A new report on the United States’ controversial Public Service Loan Forgiveness (PSLF) program raises fresh concerns that the program is failing millions of student loan borrowers who were promised relief.
The report, issued by The American Federation of Teachers and the Student Borrower Protection Centre, examined records accessed through State and Federal freedom of information requests.
The authors argue that there continues to be widespread problems with the PSLF.
Public Service Loan Forgiveness allows certain Federal student loan borrowers to get their loans forgiven after 120 ‘qualifying’ monthly payments, while working in low-paid Public Service or non-Government organisations.
If the payments are made consecutively, this is equivalent to 10 years.
The report finds that student loan borrowers were not given clear information on the eligibility criteria for the PSLF.
It says the Department of Education and its contracted loan servicers did a poor job communicating the requirements to borrowers, and sometimes actively misled them.
“As a result, many borrowers thought they had made substantial progress towards loan forgiveness, only to find out later that they were making payments on the wrong type of loan, or under the wrong type of repayment plan,” the report stated.
“When student loan borrowers were first eligible to apply for forgiveness in late 2017, the program had an abysmal initial approval rate of only one per cent,” it said.
The report said multiple borrowers, all employed by the same organisations, received different responses to their submitted applications.
“The current PSLF evaluation system lacks a standardised evaluation process and suffers from chronic poor record-keeping, leading to inconsistent results,” it said.
This was because those in charge of making loan payments were given “broad interpretive discretion, with little recourse for borrowers”.
Executive Director of the Student Borrower Protection Centre, Seth Frotman (pictured) said the investigation offered new evidence that borrowers might have been wrongly denied their right to loan forgiveness.
“Tens of thousands more are being confused or misled, or are currently in jeopardy because of Government mismanagement and industry abuse,” Mr Frotman said.
“Policy-makers should immediately implement new reforms to better protect borrowers working in public service and demand justice for those harmed by years of mismanagement and abuse,” he said.
Washington, 15 August 2020
