The Biden administration has launched a process to potentially correct the struggling Public Service Loan Forgiveness Program (PSLF).
“Unfortunately, for too many public service workers, the [PSLF] program did not work out as they hoped, ”Julie Margetta Morgan, senior advisor and acting deputy secretary of the Office of the Under-Secretary of Education said in a statement. “Fixing the PSLF program has been a priority for the Biden-Harris administration from day one. While we have identified many opportunities for improvement by speaking with experts and borrowers and reviewing our procedures, we also want to hear from you. This is why, today, we are launching an Information Request on the PSLF.
The Inquiry is a formal process for obtaining public comments on the PSLF program. The Education Ministry said it was specifically looking for information on the features of the PSLF that are most difficult for borrowers to navigate; barriers that prevent public service workers from pursuing the PSLF or receiving a student loan forgiveness under the PSLF; and the experiences of borrowers participating in the PSLF.
Public Service Loan Forgiveness is a popular federal student loan program whereby some borrowers can request their federal student loan forgiveness after working as a full-time employee for government entities or non-profit organizations 501 ( c) (3) for 10 years or more. The program, however, has complicated eligibility criteria, which limit relief to borrowers who have specific types of federal student loans over specific types of repayment plans. These requirements have not always been well communicated to student borrowers.
A recent report from the Consumer Financial Protection Bureau (CFPB) concluded that the PSLF program has been riddled with problems. The CFPB “uncovered a number of ways in which student loan officers were giving borrowers incorrect information” about the PSLF requirements, resulting in “missteps that could cost consumers thousands of dollars.” The CFPB also reported widespread issues with service agents failing to properly certify PSLF eligible jobs, incorrectly distribute monthly payments, and incorrectly calculate payment amounts. The CFPB concluded that many of these practices “caused or were likely to cause significant harm” to student loan borrowers.
In large part because of these problems, the PSLF program suffers from catastrophic approval rates. When student loan borrowers were first eligible to apply for a waiver under the program in 2017, the PSLF had an approval rate of just 1%. The latest statistics suggest only marginal improvement, with a current approval rating of just 2%. The Ministry of Education also faced a substantial backlog of PSLF applications, resulting in processing delays of six months or more.
Meanwhile, the Pennsylvania Higher Education Assistance Authority (PHEAA), which manages FedLoan Servicing – the only Department of Education contracted service provider responsible for administering the Public Service Loan Forgiveness program – has announced that it will not renew not his contract with the US Department of Education. As a result, more than 8 million student loan borrowers, many of whom are on track for eventual PSLF student loan forgiveness, will have their accounts transferred to new loan managers. These transfers have historically been quite messy.
Advocates for student loan borrowers have praised the Department of Education for its announcement. “Today’s action by the Department of Education offers hope to public service workers who have been disappointed and deceived by the promised debt relief,” said the executive director of the Student Borrower Protection Center , Seth Frotman, in a statement. “For the first time, the federal government is asking those who depend on the program to help decide what to do next. U.S. public service workers must take this opportunity to tell President Biden and Secretary Cardona that the PSLF is broken and that only sweeping debt relief action can undo a decade of wrongs committed by the Department of Education and the student loan industry. Civil service workers have done their part – now is the time for the Biden administration to keep the PSLF promise. “
Earlier this year, a coalition of more than 100 civil rights and consumer protection organizations sent a letter to Education Secretary Miguel Cardona, calling on him to use emergency legal authority to audit the PSLF program and to cancel the student loan debt of all student loan borrowers who have completed ten or more years of public service, regardless of their specific compliance with the complex PSLF program eligibility criteria.
The Department’s announcement today follows the launch of a long negotiated rule-making process to review and potentially revise key federal student loan programs, including public service loan forgiveness. The review could result in substantial changes to the PSLF, although permanent changes are still likely years away.
Borrowers who wish to submit comments to the Ministry of Education regarding the PSLF can do so here starting July 26.
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