« ISDA Promotes a Race to the Bottom | Main | No comment »

Million public servants counting on broken PSLF program

posted by Alan White

Screen Shot 2018-09-29 at 7.16.15 AMThis 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.)  

 

 

 

Comments

You are assuming the Powers That Be want to fix any of this. All signs point to "No", especially considering DeVos is one of those making major bank from the student loan scam.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF

Powered by TypePad