SAN DIEGO — The deadline to apply for the relaxed rules through the Public Service Loan Forgiveness program is Oct. 31, 2022. The rules go back to the way they were before on Nov.1, but not for long.
The U.S. Department of Education on Monday announced more changes are coming to student loan debt in July 2023, including changes to the Public Service Loan Forgiveness program.
The changes also include a one-time account adjustment for some borrowers who qualify for the Public Service Loan Forgiveness. The new changes can be found here.
The announcement that will likely apply to the most amount of student loan borrowers is the change to “interest capitalization.”
“Interest capitalization occurs when borrowers have outstanding unpaid interest added to their principal balance,” the announcement said. “After interest capitalizes, borrowers are then charged greater amounts of interest on that larger principal balance.”
This plan will eliminate interest capitalization, as long as it is not required by statute.
“This means interest will no longer be added to a borrower’s principal balance. The first time a borrower enters repayment, upon exiting a forbearance, and leaving any income-driven repayment plan besides Income-Based Repayment,” the plan reads.
“Closed School Discharges” allow borrowers to get rid of their student loans if the school they attended closed, while they were enrolled or if they left 180 days prior to the closure of the school, and did not accept an approved agreement or a “continuation of the program at another location of the school,” Monday’s announcement from the U.S. Department of Education read.
“Those who accept but do not complete a teach-out agreement or program continuation will receive a discharge one year after their last date of attendance.”
The announcement also allows some borrowers who have a permanent disability to receive a discharge of their student loans.
The last plan will help smooth the process “for when a college falsely certifies a borrower’s eligibility for student loans when, in fact, the student was ineligible,” according to the program.
“These transformational changes will protect students who’ve been cheated by their colleges from the bureaucratic nightmares of the past and ensure that all our targeted debt relief programs live up to the promises made by Congress in the Higher Education Act. We’re also protecting borrowers from higher costs by limiting the practice of tacking unpaid student loan interest onto their principal balances,” U.S. Secretary of Education Miguel Cardona said.