A lot of people look forward to spring. But Stanley Merritt is dreading it, because the pandemic pause in repayments for federal student loans is scheduled to end soon — possibly as soon as May 1. And when the bills resume, they’ll be more than he can now afford from his pension and his wife’s Social Security disability benefits, whose buying power is being battered by inflation. He’s already cutting back on other expenses, such as cable TV and groceries, and planning to tap into retirement savings.
The payment pause “has been a huge help,” says Merritt, 59, who borrowed to help send his son to college. But having to resume repayments “will make a bad situation worse.”
There has seldom been so much change and confusion around the rules that govern student loans. That suspension of repayments has repeatedly come close to ending, only to be extended. Some requirements around debt forgiveness have been relaxed.
At the same time, many of the private companies with which the government contracts to service the loans are getting out of the business, handing off exasperated borrowers from one company to another. “People don’t know where to go when problems arise or they have questions,” says Kyra Taylor, an attorney who focuses on student loans for the National Consumer Law Center. “It becomes a maze to figure out who’s eligible for what.”
All of this is happening against the backdrop of a debate in Congress over whether outstanding student loans should be forgiven altogether.
“I’ve been through my share of upheaval, whether it be economic or because of a disaster, and this is the craziest time I’ve been through,” says Betsy Mayotte, president of the Institute of Student Loan Advisors. “There are just a lot of balls in the air.”
But amid all the turmoil, there are also opportunities for people to save money or have their remaining debts forgiven, if they’re determined and persistent and meet a myriad of conditions. That includes the estimated 8.4 million student loan holders who are 50 and older, who the Federal Reserve says owe a combined $358.1 billion — or an average of $42,630 each — a fifth of the $1.58 trillion in student loan debt held by all Americans.
Experts, for example, counsel borrowers who can afford it to keep paying their loans during the pause, since they’ll save on interest. The government is also fully canceling billions of dollars worth of federal loans held by people who are permanently disabled or who were defrauded by institutions that misled them or closed before they got their degrees, such as ITT Technical Institutes and Westwood College. These so-called borrower-defense-to-repayment claims had been limited previously.
One of the most promising routes to reducing federal student loan debt is a program known as public service loan forgiveness, or PSLF, which was designed to encourage people to take public service jobs, such as being a teacher or a first responder, in exchange for having their remaining debt wiped out after making 120 consecutive payments. In practice, however, as of last year, only 16,000 applicants had had any of their debt forgiven during the program’s more than a decade in existence. That was a tiny fraction of the number who applied, and due not only to indecipherable rules but to documented errors by loan servicers.
The Biden administration in October relaxed certain requirements for PSLF, qualifying 70,000 more borrowers for relief from remaining loans worth nearly $5 billion. It’s still a complex process — there were 391,000 applications, but 8 out of 10 applicants hadn’t yet made the required 120 payments — and the widened eligibility also has a time limit: It ends in October.
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Parent PLUS loans
Many over-50s who have student loan debt borrowed for their kids through Parent PLUS. In addition to having worked in public service, to qualify for PSLF, they have to first consolidate their loans (it’s free, and can be done on the federal student loan website) into an income-contingent repayment plan.
“You need to know about the program, and you need to know that you have to consolidate,” says Winston Berkman-Breen, deputy director of advocacy and policy counsel at the Student Borrower Protection Center. “You have to be in the right repayment plan, have the right loan type and be in qualifying public service work.”
Before October, consolidating a loan would reset the clock on those 120 required repayments; for now, and until October, it won’t. (Even if the consolidated loan is rejected for PSLF, switching to income-contingent repayments can reduce the monthly balance for people with low incomes.)
If all that seems like superfluous paperwork, it pretty much is. That’s because holders of Parent PLUS loans “are one of the most neglected categories of borrowers,” says Whitney Barkley, senior policy counsel at the Center for Responsible Lending. “We don’t even think about them when we talk about things like income-driven loan forgiveness and other ways that other borrowers get help.”
Still not easy
So many changes in the rules have only raised more questions for people such as Merritt, who worked in human resources for local government in New York state but wasn’t sure whether or not he could apply for PSLF as a retiree and if the loans he took out for his son might qualify.
He can (until October), and they might — except he hasn’t yet made the 10 years of payments for the debt he still owes to be canceled. Even if loan holders who might qualify for PSLF haven’t made 120 payments, Berkman-Breen advises, they should consolidate by the October deadline to get credit for as many as they can.
Older Americans increasingly also have student loans of their own, taken out to get degrees later in life or for graduate study. If they have or had careers in public service, they, too, could qualify for PSLF — assuming they can navigate the bureaucratic minefield.
Patricia Bradley, now 64, still owes $35,000 of what she borrowed for her bachelor’s and master’s degrees. After a lifetime of working for nonprofits, she’s applied for PSLF. But “every time I try, they tell me I’m not eligible.” She’s not clear about why; she thinks it might have to do with her loan being transferred from one servicer to another. “I haven’t been able to get answers,” says Bradley, who lives in Massachusetts and is director of childcare at a YMCA. “All I get is the runaround.”
A long-held plan to buy an RV and travel around the country — she’s already settled on naming it the “Patti Wagon” — is on hold. With rent going up and unable to shake her unrelenting student loan debt, she says, “I’m petrified to retire. It really stinks. I want to cry sometimes. I can get rid of the rent, I can get rid of the rest. The only thing that’s still there is that damned student loan.”
A few hours after sharing her frustration, Bradley gets home to find another letter from her loan servicer telling her that documents were missing from her latest application to qualify for PSLF.
“It’s 10 pages. I’m going to see if I can figure it out.” She sighs. At this rate, she says, “they’re going to dig me up and take the gold off my body to pay off my student loans when I die.”
Jon Marcus is the higher education editor at The Hechinger Report and also writes for The Washington Post, The New York Times and others.