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What's Wrong with PSLF and How to Fix It

posted by Alan White

The Public Service Loan Forgiveness program has so far rejected roughly 99,000 out of 100,000 student loan borrower applicants. Poor Education Department oversight, poor contract design and implementation, and widespread servicing contractor failures are as much to blame as problems in the legislative and regulatory program design. Making this program work to provide loan relief for potentially millions of public servants requires a comprehensive set of fixes. US Ed. could start by enforcing its contracts and compensating its contractors properly, and by relaxing its needlessly strict 15-day on-time payment rule, while Congress could give borrowers credit for all payments made under any repayment plan. In our new white paper summarizing federal agency reports, attorney general and borrower lawsuits, consumer complaints, and contract documents, my research assistant and I survey the various reasons nearly all applications have been denied, and we propose contractual, regulatory and legislative reforms needed to fix PSLF.


Another less than perfect solution, but still an improvement would be the great use of IDRs through Chapter 13 plans, particularly coupled with court supervision and accounting for IDR payments.

This is not that dissimilar a problem from the mortgage crisis, with the provisions of Rule 3002.1 being a model for overseeing such payments and determining the number of qualifying payments made during the bankruptcy.

I like Ed Boltz's comment about having a court supervised approach for those in bankruptcy. This can be accomplished without congressional action. Also borrowers who sue their lenders in federal court could get court supervision if the rules of civil procedure are amended to create such supervision for those not in bankruptcy. The previous post can be found at: https://www.creditslips.org/creditslips/2019/11/whats-wrong-with-pslf-and-how-to-fix-it.html

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