This week we learn from the GAO that more than 1 million public servants have applied to certify their work and their student loan payments as qualifying for Public Service Loan Forgiveness. The number seems to be growing by about 300,000 annually. These teachers, child care workers, firefighters, soldiers, police officers, nurses, prosecutors, and public defenders, are facing a gauntlet of needlessly complex and exacting rules to receive the debt relief Congress promised them.
According to the GAO report, 40% of the tens of thousands of rejected applicants were found not to have made the required 120 monthly payments. The Department of Education's regulations for the program, 34 CFR 685.219, require that there be 120 "separate" monthly payments, that every payment be made within fifteen days of the due date, in the required amount, and under a qualifying repayment plan. This creates all sorts of problems, for example, when a servicer delays posting a timely payment until day 16, or a borrower has an emergency and makes 2 payments in a lump sum, or especially for borrowers who receive employer or law school assistance in making their payments. The "every month by day 15" rule was not written by Congress. The statute, Section 455(m) of the Higher Education Act, requires only that public servants have made 120 monthly payments under a qualifying plan. A less procrustean payment rule would be an easy regulatory fix.
Only Federal Direct loans qualify, not private or guaranteed loans. However, borrowers can use a Direct Consolidation loan in many cases to convert ineligible student loans into eligible loans.
The statute also requires that the public servant have been in a qualifying full-time job "during the period in which the borrower makes each of the 120 payments. . . ." This requirement has also been interpreted strictly by the Department, and may create problems for public servants changing jobs or job assignments, teaching for only part of the year, and so forth. It also appears that some simple technology fixes could go a long way towards fixing the problems. For example, a public servant's monthly loan statement could show a running total of months earned towards the 120 total required, perhaps with two check boxes for timely payment, and qualifying work.
Another obvious fix is to provide assistance for public servants whose applications were rejected, to calculate exactly what they need to do to finish making 120 qualifying payments and receive their discharge. The problems with this program are being widely reported. What is needed now are solutions from Congress, the Education Department, and the servicer (PHEAA/FedLoan.)