The Public Service Loan Forgiveness program could have been a slam dunk for millions of borrowers. The qualifications seem simple enough: work in the public sector for ten years, and all your federal student loans are forgiven.
But now, just over ten years since the program was established, the vast majority of enrollees who have completed their ten years of service are seeing their applications denied, often without much explanation.
A recent report from our partners at the American Federation of Teachers in collaboration with the Student Borrower Protection Center details the extent of mismanagement of the PSLF program — and how it can impact borrowers’ financial health for years to come. Read on for key takeaways from the report.
Where did PSLF go wrong?
Established in 2007, the Public Service Loan Forgiveness program aims to provide public service workers with total forgiveness on their federal student loans after completing certain requirements.
Borrowers in the program are required to complete ten years of full-time employment in a public service field — whether that be as a public school teacher, nonprofit worker, or any of the many other qualified career paths. At the end of those ten years, the remaining balance on their federal student loans is forgiven.
This program was supposed to be a win-win for everyone. Our society depends on public service workers. We want them to have the right skills and knowledge to perform their jobs well, which often requires them to get costly degrees in specialized fields. But these positions often don’t pay enough to cover the costs of their student loans — which is where PSLF should come into play.
Yet now the PSLF program has a nearly 99% denial rate. According to AFT and SBPC’s report, that vast disparity is fueled by mismanagement and disorganization within the program.
Borrowers often find their applications denied because, according to PSLF, their employers do not qualify for the program — even if they meet the qualifications on paper. Since 2012, borrowers have been told more than 50,000 times that their employer was ineligible for PSLF.
Some borrowers who had their employment certified as eligible for PSLF were later reconsidered and rejected. Others have had their forgiveness denied due to their employer’s ineligibility, only to later see their colleagues in the same job approved.
And when borrowers find their employers rejected, there is no formal process for appealing the denial if they believe it was made in error. In fact, they’re often sent denials without much explanation. So there’s no clear path forward for rejected applicants to correct missteps and get back on track towards forgiveness — and no way for other borrowers to learn from these experiences.
Plus, the program’s ease of accessibility varies based on a borrower’s type of loans. Another report released from AFT and SBPC details the program’s patchy track record of extending relief to borrowers covered by the Federal Family Education Loan (FFEL) Program. Despite their eligibility for the program, thousands of FFEL borrowers have been misled about their right to PSLF as well as the steps necessary to apply.
How will this impact borrowers?
The mismanagement within the PSLF program causes more than just frustration for borrowers. Many PSLF participants have built their careers, budgets, and life paths around the promise that their debt would be wiped out after ten years.
For those public service workers — including teachers, nurses, military veterans, and other traditionally lower-wage positions — loan forgiveness is not just a drop in the bucket. The amount of loan forgiveness per PSLF applicant averages out to just over $60,000.
Plus, many of these borrowers are enrolled in income-driven repayment (IDR) plans. Under IDR plans, monthly payments are reduced to 10-20% of discretionary salary. If their debt-to-income ratio is high, this could mean that their interest may still be growing. That’s fine if they can get it all forgiven — but if not, they may end up on the hook for more debt than they originally agreed to.
Also, not for nothing, but seeing how PSLF is playing out may dissuade current students from choosing a career path in public service. Down the line, this could result in a public service sector that is less accessible to professionals from all backgrounds, leading to a less diverse workforce.
How can we fix this?
If you are one of these borrowers who has had their path to loan forgiveness rocked by PSLF, rest assured that this isn’t necessarily the end of the line. But until the Department of Education takes substantive action to reform the PSLF system, this will just keep happening to more borrowers.
In their report, the AFT and the SBPC recommend clear, actionable steps that can lay the groundwork for a more effective PSLF program:
- “Issue new rules to simplify and expand the definitions of ‘public service,’ ‘public service job,’ and ‘public service organization.’” This is possibly the easiest step the Department of Education could take to improve PSLF, but it could have significant impacts on borrowers’ expectations for the program.
- “Provide transparency to borrowers around employment certification denials.” When borrowers are told that their employers did not meet requirements, they are given little explanation why. Not only does this cause extreme frustration, but it also conceals information that is essential to the future success of the program. If a borrower is not approved for forgiveness, they should (at the very least) know why.
- “Establish a straightforward appeals process that all borrowers and organizations can access when a public service organization is rejected.” Far too many borrowers have spent a full decade stringently following the program guidelines, only to be denied due to an error by the PSLF. And when they’re denied, there’s no clear path forward to appeal that decision. A mistaken rejection should not be the end of the road for these borrowers.
- “Publish a comprehensive, up-to-date registry of public service organizations that have been certified as qualifying employers under PSLF.” This registry would be an invaluable resource for borrowers, employers, and Department of Education staff alike.
The good news? The Department of Education has already taken steps to address some of the issues identified in the report. Still, there is a ways to go towards creating a more inclusive, effective program.
Summer is here to help
As always, we at Summer stand firmly on the side of borrowers. As borrowers navigate PSLF, we are here to make the process more manageable.
Here are some ways Summer is helping borrowers navigate PSLF:
- Our Borrower Success team are experts on the program. We draw on our experience working with thousands of borrowers to provide personalized guidance. When the application process gets confusing, we are here to walk borrowers through each step of the process.
- When the program is updated, our product is updated too. Our borrower success team is continually monitoring for any updates to the program — and we make sure our borrowers are kept up-to-date on any new developments.
- We can take the headache out of contacting the department. When borrowers need to reach out, we streamline the process to get them in touch with the right people fast.
Regardless of where the PSLF program goes from here, our commitment to borrowers is stronger than ever.