Public service loan forgiveness rules shift under new federal loan law
New repayment restrictions took effect July 1, changing how some borrowers can earn credit toward Public Service Loan Forgiveness.
By Sarah Jenkins · Chief Macro Economics Correspondent
· 4 min read
Public Service Loan Forgiveness borrowers face new repayment limits after changes to the federal student loan system took effect on July 1 under President Donald Trump’s One Big Beautiful Bill Act. The most immediate effect is that time spent in the new Tiered Standard repayment plan will not count toward the 120 qualifying payments required for debt cancellation, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance.
The program, signed into law by President George W. Bush in 2007, cancels remaining federal student debt for eligible government and nonprofit workers after 10 years of qualifying payments. More than 9 million borrowers may be eligible, according to a 2022 estimate by Protect Borrowers, a nonprofit organization.
Federal courts have blocked a separate Trump administration effort to narrow the employers that qualify for PSLF. Other changes tied to the new law remain in effect and may alter repayment choices for new borrowers, existing borrowers and Parent PLUS borrowers.
Tiered Standard payments do not count
Borrowers seeking PSLF must repay their loans under qualifying plans. Buchanan said payments made under the Tiered Standard plan, one of the plans created under the new law, will not count toward PSLF’s 120-payment requirement.
The Tiered Standard plan uses fixed payments, with repayment periods that vary according to the borrower’s total debt. For borrowers taking out new loans on or after July 1, the qualifying repayment option for PSLF is the new Repayment Assistance Plan, according to the program changes described by experts.
The Repayment Assistance Plan is an income-driven repayment plan administered by the U.S. Department of Education. It sets monthly payments as a share of income, typically from 1% to 10% of earnings, with higher-income borrowers required to pay more.
Rich Williams, a former deputy assistant secretary at the Education Department, said the distinction is especially relevant because the Tiered Standard plan is the default for borrowers with new loans. Borrowers placed there automatically would not build PSLF credit unless they chose a qualifying plan, he said.
Existing borrowers pursuing PSLF may still have additional repayment options, including Income-Based Repayment, according to Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York. Nierman said PSLF remains a 10-year route to forgiveness for eligible borrowers regardless of the longer forgiveness period attached to some income-driven plans, such as the 30-year term under RAP.
Parent PLUS access narrows
The new law also changes access for many Parent PLUS borrowers, who take federal loans to help pay for a child’s education. Williams said Parent PLUS loans no longer have a route into income-driven repayment or PSLF.
Parents who took out loans after July 1 qualify only for the Tiered Standard Repayment plan, which does not generate PSLF credit, according to the experts cited. Existing Parent PLUS borrowers previously had a limited opportunity to consolidate their debt into a Direct federal loan, which could preserve access to an income-driven plan. Experts said borrowers who did not consolidate during that period lost access to income-driven repayment plans and, as a result, PSLF benefits.
Employer rule blocked by courts
Borrowers have received more favorable clarity on employer eligibility. Two federal judges in June struck down a Trump administration rule that would have changed the definition of a qualifying PSLF employer to exclude organizations that “engage in unlawful activities.”
Opponents argued that the language was broad enough to let the administration exclude disfavored nonprofits. Nierman said the administration could appeal, but had not said anything since the rule was struck down, and that an appeal would not guarantee a government victory.
The Education Department said on its website that it is updating the PSLF form to comply with the court order. The department also said language asking employers to certify that they have not engaged in illegal activities “will have no effect.”
Experts said borrowers can check whether their employment qualifies by submitting the PSLF employer certification form, and said borrowers should keep records of confirmed qualifying payments.
This story draws on original reporting from CNBC.
