Education Ministry plans to overhaul distressed civil service loan forgiveness program

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A struggling student debt relief program for teachers, police officers and other public service workers will soon have the makeover borrowers have been asking for.

Next week, according to a source familiar with the plans but not authorized to discuss them publicly, the US Department of Education will unveil a major overhaul of the Public Service Loan Forgiveness (PSLF) program, which has been a magnet to confusion, errors and mismanagement since its inception in 2007.

The changes will be in two phases: a long-term renovation to make the program easier to navigate, achieved through the federal process known as regulation, and a temporary move using the executive branch of the department to retroactively relax program rules. to immediately help thousands of affected borrowers.

Confused requirements led borrowers to be denied

Borrowers must meet a handful of often confusing requirements to be eligible for the PSLF:

  • The borrower must be employed in the public sector.
  • The borrower must make 120 student loan payments on time.
  • The borrower must participate in a qualifying repayment plan.
  • The borrower’s loans must be of a specific type, called federal direct loans.

For borrowers who hoped for an easy route to loan cancellation, in the past these demands have acted like the creaking planks of a rope bridge and, as NPR reported, each plank took a plunge. crowd of frustrated officials.

For example what is Public Service? According to the program’s Department of Education home page, public service includes anyone working for “a United States federal, state, local, or tribal government or nonprofit organization.”

But in a 2018 review, the U.S. Government Accountability Office found that when borrowers called the company running the PSLF to make sure their jobs were qualified, they sometimes didn’t get a response – because the Ministry of Education had not given the company a list of eligible candidates. employers.

More recently, the Student Borrower Protection Center, a nonprofit that has advocated for PSLF reform, found evidence that thousands of borrowers in skilled public service jobs were nonetheless barred from claiming remission. loan.

The repayment plan presents another hurdle, with many borrowers making their payments on time, believing (and often being told by their loan officer) that they were on the road to forgiveness, only to find later that these payments were not made. ‘had not counted for the PSLF, as they had been made under the wrong repayment plan. In 2018, Congress created an emergency extension of the PSLF in an attempt to address this issue.

And then there are the loans themselves. When the PSLF was created, the lion’s share of federal student loans was known as Federal Family Education Loans (FFELs) – loans typically issued by banks but backed by the U.S. government. In 2010, the FFEL was closed and all new loans were made under the pre-existing federal direct lending program. While direct loans are eligible for PSLF, FFEL loans are not.

Many borrowers with FFEL loans spent years in the civil service, only to find that their payments did not count for the PSLF. Their only way to qualify was to consolidate their debts into direct loans. But this consolidation comes at a cost. Imagine a nurse works for three years and makes 36 loan repayments before realizing that her FFEL loans are ineligible. When she consolidates, her path to 120 payouts does not start at 37. It starts at zero.

In an article published in June, the federal student aid office of the Department of Education admitted that “over the years the PSLF has created a lot of confusion and frustration. Millions of people are employed in the civil service, including teachers, firefighters, law enforcement and some nonprofit workers, yet to date only around 5,500 borrowers have received PSLF discharges, for a total of $ 453 million. ”

Now the ministry plans to use its executive power to help thousands of skilled civil servants get back on the path to canceling their loans.

Immediate fixes for current borrowers

According to the source familiar with the Ministry of Education’s plans, the agency will provide a temporary opportunity for anyone working in the public service to obtain previous loan payments recorded in the PSLF – even if those payments were intended for FFEL loans disqualified.

And they don’t just extend the rules regarding the type of loan. Borrowers will also receive credit for payments made under the wrong repayment plan, whether or not the payment was made on time.

To benefit from this recovery, borrowers must apply for a PSLF before October 31, 2022.

In addition, for borrowers who have been asked to consolidate older loans into direct loans, but who had already certified their years of public service, the ministry plans to automatically adjust the number of their payments, granting them a credit for payments made before consolidation. In the case of this hypothetical nurse, that means her payment account would not be reset; it would now include these 36 earlier payments.

According to a source close to the details, 60% of borrowers who are not yet eligible for the PSLF because they have not made enough qualifying payments also have – or had at some point had – non-qualifying loans. This decision to grant them credit for the payments of these previously ineligible loans could accelerate some borrowers who had all but given up on canceling their loans.

Even borrowers who have not certified those first years of public service will be able to do so retroactively and receive credit for those first FFEL payments.

For military service members, the department will also allow any months spent on active service to count towards the PSLF, even if their loan payments have been suspended.

Details of the department’s plans, obtained by NPR, suggest tens of thousands of borrowers could potentially see their loans canceled, while hundreds of thousands could at least see a drop in the number of payments they need to make.

The ministry is expected to provide more information next week to help borrowers navigate these changes.

Long-term fixes are also underway

In addition to using its executive power to help borrowers obtain credit for disqualified payments, the department also plans to use the rulemaking process to overhaul the PSLF in the long run.

Potential changes include simplifying the rules for qualifying payments and granting credit to borrowers even if payments are late or made in installments.

The department also wants to extend credit to borrowers for the PSLF even though under certain circumstances their payments have been suspended, including active duty members and borrowers facing economic hardship.

Even the definition of the public service needs to be reviewed. Under current rules, many nurses and health care workers are not eligible for the program because they work in for-profit hospitals, for example.

Recognizing that borrowers’ refusals under the PSLF program can be frustratingly opaque, the ministry also wants to create a formal review process so borrowers can explain themselves clearly and correct errors if necessary.

Borrowers have expressed frustration with the PSLF

The planned changes to the PSLF come after a sustained surge of several years on the part of borrower advocates. In September, more than 200 organizations – representing students, teachers, public health officials and the military – sent a letter to US Secretary of Education Miguel Cardona, urging him to “take administrative action to ensure that he is ensure that all civil servants who have completed a decade of service receive the debt relief they have been promised … This action must be immediate and must not wait for the Ministry of Education to draft new rules. ”

The letter was edited by the Student Borrower Protection Center and co-signed by the two largest teachers’ unions in the country.

The Biden administration had previously signaled its willingness to overhaul the PSLF, which was intended, in spirit, to encourage borrowers to work in the civil service.

“We will repair the forgiveness of the civil service loans,” Cardona told NPR two days before receiving the aforementioned letter. “This system is broken. We are going to overhaul and fix it and make it work for the students.”

In July, the ministry released a public request for information on the program. In about two months, the request generated more than 48,000 comments.

“I spent years in the wrong pay-for-nothing plan,” wrote Scott Friedman of Los Angeles. “Everything is broken.”

Friedman echoes many comments when he writes: “It should be simple – if you can show that you have worked in the public sector for 10 years, that should be enough.”

“This program has been plagued with misleading misinformation from the start,” a comment from Arizona firefighter Russell Smith read. “None of us in the public service” expects “this, yet it was offered as a government program and our government should do everything in its power to address it.”

Now it appears that is what the US Department of Education intends to do.

Copyright 2021 NPR. To learn more, visit https://www.npr.org.

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