NPR Exclusive: The Public Service Loans Program is being revised
A troubled debt relief program for teachers, police officers and other civil servants will soon receive the revision requested by borrowers.
According to a source familiar with the plans but not empowered to publicly discuss them, the U.S. Department of Education will next week unveil a major overhaul of the Government Loan Funding Program (PSLF) that has been a magnet for confusion. Error and mismanagement since its inception in 2007.
The changes will come in two phases – a long-term renovation to make it easier to navigate the program, which will be achieved through the federal process known as rulemaking, and a temporary postponement using the Ministry’s Executive Authority to retrospectively apply the rules of the program loosen up to instantly help thousands of affected borrowers.
Confusing requirements resulted in borrowers being rejected
Borrowers have to meet a handful of often confusing requirements to qualify for PSLF:
For borrowers hoping for an easy path to lending, these requirements act like the creaky wooden boards of a rope bridge, and as reported by NPR, every plank sent a bunch of frustrated officials down.
For example what is Public service? According to the program Ministry of Education website, Public service includes anyone who works for “any federal, state, local, or tribal government or nonprofit organization”.
but in a review of 2018, the U.S. Government Accountability Office found that borrowers sometimes got no response when they called the company that managed PSLF to make sure their jobs were skilled – because the Department of Education hadn’t given the company a list of eligible employers .
More recently, the Student Borrower Protection Center, a nonprofit that has been vocal about PSLF reform, has Evidence found that thousands of borrowers working in skilled public services have been prevented from applying for lending.
The repayment schedule is another obstacle as many borrowers make payments on time because they believe (and are often told by their loan service provider) that they are on their way to forgiveness, only to find out later that those payments do not count towards the PSLF because they had been paid under the wrong amortization schedule. In 2018, Congress created an emergency extension to the PSLF to try to address that.
And then there are the loans themselves. When the PSLF was created, the lion’s share of federal student loans were known as Federal Family Education Loans (FFEL) – loans usually given by banks but supported by the US government. In 2010, FFEL was closed and all new loans were granted under the already existing federal direct loan program. While direct loans do qualify for the loan forgiveness program, FFEL loans do not.
Many FFEL loan borrowers spent years in the public service only to later find that their payments did not count towards the PSLF. Their only way to qualify was to consolidate their debts into direct loans. But this consolidation comes at a price. Imagine a nurse working for three years – making 36 loan payments – before realizing that her FFEL loan is out of the question. When she consolidates, her path to 120 payments starts from zero, not 37.
In a June posting, the Department of Education’s Federal Student Aid Office admitted that “PSLF has created a lot of confusion and frustration over the years. Millions of people are employed in the public sector, including teachers, firefighters, law enforcement and some community service workers, but only about 5,500 borrowers” . have received a total of $ 453 million in PSLF layoffs to date. ”
Now the department plans to use its executive powers to help thousands of skilled officials get back on track with lending.
The instant fixes for current borrowers
According to a source familiar with the Department of Education’s plans, the agency will provide anyone in the public sector with a temporary opportunity to have previous loan payments credited towards the PSLF – even if those payments were used on disqualified FFEL loans.
And the department isn’t just expanding the credit type rules. Payments in the wrong repayment schedule will also be credited to the borrower, regardless of whether the payment was made on time.
To qualify for this do-over, borrowers must apply for PSLF before October 31, 2022.
Additionally, for borrowers who should pool older loans into direct loans but previously certified their years in public service, the department plans to automatically adjust their payments and credit them with payments prior to consolidation. In the case of this hypothetical nurse, it means that her payment counter would not be reset to zero; it would now include these 36 previous payments.
According to a source familiar with the details, 60% of borrowers who are not yet eligible for PSLF because they have not made enough qualified payments also have – or have had – ineligible loans. This move of lending them credit in exchange for payments on those previously ineligible loans could speed up some borrowers who had almost given up on loan relief.
Even borrowers who did not certify these early years of public service can do so retrospectively and receive credit for those early FFEL payments.
For members of the military, 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 plans from the department that NPR received suggest that tens of thousands of borrowers may see their loans canceled, while hundreds of thousands could see at least a decrease in the number of payments they have to make.
The department is expected to provide more information next week to help borrowers address these changes.
Long-term fixes are also on the way
In addition to using its executive powers to help borrowers get loans for disqualified payments, the department also plans to use the rulemaking process to revise PSLF over the long term.
Changes that may be made include simplifying the rules for qualified payments and granting credit to borrowers even when payments are made late or in installments.
The department also wants to credit PSLF borrowers if their payments have been paused under certain circumstances, for example in the case of active service members and borrowers in economic distress.
The definition of the public service is also up for review. Under the current rules, many nurses do not qualify for the program because, for example, they work in for-profit hospitals.
Given that the denials of borrowers under the PSLF program can be frustratingly opaque, the department also wants to create a formal review process so that borrowers can explain themselves clearly and correct errors if necessary.
Borrowers have voiced their frustration over PSLF
The expected changes to the PSLF come after a sustained, year-long push by advocates for borrowers. In September, more than 200 organizations – representing students, teachers, public health workers and members of the military – sent a letter to US Secretary of Education Miguel Cardona, urging him to “take administrative steps to ensure that all public sector workers who have served a decade receive promised debt relief … This action should and must be immediate not to the Ministry of Education to write new rules. ”
The letter was directed by the Student Borrower Protection Center and co-signed by the two largest teacher unions in the country.
The Biden government had already made clear its will to revise the PSLF, which was basically intended to encourage borrowers to work in the public sector.
“We’re going to fix government loan forgiveness,” Cardona told NPR two days before receiving the above letter. “This system is broken. We’re going to overhaul and fix it and get it working for the students.”
In July, the department published a public Information request about the program. In about two months, the request generated more than 48,000 comments.
“I’ve spent years in vain on the wrong payment plan” wrote Scott Friedman from Los Angeles. “The whole thing is broken.”
Friedman echoes many of the comments when he writes, “It should be easy – if you can show you’ve worked in the public sector for 10 years, that should be enough.”
“This program was plagued with misleading, inaccurate information from the start,” reads a comment by Arizona firefighter Russell Smith. “None of us in the public service ‘expect’ this, but it was offered as a government program and our government should do everything in its power to get it right.”
It now appears that the US Department of Education intends to do so.
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