WASHINGTON – The promise of the Public Service Loan Forgiveness Program should have been simple.
If college graduates were willing to forgo the lucrative private sector salary and work as a teacher, police officer or government employee, any federal student loans they had would be forgiven after 10 years of pay.
The program has proved anything but forgiving. More than a decade after it was founded in 2007, thousands of borrowers have applied for forgiveness. The federal government has rejected almost all of them.
Starting this fall, that should change.
The Education Department on Wednesday announced sweeping changes to the loan forgiveness program that would immediately wipe out $1.7 billion in debt from 22,000 borrowers. The government estimates that about $2.8 billion in debt could be forgiven to another 27,000 borrowers if they proved they were employed in a qualified job.
The changes are designed to help borrowers correct errors and calculate the payments they were trying to make for the program. The government said more than 550,000 borrowers — who have already consolidated their loans — need to make payments to qualify for forgiveness.
The redesign of the Public Service Loan Forgiveness program is President Joe Biden’s latest effort to address the nation’s growing $1.7 trillion in student loan debt and ease the burden of struggling borrowers.
Progressives call on Biden To forgive a loan of up to $50,000 per borrower, but the executive branch has instead introduced targeted relief, such as for those who have been defrauded by their college or who are permanently disabled. With changes to the public service program, the federal government would have Forgiven nearly $11.5 billion in student loan debt.
“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of public service loan forgiveness,” said Education Secretary Miguel Cardona. “The system has not delivered on that promise to date, but it is about to change for many borrowers who have served their communities and their countries.”
The changes come after a string of critical reports about the inaccessibility of public service loan forgiveness. CBS’ “60 Minutes” Recently reported on military veterans Those who tried to get forgiveness and failed.
and the Student Borrower Protection Center, an advocacy group, found that loan servicer FedLoan had Denied thousands of borrowers Apologies due to minor errors or paperwork issues.
Seth Frotman, the group’s executive director, is a frequent critic of the Department of Education’s management of student loans, particularly the Public Service Loan Forgiveness Program. But he said he was encouraged by the changes made by the department.
“It’s a good day for teachers, nurses, soldiers and the millions of workers on the front lines of the pandemic,” Frotman said. “For too long, those who give the most to our communities and our country have been ransacked and forced to incur debts that should have been cancelled.”
Strict requirements hinder relief
The problem with public service loan forgiveness stems from the need for relief.
Borrowers seeking pardon must be working in a job the government considers a public service, and must pay 120 through proper channel Income based repayment plan. And only borrowers with loans made by the federal government, known as direct loans, qualify for relief.
Thousands thought they qualified, but messed up one of those criteria—by paying on the wrong type of loan, not enrolling in an income-based repayment plan before making payments, or by working a job they had to pay later. Turns out ‘not deserving of pardon’ – and found himself out of luck.
Prior to the announcement, only 16,000 borrowers had their loans forgiven through the program, according to the Department of Education. Around 13 lakh people are trying to discharge their debts through this program.
Changes in the loan waiver program will happen in two parts. The agency will earlier relax some of the rules that had prevented eligible borrowers from discharging their loans through a limited exemption. For example, the government would allow a person to calculate the total number of payments required to be forgiven on any loan.
The department said it will automatically credit borrowers who already have direct loans and have proven that they operate in an eligible sector. Others who haven’t enrolled in the program or have ineligible federal loans must apply for forgiveness, which may require them to consolidate their loans. Borrowers will have by October 2022 In order to apply.
The department also plans to review all public service loan forgiveness applications that were denied and automatically grant them to federal employees. Forgiveness credit.
Other changes will come more slowly through rules created by a lengthy and complex bureaucratic “rule-making” between the government and other stakeholders.
Only some debts are forgivable
One of the most problematic pieces of Public Service loan forgiveness: Many borrowers had the wrong type of loan, and didn’t realize they weren’t eligible for relief.
When the loan-forgiveness program was first introduced, many loans given by the federal government were Family Federal Education Loan, or loans made through private entities but insured by the federal government. The government stopped offering these loans in 2010, and is now relying on direct loans – which are worthy of forgiveness. The Department of Education said that about 60% of borrowers with approved employers hold FFEL loans.
“To a layman, it wouldn’t be very obvious that you had the wrong loan type,” said Betsy Mayotte, president of the Student Loan Advisory Institute.
And borrowers had no choice as to what type of loan they received, she said. Mayotte’s nonprofit has helped thousands of borrowers with their student loan payments, and she helps medium to subreddit Focused on Public Service Loan Forgiveness. She said that many of the issues she handles these days are related to borrowers with ineligible loans.
Mayotte said short-term exemptions would help people, but questioned whether borrowers who miss the grace period could be in the same boat as on November 1, 2022.
It said the borrowers concerned may consider consolidating their loans into a single direct loan if they have not already done so.
If borrowers are unsure about what type of loan they have, Mayotte said they can request that information from their loan servicer or they can investigate Federal Government Website for Financial Aid.