Public Service Loan Forgiveness is a great concept that suffers from terrible implementation. On the surface it sounds straightforward enough: Work 10 years in the public or non-profit sector, make payments on your student loan for those 10 years, and any balance remaining is forgiven. In theory, loan forgiveness after 10 years would make it possible for individuals to pursue public sector careers that, despite lower pay rates, still require college and often advanced degrees: teachers, military service members, social workers, public defenders, nurses and many similar career paths.

In practice, PSLF's qualifying criteria have served as a barrier that often prevented eligible borrowers from gaining relief. On the surface, they seem pretty straightforward:

• Make 120 qualifying payments (12 monthly payments for 10 years)

• On a qualifying loan

• In a qualifying repayment program

In practice, many eligible borrowers found that payments weren't counted or their loan or repayment plan didn't qualify. Loan forgiveness requires a borrower to have a direct student loan and to be enrolled in an income-based repayment program. Furthermore, "qualifying payments" had to be made in the exact payment amount, which can be difficult when one's income needs to be recertified each year in order to calculate the correct payment. It is not unusual for an otherwise eligible person to have 10% or less of the payments they've made actually count towards loan forgiveness. In fact, as of Oct., 2021, a mere 16,000 borrowers had received loan forgiveness through the PSLF program-- only about 1% of applications.

Fortunately, the Department of Education has a plan to rectify this, the Public Service Loan Forgiveness Temporary Waiver. The waiver removes some of the administrative barriers to loan forgiveness, opening a path for hundreds of thousands of borrowers to receive forgiveness. Borrowers still need to make (or have made) 120 payments while employed in the public or non-profit sector. The waiver addresses the two other issues: repayment programs and loan types, plus a few additional administrative issues.

Specifically, the waiver counts all prior payments made while engaged in qualifying (public sector or nonprofit) employment, regardless of loan type or repayment program. Previously, only payments made on direct loans in income-based payment programs counted. With approximately 60% of outstanding loans being from the FFEL program and less than half of borrowers in income-based repayment programs, counting these payments dramatically increases the pool of borrowers eligible for loan forgiveness.

In addition, several administrative issues that have disqualified past payments-- for example, payments that were off by a few pennies or a couple of days-- have been rectified so that those payments now qualify. One bizarre issue has prevented many military servicemembers from receiving loan forgiveness: military servicemembers are allowed to put their loans in forbearance when they are deployed for active duty. However, those periods of forbearance have not counted towards repayment. The waiver allows active duty forbearance periods, including those that have already happened, to count towards forgiveness.

There is one important criterium for forgiveness: The Department of Education can only forgive the loans it holds, which means that it can only forgive direct loans. Any borrower with a FFEL loan must consolidate that loan into a Direct Consolidation Loan in order to apply for forgiveness. If you have federal student loans on which you've had to make payments for the past several years during the pandemic forbearance period, you have FFEL loans and need to consolidate them. If your loans have not required payment since March 2020, then they are direct loans and eligible for the waiver as-is. If you're unsure of your loan type, or have multiple loan types, go to StudentAid.gov/aid-summary/ and scroll down to the Loan Breakdown section to see what you have.

How do you take advantage of the waiver program and get loans forgiven? The waiver application and full details on the program are available at StudentAid.gov/PSLFwaiver. It is available through Oct. 31, 2022, but with loan payments scheduled to restart in May of this year, acting quickly will save you some money and hassle. And if you need to consolidate your loans, you'll want to start that process ASAP. Remember, too, that parent PLUS loans are also eligible for PSLF if the parent borrower is employed in the public or nonprofit sector; however, those loans need to be consolidated to Direct Consolidation loans to be eligible.

For those wondering why any loans should be forgiven, I'd remind you of the debt trap that is income-based repayment. IBR has been a requirement for PSLF, and the end result is often that a person has more than repaid their loans by the time they get forgiveness. In IBR, payments are based on a portion of the borrower's discretionary income, either 10%, 15% or 20% depending on the program. Because the loan isn't fully amortized with principal and interest paid in each payment, and interest rates border on usurious (7% or higher is typical, and federal loans cannot be refinanced except to private loans), many borrowers see their loan balances grow over time despite making payments. For example, if you borrowed $80,000 for graduate school with a 7% interest rate, your annual interest cost is $5,600. If your first year's income-based payment were $350 per month, your loan balance would grow by $1400 by the end of the year due to the unpaid interest. Suppose your payment increased by 5% each year as your salary grew. After 6 years, you would have paid almost $30,000 towards your loan, but your balance would be over $85,000 due to accrued interest. In year 7, you would finally start paying more than the interest amount, but those excess payments would go towards the unpaid interest. You're still not paying principal, and in fact after 10 years and about $53,000 in payments, you'd owe almost $90,000. Extend that out by another five years, since forgiveness has been nearly impossible, and the borrower would have paid more than $90,000 and still owe about the same amount as they did when they finished their degree.