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The intention was good: The federal government would offer the nation’s teachers, first responders and other public servants relief on their college loan debt.
The reality is bad: Fewer than one percent of applicants to the Public Service Loan Forgiveness program (PSLF) have been approved, in large part due to problematic loan-servicing practices.
This situation has prompted a string of lawsuits as well as Republican calls to end the program. But Congress also has the opportunity to fix this broken program rather than shut it down. And lawmakers owe it to our nation’s public servants to do so.
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Created under the College Cost Reduction and Access Act of 2007, Public Service Loan Forgiveness promises that if student loan borrowers pursue a public service career and make 120 qualifying payments — 10 years’ worth — on their loans, the government will forgive their remaining debt.
When the first cohort of borrowers became eligible in 2017, though, tens of thousands of public service employees were denied, even though many had planned their financial futures around the program’s promise. Instead, they found themselves among the 99 percent of applicants stuck with years of unanticipated costs.
Reckless loan servicing caused a significant portion of the denials. Studies from the Government Accountability Office and the Consumer Financial Protection Bureau both show that thousands of borrowers thought they were making progress toward forgiveness, but either were not in the correct repayment plan or did not meet other eligibility requirements, including having the right type of loan or working for the right type of employer.
Several state attorneys general, American Federation of Teachers members, and individual borrowers have filed lawsuits across the country against student loan servicers. The lawsuits allege that servicers misled borrowers into enrolling in ineligible repayment plans and then falsely told those borrowers they were on track for loan forgiveness.
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Servicers have a financial incentive to stop student loan borrowers from enrolling in the debt relief program, a process that takes up more servicer resources and ultimately requires the loans to be transferred to a rival servicer, FedLoan.
President Trump’s proposed solution to this mess was to eliminate the program entirely, reneging on the promise made to hundreds of thousands of borrowers. Rep. Virginia Foxx (formerly chair of the House Education & Labor Committee) cheered him on last year, also proposing to eliminate the program as part of the PROSPER Act. Those efforts failed, thanks to bipartisan support for the program in the House and Senate.
Preserving the program in its current state is not enough, however. Congress must act. First, for a program plagued with delays, Congress can start by setting concrete deadlines for servicers to process income-driven repayment applications and for FedLoan to process annual certifications and PSLF applications.
Second, Congress can mandate that FedLoan immediately begin counting qualifying payments when it accepts a transferred loan from another servicer. It’s not acceptable for FedLoan to put loans into administrative forbearance for 1-2 months (the typical current practice) while the borrower loses out on those payments.
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Third, borrowers should be able to easily see where mistakes in payment counting may have occurred. Congress can tell FedLoan to provide student borrowers with detailed information, broken down by loan and month, after it receives and processes a borrower’s annual certification form.
Fourth, there should be a formal departmental appeals process when issues with payment counts arise during or at the end of the PSLF process. My organization has seen requests for recounts sit for over 12 months before action is taken.
Finally, the Department of Education should produce a checklist that is easily understandable by average borrowers to ensure they have right loan, repayment plan and employment before that borrower accepts a new job or enters repayment.
These forward-looking solutions won’t help many of applicants who were rejected for having the wrong type of loan or working for the wrong type of employer after having relied on faulty advice from their servicer. A small subset of these borrowers got relief from a provision in a 2018 spending bill, but many more were left out. The Department of Education should forgive the remaining debt for those PSLF applicants who made a good-faith effort to hold up their ends of the bargain.
An opportunity to reform this important program could come soon, as key lawmakers in both the House and Senate have signaled they are looking to update the Higher Education Act by the end of the year.
They should take the opportunity to make good on the promise made to our nation’s teachers first responders, nurses and service members, and provide a meaningful fix to the program so these public servants are provided the debt relief they deserve.
This story about college loan forgiveness was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our newsletter.
Aaron Ament, former chief of the U.S. Department of Education’s office of the general counsel in the Obama administration, is president of the National Student Legal Defense Network.
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