Student Loan Forgiveness Program Continues to Create Headaches for Borrowers

A student loan forgiveness program intended to encourage graduates to work in the public sector continues to deny most borrowers even after an intended fix was passed by Congress, a GAO report found.

A long-running controversy in the education field involving student loan debt just took another turn. And just like before, that turn has largely prevented thousands of public-sector and nonprofit employees from getting a benefit they were promised more than a decade ago.

This week, the Government Accountability Office released a review of the Public Service Loan Forgiveness (PSLF) program, which was the subject of much scrutiny a year ago, after it was revealed that the program, despite tens of thousands of applicants, had only forgiven the student debts of 55 people.

Congress responded by creating a secondary program—Temporary Expanded Public Service Loan Forgiveness—to fix PSLF’s issues. But the GAO report found that even then, when given specific guidance to make TEPSLF as easy to take advantage of as possible, the U.S. Department of Education had only approved 661 of 54,000 requests—a rejection rate of 99 percent. The GAO blamed the situation on a lack of awareness and an application process that was just as arduous as the program it was augmenting.

“In 2018, after few loans were forgiven, Congress temporarily expanded the program to include more borrowers,” the report states. “But some borrowers may not know about the temporary program because most loan servicers’ websites don’t have information on it. Also, applying is a potentially confusing multi-step process.”

Part of the problem was a result of a requirement, implemented independently of an act of Congress, that required those signing up for TEPSLF to reapply for PSLF and get rejected  before they applied for the temporary program. According to the GAO report, 71 percent of all rejected TEPSLF applicants ran into this hurdle.

Speaking to NPR, GAO Director Melissa Emrey-Arras, who focuses on education, workforce, and income security issues, expressed deep concern with the findings.

“We were disheartened,” Emrey-Arras said. “I think we were discouraged. I mean, the hope is that you have this temporary expanded process, and you want it to help a lot of people. And you don’t want borrowers to be confused about the eligibility criteria and to face a high denial rate. And yet, that’s what we found.”

(For its part, the Education Department agreed with the sentiment of the GAO report and promised fixes.)

The problems with the loan forgiveness program have created issues that have broadly affected both employees that took jobs in public service based on the promise of debt forgiveness and associations that represent those individuals. In 2016, the American Bar Association filed a lawsuit against the Education Department after the federal agency told some of its members that they, along with other nonprofit employees, were no longer eligible for the program because ABA was not an eligible employer.

As reported last month [registration], however, ABA won a victory, after FedLoan Servicing announced that it would begin to accept the association as a qualified employer in the program, along with members of two other nonprofit groups that had members that took part in the lawsuit.

The issues with PSLF and TEPSLF have members of Congress, such as Rep. Bobby Scott (D-VA), promising hearings in an effort to ensure both programs are being administered fairly.

(TheaDesign/iStock/Getty Images Plus)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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