PSLF update

At last report, the US Education Department has discharged 38,000 student loans under the limited waiver program to increase Public Service Loan Forgiveness approvals. US ED does not report comprehensive data, but piecing together several reports, this looks to be out of perhaps 800,000 to 900,000 total applications since 2017. In November 2020 there had been 227,000 applications, of which fewer than 6,000 were approved. From November 2020 to September 2021, borrowers submitted 678,000 applications, and 11,600 were approved (PSLF and TEPSLF).  The waiver program began in October 2021, and the 38,000 figure was reported in mid-December 2021.

In short, the 2% approval rate has been boosted to 5% to 10% (the denominator is hard to determine.) According to the September 2021 report, the vast majority of denials before the new waiver program (80%) were people either in non-qualifying FFEL repayment or some other non-repayment status (forbearance or deferment) for part of the ten-year period. The waiver should permit most or all of those denials to be reversed. So if you were turned down for PSLF before October 2021, send in an application under the waiver program. It is currently set to expire in October 2022.

ED announces PSLF overhaul, aims to boost 2% approval rate

Education Department Secretary Cardona today announced a remarkably bold, yet sadly incomplete, emergency suspension of regulatory barriers to the Public Service Loan Forgiveness program. The Secretary is using statutory authority to suspend, temporarily, some of the needless regulatory hurdles (as I and others have advocated) that have produced a 98% rejection rate for the program for the past five years. On the other hand, today’s announcement does not appear to address all of the hurdles, and some details remain vague. The Department estimates it can immediately approve 22,000 additional loan cancellations, increasing the approval rate from 2% to 5%, and another 27,000 need only obtain employment certifications for periods in which they already made payments, bumping the approval rate up another 3% to 4%. Another 550,000 borrowers may receive several years of additional credit towards the ten-year required total payment period, lining them up for discharges in future years.

In its biggest improvement the Department will allow all payments made on all loan types and all repayment plans to count towards the 120 month required total. Less clear is how the Department is addressing the two remaining hurdles. Many borrowers find payments are not counted because the payment is not within 15 days before or after the due date or is not in the exact amount the servicer requires. Early or lump-sum multi-month payments don’t receive full credit. The Department’s press release says the waiver will address this issue, but does not say how, or to what extent. Extending the window by 15 or 30 days, or the payment amount tolerance by 10% or 20%, will not do.  UPDATE: at negotiated rulemaking today, USED announces they will stop counting payments, and instead count time in repayment. If true this is a HUGE improvement. They mentioned in some cases borrower payment counts now go from zero to 120.

Borrowers also face a third hurdle, having to get employer certifications that their jobs qualify as public service covering each and every one of the 120 qualifying months. The Department’s servicer has rejected many certifications, the Department has failed to establish a universal database of qualifying employers, and some borrowers simply have difficulty filling gaps of long-ago employment. The Department says it will improve its employer database and audit prior rejections, but does not propose as I have recommended to allow borrower self-certification of qualifying employment.

A Heroes Jubilee

Millions of heroes of the pandemic--health care workers, law enforcement and first responders, National Guard troops, public school teachers, and social workers--are suffering needless financial hardship because of student loans. Years ago Congress passed, and president Bush signed into law the Public Service Loan Forgiveness program. After repaying student loans for ten years while working in public service, these workers are entitled to have their remaining debt canceled by the Education Secretary.  In a continual insult to these heroes, the Education Department and its contractor continue to reject 98% of PSLF applications, for absurd bureaucratic reasons I have elaborated on elsewhere.

Another act of Congress, the HEROES Act of 2003 gives Education Secretary Cardona clear legal authority to fix this failure and cancel hundreds of thousands of student loans now. The HEROES Act allows the Education Secretary to waive any regulation or even statute as necessary to ensure that no individual or class of people experiencing hardship because of a national emergency suffers financial harm because of the emergency. With a few simple waivers of unnecessary rules, the Education Department could implement PSLF loan cancellations for hundreds of thousands or even millions under existing legal authority.

A broad, one-time effort to extend PSLF relief to all those eligible could happen in a few simple steps. First, the federal loan servicing contractors could identify ALL borrowers who entered repayment more than ten years ago and who are not currently in default, and send every one of them an invitation to fill out a simple form asking if they have been working in public service. Second, the existing maze of paperwork created by the Department’s rules could be waived in favor of a simple one-page form. The PSLF applicant need only certify under penalty of law that they worked full–time for at least ten years and still work in a qualifying job. The form’s checklist of jobs should include the words of the statute: 

a full-time job in emergency management, government, ... military service, public safety, law enforcement, public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations...), public education, social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy on behalf of low-income communities at a nonprofit organization), early childhood education (including licensed or regulated childcare, Head Start, and State funded prekindergarten), public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or [a job] at a [501(c)(3) tax exempt organization].

Any borrower signing and returning the form should immediately have all federal student loans cancelled. The Department should provide adequate funding to its contractors to fully administer this PSLF jubilee.