Congress created the Public service loan forgiveness program (PSLF) in 2007 to help various types of public service workers pay off their student loan debt after ten years of loan repayment.
But the management of the program is widely seen as a failure since more than 98% of applications from teachers, firefighters, police and other officials are rejected.
Education Secretary Betsy DeVos has been sued several times about his department’s high refusal rate, while Department of Education (ED) officials say Congress designed the rules to be too restrictive.
To better understand the PSLF process, Yahoo Finance spoke with two officials who attempted to use the PSLF program to pay off their student debt.
“It just seemed to be designed to fail”
One is a story of success by sheer will, while the other is a story of disappointment.
“It was the most confusing thing I have ever seen in my life, and I’m just being honest,” Ami Sandler, a California-based teacher, told Yahoo Finance. “It was the most tedious and complicated thing I have ever seen.”
Gloria Nolan, who works at a nonprofit in Missouri, echoed the same sentiment. “It has been a very tedious process,” she told Yahoo Finance. “But I told you I was fiery. And I keep pushing and trying to look for the answers that are needed. “
While Nolan and Sandler both saw their initial forgiveness requests rejected, Sandler ultimately saw $ 16,000 of his student loans canceled through another public service forgiveness program after struggling with the PSLF. Nolan, who still has $ 58,000 in student debt, is currently one of the plaintiffs in a trial filed by the American Federation of Teachers (AFT).
“It just seemed like it was designed to fail,” Sandler said of the PSLF program. “Honestly, it is. I have the impression that the system was designed to fail.
From April this year, around 150,000 borrowers applied to the PSLF, the initial program. About 1.7% of requests were approved. The average amount released was $ 66,000.
A big part of the reason why so many applications were turned down: The borrower had not made enough monthly qualifying payments – all 120 of them – or had information missing from their documents. Or, their loans weren’t actually eligible in the first place.
When Nolan found out about the program in 2008, she said her loan officer told her that she “shouldn’t even be having this conversation” since she had to make 120 payments first to qualify for the program. Once she was done with that, she recalls, the duty officer promised to set up the loan remission.
Nolan started making these payments, but found out after six years that she had been on the wrong payment plan and that these payments would not count. She finally figured out the paperwork and worked with the service agent to sign up for the right payment plan and started all over again.
However, his request was rejected. Nolan then heard about the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) – a Congress-mandated PSLF expansion that reduced some of the barriers – and asked for this.
Nolan’s request was also rejected by TEPSLF. And she is not alone: ED’s March 2020 data revealed that 29,728 requests were made for TEPSLF and approximately 6% of requests were approved. The average balance released was $ 42,943.
Frustrated, Nolan decided to join the ATF lawsuit to get ED to fix the system.
“I felt betrayed”
Sandler went through a similar process. After finding out about the PSLF and figuring he was eligible for a remission of his $ 53,000 student loan debt, he officially requested the remission in 2017 after ten years of payments.
“You had to fill out paperwork to verify your employment – it seemed easy enough. You had to check the documents that showed you still had loans – pretty straightforward, ”Sandler recalls. “But then, after I first sent the actual PSLF request, they emailed me back and said, ‘Oh, you sent us the wrong form. You will have to start over.
He apparently sent in the wrong workplace verification form, while the correct one on the federal government website was “no kidding … 95% the same.” “
“It was a difference of about a sentence – about 10 words – in the new form,” Sandler said.
When he finally filed his claim, he continued, ED turned it down because he was technically on the wrong payment plan for over a decade.
“I felt betrayed,” Sandler said. “I thought, wow, this is the dumbest thing I’ve ever heard.”
Sandler eventually found out about TEPSLF and requested this because it only required 10 years of payments on any payment plan and 10 years of service.
So he switched to another income-based payment plan and made a few extra (and larger) monthly payments (about $ 500 more) for 12 months and eventually saw his loans wiped out.
“All of your federal student loans managed by FedLoan Servicing have been canceled as part of the TEPSLF opportunity,” the email from FedLoan said. “You no longer have any remaining balance with FedLoan Servicing. “
When he read the email, “I felt like I was losing 30 pounds, it’s easy,” Sandler said. “It was just crazy and it was so good … it was $ 16,000.”
He stressed that the fine print is worth reading if people really want their requests approved.
“This is probably why 99% of people are turned down because they don’t know they need to switch to an income based plan because it’s probably like the smallest font on the website on what to do “Sandler said. .
‘If the government wanted to help teachers … ‘
In early 2020, amid lawsuits against the department and lawmakers denouncing the 99% rejection rate, Education Secretary Betsy DeVos agreed to simplify part of the administrative process.
Prior to this announcement, the Trump administration had taken the opposite direction: in its FY21 budget proposal, it stated its intention to terminate the PSLF program save about $ 1.9 billion over the year.
In May, Democratic senators presented a bill to amend the Higher Education Act; and to revamp the PSLF program to relax some of the convoluted rules that ED said was the cause of the high rejection rate.
The legislation offers a pardon program on several levels. So instead of making 120 payments over 10 years, borrowers would get 15% of their balance returned after 2 years, another 15% of the balance after 4 years, and the full balance after 10 years.
In June, California Attorney General Xavier Becerra filed a complaint targeting the TEPSLF program, calling it “virtually inaccessible” with a “convoluted application process” for borrowers.
“As a borrower, nothing has ever been shared with me,” Sandler lamented. “If the government had wanted to help teachers, you would have thought they would have sent something to every educator who has a loan and said, ‘Here’s something you might want to think about. Here is something you could possibly qualify for 10 years from now. And I would have done it 100%. I would have done that at the time. “
Aarthi Swaminathan and Reggie Wade are reporters for Yahoo Finance.