Student loan forgiveness overhaul hits first stumbling block: NPR

Swim in the paperwork

The US Department of Education has said it will contact federal student loan borrowers who may be prematurely denied a loan forgiveness under the revamped Public Service Loan forgiveness program (PSLF), and will restate their loan forgiveness. requests.

The move comes after an NPR review of borrower documents, as well as information provided by people familiar with the deployment, revealed that FedLoan Servicing, which manages PSLF, continued to operate under the program. loan cancellation. old rules for weeks after the redesign rolled out on October 6. As a result, for at least three weeks, the server rejected requests from some borrowers who appear to be eligible for a discount under the new terms.

In a statement to NPR, Richard Cordray, bureau chief for the Federal Student Aid Department (FSA), said “[we] expect our providers to provide clear and accurate information to borrowers, and we take steps to ensure they do. We requested information from [FedLoan’s parent company, PHEAA] about any borrower who submitted an application after October 6 and received a response that did not meet the new program terms. The FSA will ensure that these borrowers benefit from the new conditions to guarantee the cancellation of the loan they have obtained. “

FedLoan’s refusals have further discouraged borrowers

Congress created the PSLF in 2007 to encourage public service. The deal was: Work in a public service job – think a teacher, nurse, or firefighter – while making payments for your federal student loans, and after 10 years the government will write off any remaining debt.

Melissa Crowe applauded the Oct. 6 announcement that the department was temporarily relaxing PSLF rules. Borrowers still have a decade to work in the public service, but under the new rules Crowe, who had the wrong type of loans, as well as borrowers with the wrong repayment plan, may be eligible.

At first, “that was such good news,” says Crowe, an assistant professor at the University of North Carolina at Wilmington. By his own calculations, the overhaul allows him to go from a handful of qualified PSLF payments to forgiving his more than $ 50,000 in federal student loans.

Crowe therefore quickly sent FedLoan the documents required to certify his years of public service. But the company’s response, dated Oct. 19, told Crowe that its previous loans were still ineligible.

That’s when Crowe says the desperation set in, because “the sinking feeling I had all the time, about what was some kind of bait and switch, went downhill. been confirmed. [my husband and I] were really crushed. “

She was not alone. In recent weeks, many borrowers have taken to social media to share new of their latest rejections.

Why eligible borrowers were turned down for loan forgiveness

On Tuesday, weeks after the Department of Education unveiled its new PSLF rules, FedLoan Servicing confirmed to NPR that it was using the old rules for evaluating applications.

“We continue to carry out all relevant activities of the PSLF within the framework of [Education Department] rules and guidance until asked otherwise, ”Keith New, spokesperson for FedLoan’s parent company, the Pennsylvania Higher Education Assistance Agency (PHEAA), wrote in an email.

But a few days earlier, on Friday, October 29, the Education Department sent an email to FedLoan asking the server to stop rejecting requests from borrowers whose loans could be canceled under the new rules.

In the email, which the Education Department shared with NPR, the department expressed concern “that denial of applications that might otherwise be approved under the limited waiver could create confusion among customers.” , telling FedLoan to stop turning down potentially eligible borrowers “as quickly as possible.”

New confirmed to NPR on Wednesday that FedLoan received this email and responded to the request “earlier this week.” He added that FedLoan also told the ministry that the duty officer still needed more advice on how to communicate with borrowers about the PSLF redesign and how to process requests. The duty officer argues he cannot move forward without the Education Department formally changing his contract, which expires on December 14.

A borrower advocacy group blames these early rejections on FedLoan and PHEAA. The Student Loan Protection Center (SBPC) sent a letter on Tuesday demanding that the company “end the inappropriate and illegal mismanagement of the recently announced civil service loan forgiveness overhaul.”

But through spokesperson Keith New, FedLoan insists he’s doing the right thing – that he can’t fully implement the overhaul until the department officially shares detailed plans. with his services, changed his contract with FedLoan and started sharing the results of the FSA’s own borrower eligibility analyzes.

Many borrowers have already been told they are closer to a loan forgiveness

The Ministry of Education says these first mistakes should not obscure the good news of the PSLF overhaul. He has already sent notices to many borrowers, telling them how much closer they are to canceling the loan under the new rules.

“Federal Student Aid is committed to keeping the promise of the civil service loan forgiveness,” FSA Cordray wrote in a statement to NPR. “To implement the new program redesign, we are working to provide automated relief to borrowers. We have already notified over 500,000 borrowers who will receive additional credit for the remission, and more will be available soon.”

The department also says that, unlike FedLoan’s version of events, it has been proactive with its services, sending out three separate notices outlining planned changes to the PSLF, starting with an email on October 1 and another on October 6. October, although the most detailed guidelines were not sent until Friday, October 29, three weeks after the announcement.

In this October 29 notice, the department appears unhappy with the way some agents communicated with borrowers, warning: “It would be an inaccurate or misleading statement to tell borrowers that you have no waiver information and that you do not. can’t help the borrower. “

But, for several days after that notice, the FedLoan website did just that, saying, “At this time, we don’t have any additional details on the eligibility requirements needed to complete exams.”

This post was deleted on Wednesday and replaced with softer language: “The implementation of this initiative will take some time, so account-level details may not be available for several months. “

Much of the PSLF overhaul will work through the education department, not loan services

It is not known how many potentially eligible borrowers were turned down in the three weeks between the announcement of the review and the department’s request that FedLoan stop rejecting borrowers.

Part of the confusion surrounding the early days of the overhaul stems from the fact that the mechanics of the fix go against tradition. For example, FedLoan is not responsible for reviewing payment data to determine borrower eligibility because this data, documenting when borrowers were “in repayment”, is kept by the FSA itself. Thus, the eligibility analyzes as well as the early communication with the borrowers are carried out directly by the FSA, and not by the services.

The problem is, borrowers are used to dealing with the companies that manage their loans, not the department itself, and so when the overhaul was unveiled, many started asking questions and submitting documents that FedLoan didn’t think he was ready to handle it.

To further complicate matters, PHEAA / FedLoan announced in July that it would not renew its loan service contract with the U.S. government. This contract technically expires in about six weeks, on December 14, although PHEAA spokesman Keith New made it clear in an email to NPR that “we will continue to manage loans under FSA direction. as long as necessary, “adding” there will be no hard release on December 14. “

Borrowers can still benefit from the overhaul, but it may take a while

The irony – that the young effort to fix the PSLF has been just as confusing to some borrowers as the program itself – is not lost on Melissa Crowe.

“The cure here looks a lot like disease,” says Crowe, who failed to qualify for forgiveness under the old program rules because, many years ago, when she asked her agent loan if his loans were eligible for the PSLF, he was told they did. But they didn’t – at least not until the review was announced.

Now Crowe says she has a message for the department and its loan management companies.

“I have a feeling that maybe they don’t understand who they are dealing with,” she said, “that there are a lot of people in this country conditioned to believe that no one is watching over them, that no one has their best interests at heart. “

And Crowe worries that these latest mistakes may lead some borrowers to simply give up on the department’s PSLF overhaul promise.

To those borrowers, says Crowe, take away your desperation. And keep pushing.

Indeed, the Federal Student Aid office estimates that eligible borrowers could begin to have their loans canceled within weeks. None of these early misunderstandings deal a serious blow to the overhaul itself – only the patience and confidence of wary borrowers.


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