations are not expected to take effect before next July, and Education officials are encouraging interested borrowers to be sure still to file before the Monday deadline.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.