Why Aren’t More Student Loan Borrowers Pursuing A Forgiveness Program?

Starting next month, federal student loan borrowers might find they are eligible to have their student loan balances forgiven, thanks to the Public Service Loan Forgiveness (PSLF) program. This should be a time of great rejoicing among those student loan holders who have had a very rough time since graduating, but recent lawsuits and data regarding the pending forgiveness program could put some of that celebrating on hold.

For one, Massachusetts Attorney General Maura Healey filed a suit against FedLoan Servicing, who services the Department of Education’s public service loan forgiveness program (and those borrowers in pursuit of the program). This suit alleges that the servicer is taking too long to process the income-driven repayment plan applications and renewal requests; this is causing the borrowers to lose many important months which would otherwise count towards the 120 months of payments needed to receive the loan forgiveness as described in the plan.

This suit specifically targets the Revised Pay As You Earn plan. This plan is supposed to provide assistance by adjusting payments according to your income. The AG says that the FedLoans servicer (particularly, but among others) took more months than necessary to process applications.

In addition, though, the suit also alleges that when the servicer did experience legitimate delays in processing these payment options, it put the borrowers in forebearance. This will postpone all payments overall; but any payments made during this forebearance period do not actually count towards the required 120 payments as described in the forgiveness program.

Outside of the suit, the Department of Education recently shared the present enrollment status for the public service loan forgiveness program. As many as 42 million (or so) are in possession of student loans but only 139 (yes, just 139) have successfully fulfilled the eligibility criteria necessary to satisfy the forgiveness program’s requirements.

More importantly, perhaps, the United States Department of Education has cataloged, perhaps, 600,000 submissions for the employment certification associated with the program. Half of these borrowers have not yet made anything resembling an eligible payment.

Indeed, it is a very tough time for everyone; perhaps even more so for college graduates than those who did not attend college, as many who graduated high school and went directly into the work force might have worked at a steady job and saved money over time while those who choose to attend college did not work very much but accrued debt over the same amount of time.

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