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Lawmakers call for reform of student loan forgiveness

99% of 54,000 applications from borrowers rejected

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In this Wednesday, April 10, 2019, file photo, Education Secretary Betsy DeVos testifies before the House Education and Labor Committee on Capitol Hill in Washington. A political battle is reheating over a federal program that was designed to cancel student loans for certain public workers but has largely failed to deliver that promise. The program, Public Service Loan Forgiveness, promises to erase federal student loans for public workers who make 10 years of payments while working for approved employers.
In this Wednesday, April 10, 2019, file photo, Education Secretary Betsy DeVos testifies before the House Education and Labor Committee on Capitol Hill in Washington. A political battle is reheating over a federal program that was designed to cancel student loans for certain public workers but has largely failed to deliver that promise. The program, Public Service Loan Forgiveness, promises to erase federal student loans for public workers who make 10 years of payments while working for approved employers. (AP Photo/Manuel Balce Ceneta, File) Photo Gallery

In 2007, the U.S. government made a promise to public service workers: Make 10 years of payments on their federal student loans and any remaining debt would be erased. But officials have largely failed to deliver.

And that’s left lawmakers questioning whether to end the program or try to fix it.

The Trump administration and some Republican legislators see it as a lost cause, arguing that the Public Service Loan Forgiveness program is misguided and has proved too complicated for borrowers to navigate.

But a group of Democrats is pushing to salvage the program, blaming its failure on poor management by the Education Department. The group, which includes six 2020 presidential contenders, proposed a new bill this month that would simplify the rules and expand the offer to a wider swath of borrowers.

“Millions of teachers, social workers, members of the military, nurses, public defenders and countless others have been denied the support they have earned,” said Sen. Kirsten Gillibrand, D-N.Y., one of the bill’s sponsors and a Democratic presidential candidate. “It’s time for Congress to fix this program and create a fairer and simpler process for public servants seeking loan forgiveness.”

Signed into law under President George W. Bush, the program is meant to help college graduates who pursue jobs that often pay modest salaries but serve a greater good, such as careers in teaching, the military or with nonprofit groups. But turmoil has been mounting around the program since last year, when the Education Department revealed that 99 percent of borrowers who applied for loan discharges had been rejected. As of December, just 338 public workers had been granted loan forgiveness out of nearly 54,000 applicants, according to recently released department data .

Most have been denied because they didn’t meet narrow eligibility requirements. Broadly, the program promises to forgive federal loans for public workers who make 120 monthly payments while working for approved employers. But there are caveats: It applies only to certain types of federal loans, for example, and only for borrowers who opted into certain repayment plans.

Thousands of borrowers have said those details were never made clear to them, and many have reported that they were misled by loan servicing companies hired by the government. A scathing 2018 report from the Government Accountability Office concluded that the Education Department had failed to issue clear information to borrowers or loan servicers.

So far, a relatively small number of borrowers have asked for loan cancellations — the window for applications began in October 2017 — but there’s evidence that many more are on the way. Education Department data show that nearly 1 million borrowers have taken the initial steps to have their loan payments counted for the program.

Seeking a temporary fix, Congress last year approved $700 million to erase loans for borrowers who were rejected because they entered into the wrong repayment plan. But Democrats say the Education Department has failed to implement even that stopgap measure.

An April 15 letter from Senate Democrats says the department has continued to send borrowers misleading information about eligibility and has taken an “unnecessarily restrictive approach” to the rules. The letter asks that Education Department officials be ordered in the 2020 budget to notify borrowers who might be eligible for loan relief.

Other Democrats have used congressional hearings to rebuke Education Secretary Betsy DeVos over her handling of the program.

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