'Designed to fail’: Two public servants describe the government's troubled student loan forgiveness program
Congress created the Public Service Loan Forgiveness Program (PSLF) in 2007 to help various types of public sector workers clear their student debt after ten years of loan payments.
However, the management of the program is generally seen as a failure as more than 98% of applications are rejected by teachers, firefighters, police officers and other officials.
Education Minister Betsy DeVos has been sued on multiple occasions for her department's high rejection rate, while Education Department officials claim that Congress has made the rules too restrictive.
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To better understand the PSLF process, Yahoo Finance spoke to two officials who were trying to use the PSLF program to pay their student debts.
San Bernardino County's firefighter, Javier Marquez, uses a water hose to extinguish a massive campfire on the 2200 block of West Lugonia Avenue in Redlands. 2200 block of West Lugonia Avenue on Friday, June 5, 2020 in Redlands, CA. (Irfan Khan / Los Angeles Times via Getty Images)
"It just seemed like it was going to fail"
One is a success story through sheer will, while the other is a story of disappointment.
"It was the most confusing thing I've ever seen in my life, and I'm just being honest," Ami Sandler, a California-based teacher, told Yahoo Finance. "It was the most boring and complicated thing I've ever seen."
Gloria Nolan, who works for a nonprofit in Missouri, repeated the same feeling. "It was a very lengthy process," she told Yahoo Finance. "But I told you I'm lively. And I keep pushing and keep trying to find the answers I need. "
While both Nolan and Sandler rejected their original grant applications, Sandler was eventually granted $ 16,000 of his student loans through another public service award program after struggling with PSLF. Nolan, who still has $ 58,000 in student debt, is currently one of the plaintiffs in a lawsuit filed by the American Federation of Teachers (AFT).
"It just seemed like it was going to fail," Sandler said of the PSLF program. "To be honest, it is. I feel that the system was designed to fail. "
Three men look through the window of the State Capitol building while teachers from across the state of North Carolina march and protest in Raleigh, the state capital, on May 16, 2018. (Photo: LOGAN CYRUS / AFP via Getty Images)
By April of this year, around 150,000 borrowers had applied for the original PSLF program. Around 1.7% of the applications were approved. The average relief amount was $ 66,000.
Much of the reason why so many applications were rejected: the borrower had not made enough qualified payments monthly - all 120 - or information was missing from his records. Or their loans weren't eligible at all.
When Nolan found out about the program in 2008, she said that the agency she was working with told her that she "shouldn't even have this conversation" because she first had to make 120 payments to qualify for the program. When she had done that, the servicer promised to set up lending.
More context to this data - About 80% of direct borrowers' applicants were not eligible for PSLF because they did not have a loan that was entered for repayment. Https://t.co/sN15B9DcpA (1/2)
- Federal Student Aid (@FAFSA) December 27, 2019
Nolan started making these payments, but found after six years that she had the wrong payment schedule and these payments would not count. Eventually, she found out the paperwork and worked with the servicer to sign up for the right payment schedule, and started over.
Nevertheless, their application was rejected. Nolan then learned of the Temporary Public Lending (TEPSLF) - a Congress-mandated extension of the PSLF that removed some of the barriers - and applied to do so.
Nolan's application was also rejected by the TEPSLF. And it's not alone: EDM data from March 2020 shows that 29,728 applications for TEPSLF have been made and around 6% of applications have been approved. The average remaining balance was $ 42,943.
Frustrated, Nolan decided to join the ATF lawsuit to force ED to fix the system.
(Graphic: David Foster)
"I felt cheated"
Sandler went through a similar process. After learning about PSLF and believing that he had qualified to forgive his student debt of $ 53,000, he officially applied for forgiveness in 2017 after making payments for ten years.
“You had to fill out paperwork to check your employment - seemed pretty easy. You had to check the paperwork showing that you still have credit - pretty easy, ”Sandler recalled. “But after that, after I sent the actual PSLF application for the first time, they emailed me back and said, 'Oh, you sent us the wrong form. You have to start over. "
He had apparently sent the wrong workplace review form, while the correct one from the federal government website was "no kidding ... 95% identical".
"It was about a sentence difference - about 10 words - in the new form," said Sandler.
When he finally submitted his application, ED rejected it because he had been technically wrong on the payment schedule for more than a decade.
"I felt cheated," said Sandler. "I thought wow, that's the stupidest thing I've ever heard."
Occupy Wall Street protesters protest on April 25, 2012 in Union Square, New York, against rising student debt. (Photo: REUTERS / Andrew Burton)
Sandler finally learned about TEPSLF and applied for it because only 10 years of payments were required for a payment plan and 10 years of service.
So he switched to another income-related payment plan and made some more - and bigger - monthly payments (about $ 500 more) for 12 months. Finally, his loans were canceled.
"All of your federal student loans managed by FedLoan Servicing were granted on the TEPSLF opportunity," the FedLoan email said. "You have no remaining credit at FedLoan Servicing."
When he read the email, "I just felt like I had just lost 30 pounds," said Sandler. "It was just crazy and it felt so good ... it was $ 16,000."
He emphasized that the fine print was worth reading if people really wanted to approve their applications.
"That's probably why 99% of people are rejected because they don't know they need to switch to an income-related plan, because what you have to do is probably like the smallest font on the website," Sandler said.
"If the government wanted to help teachers ..."
At the beginning of 2020, Education Minister Betsy DeVos agreed to simplify part of the paper cramping process due to lawsuits against the department and lawmakers decoding a 99% rejection rate.
Last but not least! @usedgov announces an optimized form for public lending and TEPSLF certification AND the application form, which combines many separate steps in one, as @SenateDems has required for years. #PSLF https://t.co/Vo4Vluh4Ey pic.twitter.com/82VTjgpAcZ
- Bryce McKibben (@bmckib), January 30, 2020
Prior to this announcement, the Trump administration had gone in the opposite direction: in its fiscal year 21 budget proposal, it announced its intention to end the PSLF program to save an estimated $ 1.9 billion over the course of the year.
In May, the Democratic Senators presented a bill to amend the University Law and revise the PSLF program to simplify some of the intricate rules that ED claimed were the cause of the high rejection rate.
Legislation offers a graded award program. Instead of making 120 payments over 10 years, borrowers would give 15% of their balance after 2 years, another 15% of the balance after 4 years, and the entire balance after 10 years.
For officials who make immense sacrifices, there is no better way to say thank you than to expand the ways to reduce the weight of student debt. They have earned every penny they would receive from strengthening public sector lending under the COVID 19 Crisis Act. pic.twitter.com/LlGwpQnCw1
- Richard Blumenthal (@SenBlumenthal), May 21, 2020
In June, California Attorney General Xavier Becerra filed a lawsuit against the TEPSLF program, describing it as "virtually inaccessible" to borrowers with a "complicated application process".
"There was never anything I was told as a borrower," complained Sandler. “If the government wanted to help the teachers, you would have thought they would have sent something to every educator with a loan and said, 'Here's something you might want to think about. Here's something you could possibly qualify for in 10 years. “And I would have done it 100%. I would have done that back then. "
Aarthi Swaminathan and Reggie Wade are reporters for Yahoo Finance.
Aarthi can be reached at firstname.lastname@example.org and email@example.com. Follow them on Twitter at @aarthiswami and @ReggieWade.
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