Biden Administration Launches Inquiry Into Public Service Loan Forgiveness Troubles

Biden Administration Launches Inquiry Into Public Service Loan Forgiveness Troubles


The Biden Administration has initiated a process to potentially fix the troubled Public Service Loan Forgiveness (PSLF) program.

“Unfortunately, for too many public service workers, the [PSLF] program has not functioned the way they hoped it would,” said Julie Margetta Morgan, Senior Advisor and Acting Under Secretary for the Office of the Under Secretary of Education in a statement. “Fixing the PSLF Program has been a priority for the Biden-Harris Administration since day one. While we have identified many opportunities for improvement by talking to experts and borrowers and reviewing our procedures, we want to hear from you as well. That’s why, today, we are issuing a Request for Information about PSLF.”

The Request for Information is a formal process to gather public comments on the PSLF program. The Department of Education indicated that it is specifically seeking information on the features of PSLF are most difficult for borrowers to navigate; the barriers that prevent public service workers from pursuing PSLF or receiving student loan forgiveness under PSLF; and borrower experiences participating in PSLF.

Public Service Loan Forgiveness is a popular federal student loan program whereby certain borrowers can apply to have their federal student loans forgiven after working as a full-time employee for government entities or 501(c)(3) nonprofit organizations for 10 years or more. The program has complicated eligibility criteria, however, which limits relief to borrowers who have specific types of federal student loans on specific types of repayment plans. These requirements have historically not been well communicated to student loan borrowers.

A recent report from the Consumer Financial Protection Bureau (CFPB) concluded that the PSLF program has been riddled with problems. The CFPB “found a number of ways that student loan servicers gave incorrect information to borrowers” about PSLF’s requirements, which resulted in “missteps that could cost consumers thousands of dollars.” The CFPB also pointed to widespread problems with servicers failing to properly certify qualifying PSLF employment, improperly allocating monthly payments, and incorrectly calculating payment amounts. The CFPB concluded that many of these practices “caused or was likely to cause substantial injury” to student loan borrowers.

Largely as a result of these problems, the PSLF program suffers from abysmal approval rates. When student loan borrowers were first eligible to to apply for forgiveness under the program in 2017, PSLF had an approval rate of only 1%. The latest statistics suggest only marginal improvement, with a current approval rate of only 2%. The Department of Education has also been dealing with a substantial backlog of PSLF applications, leading to processing times of six months or longer.

Meanwhile, the Pennsylvania Higher Education Assistance Authority (PHEAA), which operates FedLoan Servicing — the Department of Education’s sole contracted servicer tasked with administering the Public Service Loan Forgiveness program — announced that it would not be renewing its contract with the U.S. Department of Education. As a result, over 8 million student loan borrowers, many of whom are on track for eventual student loan forgiveness under PSLF, will have their accounts transferred to new loan servicers. Such transfers have historically been quite messy.

Advocates for student loan borrowers praised the Department of Education for its announcement. “Today’s action by the Department of Education offers hope for public service workers who have been let down and cheated out of promised debt forgiveness,” said Student Borrower Protection Center Executive Director Seth Frotman in a statement. “For the first time, the federal government is asking those who depend on the program to help decide what comes next. America’s public service workers must take this opportunity to tell President Biden and Secretary Cardona that PSLF is broken and that only sweeping action to deliver debt relief can right a decade of wrongs by the Department of Education and the student loan industry. Public service workers have done their part — now it is time for the Biden Administration to keep the promise of PSLF.”

Earlier this year, a coalition of over 100 civil rights and consumer protection organizations sent a letter to Education Secretary Miguel Cardona, calling on him to use emergency legal authority to audit the PSLF program and to cancel the student loan debt of all student loan borrowers who have completed ten or more years of public service, regardless of their specific compliance with the PSLF program’s complicated eligibility criteria.

The Department’s announcement today comes on the heels of the initiation of a lengthy negotiated rulemaking process to review and potentially overhaul major federal student loan programs, including Public Service Loan Forgiveness. The review could result in substantial changes to PSLF, although any permanent changes are still likely years away.

Borrowers who want to submit comments to the Department of Education regarding PSLF can do so here starting on July 26.

Further Reading

Huge Student Loan Servicing Shakeup: This Major Loan Servicer Is Ending Its Contract

How Student Loan Servicing Changes Will Impact Public Service Loan Forgiveness

Your Student Loan Servicer Is Changing: 7 Steps To Protect Yourself Now

New Federal Report: Student Loan Servicers Often Harm Borrowers Seeking Public Service Loan Forgiveness



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