This article has been updated.
A new report paints a grim picture of the Public Service Loan forgiveness program (PSLF) and raises new concerns that the program is failing millions of dollars. student loan borrowers who had been promised assistance.
The investigative report, published by the American Federation of Teachers and the Student Borrower Protection Center, examined recordings accessible through state and federal open case requests. The authors contend that there continue to be widespread problems with the PSLF program. Need cash fast? Next day lender will find you way.
Public service loan forgiveness background
The public service loan forgiveness allows some federal student loan borrowers to obtain their student loans forgiven after 120 “eligible” monthly payments. If payments are made consecutively, this equates to 10 years, although the program does not require consecutive payments. A “qualifying payment” has three main elements:
- Payments must be made on a Direct federal student loan. Other types of federal loans, such as federal Perkins loans and federally guaranteed loans (also known as “FFEL” loans) are not eligible. This can, in some cases, be corrected by consolidating non-qualifying federal loans into a federal direct consolidation loan, although this may have drawbacks in some cases.
- Payments must be made as part of a income based repayment plan like the IBR, PAID, or REFUND. Payments made under the standard 10-year plan are also eligible, although this will pay off the underlying federal loan in full within 10 years.
- The borrower must make a payment on time while employed full time for a public or government organization, or a 501 (c) (3) non-profit organization. Other nonprofits that are not 501 (c) (3) may be eligible in certain limited circumstances, although the Department of Education will make decisions on a case-by-case basis.
Borrowers can periodically submit Employment Certification Forms (ECFs) to obtain preliminary confirmation that their employment is PSLF eligible, along with a current tally of eligible PSLF payments.
History of issues with Public service loan remission
The delivery of civil service loans has been plagued by problems. For many years, student loan borrowers were not provided with clear information about the eligibility criteria for the public service loan forgiveness program. The Ministry of Education and its contract loan officers have done a poor job communicating the requirements to borrowers, and sometimes actively misled them.
As a result, many borrowers believed they had made substantial progress towards canceling the loan, only to find out later that they were making payments on the wrong type of loan or on the wrong type of repayment plan. When student loan borrowers were first eligible to apply for a waiver at the end of 2017, the program had a abysmal initial approval rate by only 1%, which means that 99% of borrowers who requested a loan forgiveness were rejected. The Ministry of Education released new statistics in March showing only marginal improvement – an approval rating of 1.8%.
Today’s report on Public service loan remission
The report released today by the American Federation of Teachers and the Student Borrower Protection Center paints a grim picture of the program. Here are some key findings:
- Borrowers whose employment had previously been certified as eligible for the PSLF after submitting a successful ECF were then reviewed and rejected – in some cases after years of employment.
- Several borrowers, all employed by the same organizations, received different responses to their submitted ECFs. According to the report, records produced by the Department of Education indicate that the department’s PSLF loan service – FedLoan Servicing – made “inconsistent determinations when assessing employers’ eligibility for the PSLF, particularly when ‘an organization was not a 501 (c) (3) nonprofit or government agency.
- The current PSLF appraisal system lacks a standardized appraisal process and suffers from chronic poor record keeping, leading to inconsistent results where employees of the Department and FedLoan Servicing have a wide power to decide. ‘interpretation, with little recourse for borrowers.
“Today’s investigation offers new evidence that borrowers may have been wrongly denied their right to forgiveness, and tens of thousands more are confused or misled, or are currently at risk due to government mismanagement and industry abuse, ”said Student Borrower Protection Center director Seth Frotman, former student loan ombudsman at the Bureau of Consumer Financial Protection. “Policymakers should immediately implement new reforms to better protect borrowers working in the public service and demand justice for those who have been harmed by years of mismanagement and abuse.”
“The mismanagement at scale reflected in these documents is exactly why we sued Betsy DeVos and the Department of Education for their mismanagement of this program,” said Randi Weingarten, president of the American Federation of teachers, referring to an ongoing litigation accusing the Ministry of Education and its loan officers of mismanagement of the PSLF program. “Almost anything that’s wrong with the ministry’s employer certification process could be fixed with simple administrative steps, but she refused, with constant apologies that make matters worse for borrowers and improve services.”
A spokesperson for the US Department of Education declined to respond to the specific allegations described in the report, but said the department makes decisions about PSLF eligibility based on appropriate regulatory criteria and is doing everything possible. to corroborate the borrower’s assertions in the PSLF forms. The spokesperson highlighted the efforts of the Ministry to improve the PSLF program, including the creation of the PSLF Help Tool (which now has a searchable employer database) and coordinated efforts to educate borrowers about eligibility.
A bill sponsored by Senators Kirsten Gillibrand (D-NY) and Tim Kaine (D-VA) could solve many problems with the civil service loan forgiveness program by allowing any repayment plan to qualify and authorizing payments on FFEL loans to qualify. The bill would also streamline and automate the PSLF application process by creating a fully electronic application and require the Department of Education to provide more detailed information to borrowers about the program upfront. Importantly, the bill would put in place a dispute resolution system that currently does not exist. Republican Senate leaders have reported no support for the bill yet.
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