Something seems to be going very, very wrong with the federal government’s student loan forgiveness program for public servants.
Under the Public Service Loan Forgiveness Program, Americans can get all of their federal education debt discharged if they spend 10 years working in government or at a nonprofit. The program launched in 2007, which means the very earliest any borrowers could have become eligible was last October. But so far, vanishingly few people have been awarded relief. Last week, the Department of Education reported that it had rejected more than 99 percent of all applications submitted through the end of June. Of the 28,913 applications reviewed, just 289 were approved. And only 96 people actually finished the process of having their loans scrubbed.
The program, while a great deal in theory, has long been dogged by concerns that it was overly complicated and poorly managed, and that as a result, many borrowers would plan their financial lives and careers around it only to discover down the line that they hadn’t met all of the necessary requirements to qualify for loan forgiveness. The fact that tens of thousands of individuals have had their applications turned down this year could be a sign those fears are coming true. “It’s concerning that there are a lot of borrowers out there who thought they were eligible” but weren’t, Clare McCann, an education policy expert at the New America Foundation, told me. (And don’t I know it: My wife is a New York City government employee who is relying on PSLF to eventually retire her voluminous law school debt. I have a vested financial interest in it functioning as advertised.)
So what’s going on? Under the program’s rules, borrowers can become eligible for forgiveness if they make 120 on-time monthly payments on their federal student loans while working full time in public service. This all sounds simple enough. But as the Consumer Financial Protection Bureau reported last year, many people have gotten tripped up on PSLF’s bureaucratic details, in part because student loan servicers have often done a poor job helping them navigate it. They may end up enrolled in the wrong kind of repayment plan (borrowers essentially need to be sign up for income-based repayment) or may not have the right kind of debts (only student loans made directly by the federal government can be discharged; older loans that were issued by private banks with federal backing aren’t eligible). As a result, some borrowers spend years making payments on their debts thinking they’re making progress toward getting them discharged, when in fact they’re not.
It’s also a bit murky what jobs actually count as “public service.” While it seems fairly clear that government workers and employees at 501(c)(3)s are eligible, the Department of Education has reversed itself on whether workers at some other kinds of nonprofits may qualify. That move prompted a lawsuit from the American Bar Association on behalf of some of its staff.
This all gets at the fundamental problem with PSLF: It seems almost impossible to know with 100 percent certainty whether you qualify for forgiveness until you’ve already spent 10 years working toward it. The best thing borrowers can do is send in paperwork to have their servicer certify that their job makes them eligible for the program, and that they’ve made a certain number of payments toward forgiveness. As of last September, more than 739,000 individuals had submitted such paperwork. But in a court filing last year, the department said that students shouldn’t necessarily rely on those certifications. (I know!)
It’s not clear exactly why the government turned down so many of the borrowers who have applied for forgiveness so far. The Department of Education said it rejected 8,103 applications because they were incomplete. Some of those individuals may qualify once they finish filling in all the necessary information on their forms. But the government reports that another 20,521 applications were declined because the person didn’t meet all of the PSLF’s complicated requirements.
Which requirements did people get tripped up on? The report doesn’t say. When I asked the Department of Education if they could provide any additional information, a spokesman referred me to an unhelpful spreadsheet tab that included a short description of the program’s rules, and a link where borrowers could get more basic information about applying.
There are at least a few possibilities about what’s going on, some of which are less worrisome than others. At least some borrowers may have meant to submit certification paperwork and accidentally applied to have their loans forgiven too early. Others may have mistakenly thought they’d made their 120 payments just because they lost track, or applied without having checked all the boxes with the hope that no one would notice.
It’s also possible that some borrowers are getting rejected intentionally. Earlier this year, Congress set aside a pool of money to forgive the student loans of borrowers who didn’t qualify for PSLF because they were enrolled in the wrong kind of repayment plan. In order to apply, though, the Department of Education website says they need to already have been rejected from the normal program first. In a letter to Education Secretary Betsy DeVos, Democratic senators including Tim Kaine from Virginia and Sheldon Whitehouse of Rhode Island said those instructions were actually incorrect, and criticized the department for placing “unnecessary hurdles” in front of students seeking forgiveness. (When I reached out to their offices about the most recent data, Kaine called them “extremely concerning” while Whitehouse said he was “disappointed” in how few students the program was helping.)
But the point is, while I’m sure there was a chunk of people who deserved to be denied, we don’t really know what’s causing so many to get turned down. “The real question is why they were rejected,” said Ben Miller, senior director for postsecondary education at the Center for American Progress. “If people who were making 10 years of payments thought they were eligible, and then got denied, then we may have a major problem on our hands.”
Have you had trouble with the Public Service Loan Forgiveness Program? Have you had your application denied? Slate wants to hear your story. Email: email@example.com.