The Biden administration has initiated a process to potentially fix the problematic public service loan forgiveness (PSLF) program.
“Unfortunately for too many civil servants [PSLF] the program didn’t work as they hoped, ”said Julie Margetta Morgan, senior advisor and acting deputy secretary of the Undersecretary of Education’s Office at 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 talking to experts and borrowers and reviewing our procedures, we also want to hear from you. That is why we are publishing a Request for Information on PSLF today. ”
A request for information is the formal process of gathering public comment on the PSLF program. The Ministry of Education indicated that it is specifically looking for information about the PSLF features that are most difficult for borrowers to navigate; barriers that prevent public service workers from seeking PSLF or receiving student loan forgiveness under the PSLF; and the experience of the borrower participating in the PSLF.
Government Loan Forgiveness is a popular federal student loan program whereby certain borrowers can apply for forgiveness of their federal student loans after working as a full-time employee in government agencies or 501 (c) (3) non-profit organizations for 10 years or more. However, the program has complex eligibility criteria, which limits the benefits to borrowers who have certain types of federal student loans on certain types of repayment plans. These claims have historically not been brought to the attention of student loan borrowers.
Recent report The Consumer Financial Protection Bureau (CFPB) has concluded that the PSLF program is full of problems. The CFPB “discovered several ways in which student loan servants misinformed borrowers” about PSLF requirements, leading to “errors that could cost consumers thousands of dollars.” The CFPB also highlighted widespread problems related to the failure of service personnel to properly certify PSLF qualifications, misallocation of monthly payments and miscalculations of payment amounts. The CFPB concluded that many of these practices “caused or may cause significant harm” to student loan borrowers.
It is largely because of these problems that PSLF suffers from appalling grades. When student loan borrowers were first eligible to apply for forgiveness under the program in 2017, PSLF had approval rate only 1%. IN latest statistics suggest only marginal improvement, with the current approval rate of just 2%. The Department of Education is also dealing with significant backlog of PSLF applications, resulting in for a processing time of six months or more…
Meanwhile, the Pennsylvania Higher Education Support Authority (PHEAA), which operates FedLoan Servicing – the only Department of Education service contractor tasked with administering a public service loan forgiveness program – announced that he will not renew 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 final student loan forgiveness under the PSLF, will be transferred into their accounts with new lending institutions. Such translations are historically was pretty dirty…
Attorneys for student loan borrowers praised the Ministry of Education for this statement. “The Education Department’s actions today are encouraging for government officials who have been disappointed and deceived in delivering on their promised debt forgiveness,” Seth Frothman, executive director of the Student Borrower Advocacy Center, said in a statement. “This is the first time the federal government is asking those dependent on the program to help decide what happens next. America’s government officials should take this opportunity to tell President Biden and Secretary of State Cardone that the PSLF is not working and that only sweeping debt relief measures can correct the Department of Education and the student loan industry’s decades-old mistakes. Civil service workers have contributed – now is the time for the Biden administration to keep the PSLF promise. ”
Earlier this year, a coalition of over 100 civil rights and consumer protection organizations sent letter Education Minister Miguel Cardone urging him to use emergency legal powers to audit the PSLF program and cancel student loan debt of all student loan borrowers who have served ten or more years in public service, regardless of their specific adherence to PSLF’s complex program eligibility criteria.
The Department’s announcement today follows the start of a lengthy, agreed rule-making process to review and possibly overhaul major federal student loan programs, including government service loan forgiveness. The review could lead to significant changes in the PSLF, although any permanent changes will likely take years.
Borrowers who wish to comment on PSLF with the Department of Education can do it here from 26 July.