The United States Department of Education is working urgently discover why some borrowers have been prematurely denied loan forgiveness even under the revamped Public Service Loan Forgiveness (PSLF) program.
The Department has ordered the applications to be reprocessed.
An investigation by journalists found that FedLoan Servicing, which manages the PSLF, appeared to have continued to operate under the old rules for weeks after the overhaul.
As a result, for at least three weeks the servicer rejected the applications of some borrowers who appeared to qualify for forgiveness under the new terms.
Head of the Department’s Office of Federal Student Aid, Richard Cordray said he expected loan servicers to provide clear, accurate information to borrowers — “and we are taking steps to ensure they do so”.
Congress created the PSLF in 2007 to encourage university graduates with high student loans to work in the Public Service.
If they worked in relatively low paid Public Service jobs such as teaching, nursing or firefighting for 10 years while making payments towards their loans, the balance would be forgiven.
However, complicated rules governing the type of loans, and the kinds of work that qualified, had previously led to 98 per cent of graduates completing their 10 years having their applications denied.
Mr Cordray (pictured) said these early mistakes should not overshadow the good news of the PSLF overhaul.
“Federal Student Aid is committed to fulfilling the promise of Public Service Loan Forgiveness,” Mr Cordray said.
“To implement the new program overhaul, we are working to provide automated relief to borrowers
“We have already notified over 500,000 borrowers who will receive additional credit toward forgiveness, with more coming soon,” he said.
Washington, 7 November 2021
