Public Service Loan Forgiveness Becomes Another Trump Tragedy for Student Loan Debtors

It is almost mindblowing how much the Betsy DeVos Department of Education under Trump is just screwing over student loan debtors. The Borrower Defense to Repayment program that is supposed to forgive student loans of defrauded student loan debtors have effectively stopped processing valid claims. The Department of Education is changing the rules all over the place and programs people enrolled in on good faith are proving to be slippery slopes of promises.

Take the Public Service Loan Forgiveness (PSLF) program. Under this program created during the Bush administration, the Congress created a promise to forgive federal student loan debt for people who work in fields for the public benefit. The idea was to encourage students to get higher education in order to care for Americans.

To qualify for PSLF the debtor had to work for a nonprofit providing charitable services or in fields like serving in law enforcement, public safety, nursing, legal aid, etc.

The program started in 2007, required 120 conforming payments, and the first time people would be eligible to have their loans forgiven would be October 2017. Even with knowing for a decade this program was coming, the current Trump administration has seemingly intentionally thwarted the process of forgiveness.

According to a letter dated October 16, 2018, a year after forgiveness claims were to be processed, the Trump administration has received 28,000 applications for forgiveness and approved only 96.

The letter from Congress also said, “Not only has this Administration ignored the mounting warning signs about PSLF as the October 1, 2017 date for accepting applications approached, but it has actively reduced oversight of student loan servicers—thereby contributing to the current problems in student loan servicing.”

The Government Accounting Office examined the program as it is being handled by the Department of Education and said few borrowers have been granted forgiveness. They went on to say, “Education does not have a comprehensive document or manual to provide the PSLF servicer guidance and instructions, which PSLF servicer officials said makes it difficult to effectively administer the program and provide consistent service to borrowers. Instead, Education’s guidance and instructions to the PSLF servicer are dispersed in a piecemeal manner across multiple documents, including Education’s original contract with the servicer, multiple updates to the contract, and hundreds of emails.” – Source

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The report also said, “In one instance, for example, Education staff incorrectly identified what they thought was an error in how the servicer was certifying borrowers that were employed part-time because they were not aware of the most recent guidance that other staff at Education had emailed the servicer on the topic.”

As of April 2018, 890,000 people had undertaken the non-mandatory employment certification process. And even when they received a positive response from the servicer tasked with approving these employment certification forms, the Department of Education says that does not matter.

I’ve heard from people who have made a decade worth of payments, only to be told they were short on the required 120 payments and they did not count towards forgiveness. One reader even told me their payments were what was shown on their statements but was later told they were less than a dollar short each month and would not count.

This lack of payment clarity is not unique. It’s another problem area the GAO investigation speaks about.

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The GAO report says, “Education is responsible for establishing the administrative structure necessary to fulfill the PSLF program’s goal of encouraging individuals to enter and continue in public service employment by providing loan forgiveness to eligible borrowers who meet program requirements.”

Education Efforts to Crash PSLF Run Deep

But it looks like the Department of Education efforts to not stand behind the PSLF program run deep. It is reported, “During a meeting at the U.S. Department of Education last week, a department official made disparaging comments about the Public Service Loan Forgiveness program and said it did not support the program.” – Source

The reporting went on to say, “At a National Youth Serving Institutions Stakeholder meeting at the Department of Education last week, Diane Jones, principal deputy under secretary…[said] if the department were not legally obligated to provide loan forgiveness, they would not because the department does not support the program. She said the department would act on its legal obligations, however. The principal deputy under secretary said the department would not encourage people to become eligible for the program, according to the Generation Progress member who attended the meeting. Another source in the room confirmed the details the staff member of Generation Progress described.”

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The true tragedy here is students embarked in education to serve the public based on a promise by the government to forgive their student loans after meeting the terms of the program. To get the benefit of the PSLF program, debtors placed their loans into income-driven repayment plans to reduce their monthly payments. When their PSLF applications are rejected or not properly processed the debtor is left with an exploded balance due because of the way income-driven payment plans work.

The result is those student loan debtors that embark on serving the public for a decade in lower-paying professions, will be left with no forgiveness, inflated balances due, and no way out of the debt.

The current Department of Education may not like the program but more than a million students believed the promise.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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