The federal Public Service Loan Forgiveness program has denied 99 percent of borrowers who—with the expectation their student loans would be forgiven after a decade—have worked for ten years in public service professions.
In May, Politico‘s Kimberly Hefling described the depth of the problems in the federal Public Service Loan Forgiveness program: “The nation’s student loan forgiveness program for public servants is a disaster, it’s widely agreed. The numbers are mind-boggling. Only about 1 percent of the teachers, nurses, public defenders, military personnel and other public servants applying for student loan relief under the Public Service Loan Forgiveness program are succeeding. That leaves tens of thousands of frustrated borrowers with student loans they thought would be forgiven after they worked a decade on the job… In fall 2017, after the first wave of borrowers hit the 10-year mark of service for eligibility in the program, the chaos started to publicly unfold.”
Hefling reports that the program has been politically divisive since its inception in 2007: “When the program was signed into law in 2007, Democrats controlled both chambers of Congress. President George W. Bush threatened to veto the legislation, but ultimately signed it.”
The Washington Post‘s Danielle Douglas-Gabriel reports that last Thursday, the American Federation of Teachers (AFT) sued Education Secretary DeVos, “alleging gross mismanagement” of the program.
Earlier lawsuits have been filed against the companies with which the U.S. Department of Education contracts to manage the program—Navient, FedLoan Servicing and others. Douglas-Gabriel describes the lawsuit filed last week by the American Federation of Teachers, which, “claims the Education Department ignored borrower complaints about loan servicers providing inaccurate information and making administrative mistakes. The alleged mismanagement of the loan forgiveness program violates federal law and the Constitution according to the lawsuit.”
One problem, writes Douglas-Gabriel, is that the program’s tangled rules have evolved over the recent decade even while borrowers thought they were enrolled in a well-established program: “Because there are so many requirements, some of which were fully fleshed out only in later years, few people could reasonably be expected to qualify for forgiveness at this point. Nearly three-quarters of processed applications were denied because borrowers did not meet at least one program requirement.” “As of March (2019), more than 73,500 federal student loan borrowers had turned in nearly 86,006 applications to have their loans canceled under Public Service Loan Forgiveness. Only 864 of those applications have been approved, and 518 people have received debt forgiveness….”
Douglas-Gabriel continues: “The rules are complex. They require borrowers to have loans made directly by the federal government, but until 2010 most federal loans were originated by private lenders. Applicants must also be enrolled in certain repayment plans—primarily those that cap monthly loan payments to a percentage of borrowers’ income. But most of those plans emerged only in recent years. A recent Government Accountability Office audit said the Education Department never provided a written instruction manual to FedLoan, the company managing the program. The company has had to interpret guidance that was contradictory or poorly explained… Investigators said poor communication between FedLoan and other servicing companies about borrowers’ accounts results in miscounting payments eligible for the program.”
AFT filed the lawsuit last week with several co-plaintiffs who have been misled by the program. One plaintiff, a ten-year New York public school teacher, expected that her debt would be forgiven. Today she finds herself $88,000 in debt after being rejected by the program.
It would appear that staff in the U.S. Department of Education have made little effort to accommodate borrowers who were misled. Douglas-Gabriel quotes another of the plaintiffs in the recent lawsuit: “When I asked why I was denied, I heard all kinds of reasons… I was told I pulled down the wrong application from the official website… one of my forms had the wrong date… They claimed they couldn’t read the forms. All told, I turned in 10 different applications. Denied. Denied. Denied was all I heard.”