US government cancels $42B in public service workers' student loans under revamped program

The U.S. Department of Education has approved $42 billion in student loan forgiveness for more than 615,000 public service workers since October 2021, the agency said Monday, touting what it described as Biden administration changes to encourage wider use of a particular debt cancellation program.

Amid legal challenges and sharp GOP criticism over President Joe Biden's broader push to forgive $400 billion in federal student loans -- with up to $20,000 canceled for each borrower -- the government's Public Service Loan Forgiveness (PSLF) program is increasingly being advertised as a secondary option, along with income-driven repayment plans, that the White House is trying to make more accessible.

The PSLF program was first congressionally authorized in 2007 to cancel student debt for government employees (like educators, firefighters, police officers, those in the military) as well as not-for-profit employees and others providing public services who make at least 10 years of payments on their loans.

However, the original PSLF program was "poorly implemented" and many borrowers weren't successfully able to receive forgiveness, according to U.S. Education Undersecretary James Kvaal.

Kvaal told ABC News that some public servants unknowingly had the "wrong type" of loans or were using ineligible repayment plans, like bank-based loans made with federal subsidies.

For years, Kvaal said, student loan borrowers were making payments under PSLF, thinking they were getting closer to debt cancellation, to no avail.

"When Secretary [Miguel] Cardona got here, he found that only 7,000 people had ever gotten forgiveness in the history of the program. And in many cases, that's because of the fine print in the program," Kvaal said.

In October 2021, for one year, the Biden administration issued what it called a limited waiver temporarily changing the rules of PSLF. On Monday, at the start of Public Service Recognition Week, the Department of Education credited those changes and others with greatly expanding the use of the program.

"The difference that Public Service Loan Forgiveness is making in the lives of hundreds of thousands of Americans reminds us why we must continue doing everything we can to fight for borrowers and why families cannot afford to have progress derailed," Cardona said in a statement.

Kvaal likened the administration's changes to a "reset" of a flawed system.

"We [the department] were able to do a one-time reset on public service loan forgiveness to say: Everyone out there who was eligible for the program but didn't file the right form at the right time -- we're going to count all of those old payments," he said. "We're going to count the years you spent in public service while making payments on your student loans and recognize that progress."

Beyond the yearlong waiver, the Department of Education is also set to implement similar regulatory changes starting in July, such as allowing payment credits under PSLF even for payments that are made late or in installments and crediting certain periods of forbearance and deferment (such as for military service or cancer treatment) toward the 10-year payment threshold.

Student debt forgiveness was one of President Biden's signature campaign promises, and he initially rolled out his major loan cancellation plan in August 2022, intending to begin forgiving loans last October. (Federal student loan repayments have been paused since 2020 and the onset of COVID-19.)

Biden's plan would have forgiven up to $10,000 of federal student loan debt per borrower, so long as they annually made under $125,000 or $250,000 as a married couple, with an additional $10,000 canceled for people who received Pell grants, which are given to low-income families.

But the sweeping proposal, which the White House has said could be used by more than 40 million Americans, was soon halted by lawsuits and the Supreme Court heard arguments on its legality in February. A decision is expected by the summer.

More than 170 Republican lawmakers oppose the president's plan, filing amicus briefs with the Supreme Court.

"Joe Biden had no legal authority whatsoever. I think the larger issue is it's unfair to people who paid off their loans. It's unfair to people who didn't take out loans," Sen. Eric Schmitt, Missouri's Republican former attorney general who first brought the case before the Supreme Court, previously told ABC News in an interview.

Rep. Virginia Foxx, R-N.C., chairs the House Education and the Workforce Committee and co-authored the House Republican brief. Foxx believes the president is scamming the American people and rejects both forms of student debt forgiveness.

"The Biden administration is breaking the law to achieve its goal of blanket loan cancelation – celebrating this effort is a slap in the face to taxpayers and ignores the underlying drivers of college costs," Foxx said in a statement.

As the debate plays out around the bigger forgiveness program, other initiatives like PSLF remain legal, allowing some of the millions of borrowers who carry more than $1 trillion in student debt to see those sums canceled.

Pennsylvania social worker Colleen Cox, 61, received a letter in late February with a zero balance on her roughly $85,000 in student loans.

Cox said the PSLF cancellation was an "unbelievable gift," but the system as a whole must be fixed.

"The most vicious way of people making money is on the backs of our students," Cox told ABC News. "They just shouldn't be saddled with this kind of usury and horrible debt just to get their education."