An initiative designed to help college graduates who choose low-paying public-service jobs pay off their student loans is run in a confusing and piecemeal fashion, according to a government report. As a result, many borrowers are left wondering whether their federal student loans can be forgiven.
Only a small number of people have had their debt discharged under the program, according to the Government Accountability Office, despite large numbers of college graduates applying for loan forgiveness.
The Public Service Loan Forgiveness program was introduced in 2007 during the administration of President George W. Bush to encourage students to pursue public-service careers without being hobbled by debt. A year ago, the first borrowers became eligible for forgiveness after working for a decade in public-service jobs and making regular payments.
While proponents say the program helps college graduates to become much-needed teachers, public defenders and police officers rather than seeking lucrative private-sector jobs, it has been derided by critics as an expensive handout for doctors and lawyers and others in professions with significant earning potential.
The GAO said nearly 1.2 million borrowers had asked for their jobs and loan repayments to be certified as eligible under the program as of April, and nearly 900,000 of those requests were certified.
But of the nearly 20,000 who asked for the balance of their loans to be wiped out, only 55 had been granted loan forgiveness as of April.
“The GAO report makes clear that the Trump administration’s failure to faithfully implement the Public Service Loan Forgiveness program is causing widespread confusion and uncertainty for public servants,” said Rep. Robert “Bobby” Scott, Virginia, the ranking Democrat on the House Committee on Education and the Workforce. “Despite the administration’s consistent hostility toward this popular program, it is still obligated to ensure that teachers, social workers, first responders and others who enter a career in public service are granted the debt forgiveness as federal law requires.”
Scott called on the Education Department to swiftly comply with the GAO recommendations so talented people will continue to pursue careers that strengthen communities.
The department posted more recent data last week saying that by the end of June, 96 people had been granted loan forgiveness.
An Education Department spokesman said Federal Student Aid conducts regular outreach to borrowers about the Public Service Loan Forgiveness program, including social media, online and in-person events, and the website StudentAid.gov, which is the primary entry point for information for students and parents. He also said Federal Student Aid officials contact borrowers who are denied public-service loan forgiveness because they are not in the right repayment plan “to make them aware of the Temporary Expanded Public Service Loan Forgiveness opportunity.”
The GAO report concludes that although the Education Department has made efforts to inform borrowers, the large number of requests that are denied suggests many borrowers do not understand or are not aware of the requirements.
The GAO noted the Education Department added information online and reached out to schools after a 2015 report recommended efforts to clarify program requirements, but the GAO was told of continued confusion from borrowers. Recently, the department was given $2.3 million to conduct more outreach to help ensure borrowers are meeting program requirements.
There is no single document or manual to explain the requirements, the report finds; rather, information is dispersed by the department “piecemeal,” with guidance that could affect hundreds of borrowers often coming by email. The lack of a central source of guidance risks varied interpretations and inconsistent implementation, the GAO warned.
One point of confusion is over which employers qualify, according to the report, leaving some borrowers uncertain about whether their jobs are eligible for loan forgiveness. According to the report, “some borrowers may be required to make more payments than necessary before receiving loan forgiveness, while others may be improperly approved for forgiveness.”
Department officials responded to a draft version of the report this year, agreed with the GAO recommendations and said they planned to create a comprehensive guide.
Separately, the loan forgiveness program is being challenged in court. On Wednesday, a U.S. District Court judge held a hearing in a case brought by the American Bar Association in 2016, which argues that the Education Department unfairly changed the program’s rules, leaving people who thought they were eligible stuck instead with hundreds of thousands of dollars in debt.
One of the plaintiffs in that case, Jamie Rudert, graduated from law school in 2010 happy to be able to take a job with a nonprofit organization that helps disabled veterans even though he owed $120,000 in tuition debt. His salary was about $52,000 a year, so if he did not have the possibility of loan forgiveness, he said he would have sought a job at a private firm or elsewhere. He quickly applied to ensure that his employer qualified. With that assurance, he followed the other requirements, only to receive a letter when he went to work for a similar nonprofit group, retroactively taking away the approvals, he said.
“I did all the complicated stuff you’re supposed to do,” Rudert said, “getting on payment plans, consolidating loans. . . . I understand how it works, and I still got screwed over.”
He has continued in the second job, helping veterans with spinal cord injuries get benefits, and has continued making his loan payments. But he hasn’t bought a home, uncertain of his financial future, he said. “I’ve put a lot of decisions on hold.”
In the Education Department’s response to the lawsuit, attorneys say Rudert spoke with a loan-servicing representative in 2016 who told him his employer might not qualify for the program because it provided partisan legal assistance.
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