Big changes are coming to the federal government’s public service loan forgiveness program. The loan forgiveness program is “an important, but largely unmet” promise to people who serve their communities, White House Press Secretary Jen Psaki said this week.
“Fixing this program has been a priority for this administration from the first day,” she added, saying that in the next few weeks, the U.S. Department of Education will announce major reforms through a series of executive actions.
Signed into law by then-President George W. Bush in 2007, the PSLF program allows non-profit and government employees to have their federal student loans canceled after 10 years, or 120 payments. The Consumer Financial Protection Bureau estimates that one-quarter of American workers could be eligible.
However, the program has been plagued by problems, making people who actually get their debt forgiven a rarity. Under 5% of borrowers who’ve applied for the relief have qualified.
Instead, hundreds of thousands of people in public service jobs believe that they’re paying their way to loan cancellation only to discover at some point in the process that they don’t qualify for one technical reason or another.
“It’s outrageous,” said Barmak Nassirian, vice president for higher education policy at Veterans Education Success. “Borrowers have to get a PhD in repayment plans to understand it.”
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Most commonly, the type of federal loans borrowers hold, or the repayment plan they enrolled in, make them ineligible. As part of its upcoming changes, the Biden administration will at least temporarily allow borrowers who’ve been rejected for these reasons to get their payments counted, NPR reported this month.
Many improvements to the program can be done by President Joe Biden and the Education Department, experts say. Congress wouldn’t be needed.
“They could fix whatever is causing eligible payments to not be counted,” said higher education expert Mark Kantrowitz. “I’ve seen several examples where borrowers had made 120 qualifying payments yet the loan servicer said they had made only half that number.”