How Loan Servicers are Derailing Public Service Loan Forgiveness

While Congress and the Trump Administration continue to work towards a budget that may eliminate the Public Service Loan Forgiveness (PSLF) program, many loan borrowers are facing issues with the loan servicers that are supposed to help them navigate a complex program.

It may be helpful to first discuss the specific requirements borrowers must meet to earn forgiveness. First, the borrower’s loans must be Direct federal loans. Second, the borrower must be working full-time in qualifying employment. This employment could be with a 501(c)(3) nonprofit, the Peace Corps, AmeriCorps, private public service organizations, or various levels of the government. Finally, the borrower must make 120 on-time qualifying monthly loan payments. More information about student loans and the PSLF program can be found here.

Although the requirements to earn PSLF are strict, once a borrower has ensured that their loans and employment meet them, it should be a straightforward process. Instead, loan servicers are making it unnecessarily difficult, or even impossible, for eligible borrowers to access the program.

According to a report published by the Consumer Financial Protection Bureau (CFPB), borrowers’ complaints against loan servicers fall largely into three categories: (1) borrowers being provided incorrect information, (2) payment processing being flawed, and (3) employer certification being incorrectly denied.

The chief complaint from borrowers is that servicers are providing information that is incorrect or unhelpful. Many borrowers have indicated to their servicers that they are public service workers and are receiving late or no information on how to earn PSLF.

The CFPB report highlights one borrower who was not informed that he needed to consolidate his loans into qualifying Direct loans, causing his payments while in the military to not count towards his 120 required payments.

A second complaint lodged against loan servicers is that they are creating processing delays and errors that cause borrowers to miss out on qualified payments. This includes borrowers paying over the payment requirement, therefore disqualifying future payments, as well as borrowers incorrectly being put in forbearance while recertifying their income and family size (a requirement each year).

One borrower that faced this issue was a nurse making payments in hopes of earning PSLF. She was told that only fourteen of her payments over four years counted towards the qualifying 120, due solely to her overpaying on one month’s payment, disqualifying her payments after that month. Another borrower was told that only nine of his forty-nine payments were approved, but once an audit was requested, the loan servicer admitted it made a mistake and all forty-nine payments were approved.

Finally, when submitting an employment certification form to receive a determination that their employment qualifies for PSLF, some borrowers are being incorrectly told that their employer does not qualify and are denied. Many servicers are not providing borrowers details on how to appeal these denials.

Public Service Loan Forgiveness has led to a sharp increase in talented young people from a wide array of professions going into the public sector and helping the country. In the legal profession, for example, more lawyers are interested in going into the nonprofit sector and becoming public defenders and prosecutors, knowing that they can earn forgiveness while helping their communities.

To prevent these issues from further impacting borrowers, we must hold loan servicers and the Department of Education to a higher standard in helping to navigate the requirements of PSLF. Equal Justice Works provides free resources to borrowers and the information they need to get their qualified payments on track, including monthly webinars.

If you or anyone you know has faced these types of issues with their loan servicers, there are resources that can help. The CFPB takes complaints, forwards them to the loan company, and works with them to get you a response. Additionally, there is a step-by-step guide from the Department of Education that may help resolves issues with your loans or loan servicer. Finally, if your complaint has not been resolved by your loan servicer, you may contact the Department of Education’s Federal Student Aid Ombudsman group, a neutral, informal, and confidential resource that can help resolve your loan issues.

Equal Justice Works provides support to public interest attorneys, and helps law students learn more about all aspects of managing their student debt. We have a debt relief newsletter, free student debt webinars, an informative website, and a free student debt e-book, Take Control of Your Future.

Brandon Hanson is the Student Debt Specialist at Equal Justice Works. At Equal Justice Works, he helps students, lawyers, and law school professionals manage their student debt through education, outreach, and policy analysis. Brandon is a graduate of the University of St. Thomas School of Law in Minneapolis and the University of Iowa, and has worked with political campaigns, non-profit organizations, and state government.

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