The premise of the plan is simple: Public service jobs, rural doctors, public defenders and the like are all essential for the common good. But education for those jobs is expensive. To incentivize students to pursue those career paths, the government introduced a plan to forgive the loans for qualifying borrowers who pay faithfully for 10 years.
That plan is the Public Service Loan Forgiveness (PSLF) plan signed into law in 2007 by President George W. Bush.
"The program’s appeal was that it offered a clear path for people who struggled to pay back loans, or struggled to envision how they would ever pay them off without abandoning public service jobs for higher-paid positions elsewhere," Ryann Liebenthal wrote in a new piece for Mother Jones.
But how does someone know if they are in fact a "qualifying borrower?" What happens if months of payments aren't actually contributing to that 10-year requirement, thanks to confusing procedure and private servicing errors? These are the questions that listeners and guests alike grappled with Monday On Point, just after news came down that the federal official in charge of protecting student borrowers from predatory lending practices had stepped down.
What started as a simple plan has morphed into a complex, fraught process that has kept many PSLF enrollees from actually benefitting. That's thanks to a slew of errors and delays from FedLoan (the company that handles loan repayment for about one-third of debt), and the corresponding government dismantling of the checks on these kinds of companies.
We heard from listeners facing these loan forgiveness issues.
"I have been working in the public service for more than 10 years, but only my time after 2007 [counts toward forgiveness] because that is when the 10-year-clock started ticking," our listener John from Columbia, Maryland, said in an email. "Another Catch-22 is the repayment plan structure. I just submitted my paperwork at the end of 2017 only to find out a bulk of my payments do not qualify because the payment structure is not one of the approved structures. The only qualifying repayment plan would have me triple my payments and have my loan paid off in seven years anyway."
Our caller Larry, from Greenville, Michigan, emailed in to point out the unfairness of forgiveness qualifications being limited to full-time teachers and public servants and not available to adjunct professors.
"I have no recourse but to continue my full payment schedule, even though I am now retired, on Social Security, a tiny pension and still serving my community as city councilor, and on several boards and committees that serve my community," he said. "I will continue to pay on this loan until I am well into my 70s, with no relief, despite the fact that I have already paid back all of the principal. I have never missed a payment since I took the loan in 2003."
Our caller Brooke from Rochester, New York, explained that each year she and her husband submit paperwork for re-certification with the PSLF plan, and that they make all payments on time.
"This year is the first time in the six years that I have been paying on it consistently that they have processed my paperwork on time, without having to fax or re-fax our paperwork," she said. "Each time, they fail to base our payments on the fact that we both have student loans, which makes our payments double what we can afford. Each time this has happens, they go ahead and easily forbear the loan for two months, so basically, because of their inability to service my loan properly, over the last five years, they have added almost a year onto the amount of time that I have to pay on the loan before it is forgiven. Even if I make payments on time during forbearance, they do not count towards my qualifying payments. He has been paying since 2009 and was told that he still has about five years' worth of payments left to go before they may be forgiven.
"Every year we are sickened when we get the email saying that we have to submit our annual paperwork. Every year, because of the high interest on our loans, we sink further into debt. If it turns out that we will not ever get our loans forgiven, there is little hope for us financially. We went to graduate school to get a little further ahead than our parents were able to, because, in the end, we are going to find ourselves caring for them as we get older and it turns out that we aren't any better off."
On top of the organizational chaos is the fact that the current administration is holding loan servicers less accountable than before.
"Under the current administration, the Department of Education has rescinded policy memos and guidance that were supposed to create at least some incentives for servicers to improve what they were doing with student loan borrowers," lawyer Adam Minsky said. "Can the system be simplified? I think that's a more complicated question. The Department of Ed certainly doesn't have the capacity to handle this internally. So how do we create a more efficient and consumer-oriented servicing system? That's going to take a lot of input."
All of this leads to the question of whether or not the federal government should be involved with this business at all. Minksy points out, though, that we see a lot of these same issues with completely private loan servicers, too.
"I don't know what the solution is," he said, "but I think part of the answer has to be a robust oversight authority, whether that's the Consumer Financial Protection Bureau or a division within the Department of Ed. These servicing companies need to be held accountable for their actions."