The Government Expanded Its Student Loan Forgiveness Program. It's Still Rejecting 99% of Applicants
A plan aimed at offering relief for the thousands of public service workers rejected from a program to forgive their student debt faces many of the same problems.
Just 1% of borrowers who’ve applied for the Temporary Expanded Public Service Forgiveness Program were approved between May 2018 and May 2019, according to a U.S. Government Accountability Office report published today. Those who were received a total of $26.9 million in loan forgiveness, or just under $50,000 on average.
Approval for the Public Service Loan Forgiveness program has been a bureaucratic mess, according to consumer advocates. The program is supposed to encourage workers to go into generally lower-paying fields with the promise of limiting how much student debt they’d have to pay back. It applies to a wide swath of jobs: any government position, ranging from firefighters to town administrators, but also any position at 501c(3) non-profit organization. Yet of the more than 75,000 people who’ve applied for forgiveness since October 2017, 99% have been rejected. Hearing those rates last year, Congress created the temporary expansion and set aside $700 million on a first-come, first-served basis for borrowers who wouldn’t qualify for PSLF.
The GAO report calls the process to qualify for the fix unclear. Some of the U.S. Department of Education's online resources, including its online tool for public service borrowers, do not mention the temporary program extension at all, according to the report. Nor does the department require that loan servicers—the companies contracted to manage the repayment process for borrowers—publish information about the program on their websites. Of the roughly 54,000 borrowers who applied to the temporary extended program between May 2018 and May 2019, about 70% were denied because they hadn’t first applied to the original PSLF—even if they knew they would be rejected. The GAO recommends the Education Department eliminate that technicality and streamline the process by incorporating the temporary relief program into the original application.
Why Are People Denied PSLF?
The findings of the GAO report will no doubt fan the flames of critics of the PSLF process, who rightfully point out how confusing and unfair it can be for borrowers who planned their careers and lives around the promise of forgiveness. (NPR has published the comments from some of those borrowers here.)
Still, low approval rates at this point aren’t necessarily surprising. Today, there are a variety of resources to walk new applicants through the PSLF process, but those didn’t exist in the early years, when people applying now would have started working towards forgiveness. It wasn’t until 2011 that the Education Department put out the employer certification form, according to Bloomberg. And while the PSLF program sounds simple—work in public service or a non-profit organization for ten years while making payments—there are actually a handful of requirements you have to cross off. To qualify, you need to have the right type of loan (a federal direct loan) and be in the right repayment plan (a plan that sets your payments based on your income).
Back in 2007, when the program was launched, many loans were through a program called the Federal Family Education Loan Program, or FFEL. Those loans do not qualify for loan forgiveness, so borrowers would have to first consolidate all their federally backed loans into a federal direct loan, and then make 10 years of qualifying payments. In 2010, the FFEL loan program ended, and since then, all borrowers are in the direct loan system, meaning they automatically have one fewer step to go through to qualify for PSLF. Similarly, when PSLF launched, income-driven repayment plans were not as broadly promoted or utilized as they are today. In the coming years when borrowers with direct loans who easily enrolled in income driven plans apply after 120 monthly payments, experts--and cost projections--predict the approval rate will rise.
As many stories in the media have described, some borrowers have been rejected for reasons beyond their control, including poor payment tracking by loan servicers, and a previous GAO report found the servicer that handles PSLF received inadequate guidance on the program from the Education Department.