The program that
public servants can use to have their federal student loans forgiven is
such a quagmire for borrowers that Congress had to set up a relief
program for the relief program.
So far, it’s not performing much better.
It
has been nearly five months since the Department of Education released
instructions for a $350 million pot of money that some public servants
can use if they received bad information about the loan forgiveness
program and ended up in the wrong type of repayment plan.
Tens
of thousands of people have applied for the relief program. But so far,
most have been rejected, and as of late last month, none among the few
thousand who remain in the running have seen their debt balances go to
zero.
In response to an inquiry led
by Senator Tim Kaine, Democrat of Virginia, the department disclosed
last week that 28,207 people had submitted requests as of Sept. 28 and
that it had found 21,672 ineligible almost immediately. It then culled
“approximately” half of the remaining 6,535 for other reasons. That
leaves just over 3,000 applications still under consideration.
It can take up to six months or so to
review these requests because of the complexity of both the forgiveness
program and the relief fund application process. The Department of
Education has shifted some staff to work more closely with the loan
servicer that handles the forgiveness program.
The
relief fund was created after it became clear that scores of teachers,
social workers and other government and nonprofit employees had received bad information
from their loan servicers about the forgiveness program’s complex
terms. So far, fewer than 1 percent of applicants have had their loans
discharged through the program, which got its start just over a decade
ago but is only now having borrowers become eligible.
To
qualify for tax-free loan forgiveness, borrowers need to make 120
on-time monthly payments (while working in an eligible public-service
position), have the right kind of loan (some federal loans qualify while
others do not) and be in the right kind of payment plan (the
income-driven ones designed to help lower-income borrowers). I explained
the process in more detail in an earlier column.
When it became clear in recent years that loan servicers had told public-servant borrowers that they were doing everything right even when they were in the wrong kind of loan or payment plan, pressure grew on elected officials to help borrowers who thought they were being meticulous only
to find that years of payments had not counted for forgiveness.
Enter
the Temporary Expanded Public Service Loan Forgiveness initiative,
which is a pool of $350 million designed to help borrowers who were in
certain ineligible payment plans, often because their loan servicers
specifically told them to use those plans or stay in them. The relief
program comes with its own rules and restrictions, which I outlined in a previous article and are available on the Department of Education’s website.
Five months in, that website is no model of clarity.
For
instance, one paragraph tells borrowers that they must submit a public
service loan forgiveness application and wait to be rejected (for
payments that were not in a qualifying payment plan) before being
potentially eligible for relief. The very next paragraph, however, tells
them that they do not need to wait before submitting a request under
the temporary plan.
Jolie von Suhr, a
psychologist in a state psychiatric hospital in Lakewood, Wash., who
was in an ineligible payment plan for years before realizing she had a
problem, said the site’s conflicting information left her both perplexed
and afraid.
“It kind of sounds like
you can submit them both at the same time, but I’m not sure,” she said.
“I’m so anxious now about doing anything incorrectly that could get me
booted out of consideration.”
In
fact, you do not have to wait for a public service loan forgiveness
denial in order to request consideration under the temporary expanded
program. I asked if the department intended to clarify this on its site
and received assurances that it “will continue to review communications
to borrowers and will adjust them as appropriate.”
Some
eligibility determinations are easier to make than others — rejecting
people who have not made 120 payments or who were in an ineligible loan,
for example. The Department of Education’s loan servicer often has a
tougher time producing an accurate count of months of repayment.
Plus, it now has to account for a rule under the temporary program that applies to people who thought they were in the right kind of repayment plan but found out much later that they were not. They are eligible for the temporary program only if their most recently monthly payment and the
one they made 12 months before their application were higher than what they would have paid if they had been enrolled in a qualifying repayment plan. Yes, it’s complicated, and clearing this hurdle may require documentation.
The Education Department seems tired of bearing blame for all of this.
“We
implement the programs Congress creates,” said the department’s press
secretary, Liz Hill. She added that the forgiveness program and the
temporary program were “poorly constructed programs, the rules of which
are highly complex and difficult for students to navigate.”
“We are working to make it as straightforward as the rules allow,” Ms. Hill said.
Some borrower advocates are not surprised by the delays thus far.
“This
is a new program in that we’re still in the first year or so of
forgiveness applications,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit adviser to debtors. “I have high hopes that the process will become more seamless and quicker over time.”
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