Student Loan Debt: Big Changes Coming to ‘Broken’ Public Service Loan Waiver Program

Borrowers have long complained about how it’s difficult to navigate the eligibility rules of the civil service loan forgiveness program with little help from their loan officers, companies that handle billing and other services. Many have said they discovered they were not eligible for forgiveness until after making what they believed to be the equivalent of a decade of qualifying payments.

As part of the program, which was enacted by then-President George W. Bush in 2007, the government waives remaining federal student loan debt for skilled public sector workers after making monthly payments for 10 years. It encourages workers to stay in lower-paying jobs – like teaching and social work – while paying off student debt.

Over a million borrowers have made at least one qualifying payment, but only a small percentage of registrants have received a rebate. About 5,500 people have had their debt written off, according to the latest government data.

“To rebuild better, we need to fix systems that have been down for too long. I am delighted that next week we are announcing a major overhaul of the civil service loan program to finally deliver the promised relief to our civil servants, “Cardona tweeted Sunday.
The upcoming changes were first reported by NPR.

Riddled with problems

To be eligible for public service forgiveness loans, borrowers must have the right type of federal student loan, be enrolled in the right type of repayment plan, and be employed full time in qualifying public sector jobs, while also being in the right type of repayment plan. making the 10 years of monthly payments. .

The first time someone would have made enough payments to qualify for a rebate was under the Trump administration in the fall of 2017. But many of these early claimants found that some or all of their loans weren’t of the right type.

More than 80% of borrowers who filed forms that did not meet all of the program’s requirements have an ineligible federal family education loan, according to government data. These loans, which were made by private lenders but supported by the government, were mostly phased out after 2010. They were replaced by federal direct loans from William D. Ford, which are made and guaranteed by the government and are eligible for the public service loan. Forgiveness.

Part of the problem stems from poor communication between the education ministry and loan officers, as well as between officers and borrowers. A 2018 report from the Government Accountability Office revealed that the ministry had not provided service agents with a definitive source of information to determine which employers qualified borrowers for loan forgiveness.
Temporary congress expanded the program in 2018, which granted eligibility to certain borrowers who had previously been denied. But those who received federal family education loans continued to be excluded, and the expansion failed to provide immediate relief to many borrowers. The Education Department denied 99% of those requests in the first 12 months of the expansion.

Political pressure

The pressure to simplify the civil service loan forgiveness program has increased under President Joe Biden, who is taking steps to streamline debt relief – unlike his predecessor, who proposed to end the forgiveness of debt. civil service loans and blocked other debt cancellation benefits.
Over 200 organizations, including the two largest teachers’ unions in the country, are calling on the administration to create a simpler path to cancel the debt of anyone who has worked in the public sector for a decade or more.
Some members of the Democratic Party, including Senate Majority Leader Chuck Schumer of New York and Senator Elizabeth Warren of Massachusetts, have repeatedly called on the Biden administration to go further and write off student debt of up to to $ 50,000 for each borrower.
But Biden has so far resisted those calls from his party and has instead focused on modifying existing programs, like one that offers debt relief to people scammed by for-profit colleges and one that rolls back. loans from those who are permanently disabled. .
Biden also extended the pandemic-related pause on federal student loan payments until January 31. Borrower balances have effectively been frozen for over a year, no payments required on federal loans since March 2020. Relief is even more important for those seeking Public Service Loan Discount. They receive credit for the 10 years of required payments as if they had continued to make them during the pandemic, as long as they are still working full-time for eligible employers.

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