It has been one year since student loan borrowers have been theoretically eligible to have their loans forgiven under the Public Service Loan Forgiveness (PSLF) program. And yet, out of the 28,000 borrowers who applied, only 96 have had their loans forgiven. That is less than 1 percent of applicants.
That number is shocking and speaks volumes about the failures of a billion-dollar servicing industry. How could this happen? First, servicers have failed to inform borrowers who requested certification for PSLF when they needed to consolidate their loans or change their payment plan to be eligible. Indeed, the Government Accountability Office (GAO) last month reported that of the approximately 1.2 million people who have requested to have their employment and loans certified as eligible for PSLF forgiveness, over 150,000 did not have any eligible loans and over 370,000 never made a single qualifying payment. Many of these errors could have been prevented had borrowers been properly counseled.
But information alone is insufficient to ensure that borrowers access the programs they are entitled to. Marketwatch highlighted one borrower, Anne Tamar-Mattis, who successfully had her loans forgiven only after what she described as a “crusade” requiring “dozens of phone calls,” bad advice from her servicer, processing errors and delays, and perhaps her law degree.
As a lawsuit brought by members of the American Federal of Teachers earlier this week highlights, servicers are standing in the way of borrowers accessing critical programs. According to the suit, borrowers who would have otherwise been eligible for forgiveness did not qualify because Navient allegedly provided these public servants with wrong information, extending the amount of time they would need to wait before having their loans discharged under the program and causing them to spend money unnecessarily on their debts.
Critically, these problems are not limited to PSLF. Many of the issues complained about in this lawsuit also harm low-income borrowers who would benefit from income-driven repayment (IDR), which can give a borrower an affordable repayment option and forgiveness of any remaining balance after 20 or 25 years. Some of the plaintiffs, for example, complained that Navient steered them away from IDR and into forbearances. Many of our low-income clients have experienced this problem and the Consumer Financial Protection Bureau has even sued Navient for the same behavior.
Other plaintiffs complained about misinformation about federal loan consolidation, which allows Federal Family Education Loan (FFEL) borrowers to access Direct Loan programs like PSLF and the Revised Pay As You Earn plan. One plaintiff was advised to consolidate her loans to lower her payments, thus wiping out the 37 payments (more than three years’ worth) she made which would have counted towards her ten years of repayment. Another was never told that she would need to consolidate in order to access PSLF, resulting in her having loans that were ineligible for PSLF.
The net effect of all these violations is that student loan borrowers are paying more money for a longer period of time. Worse, some of these borrowers are unable to access affordable repayment options and wind up in default, having their tax refunds (including the Earned Income Tax Credit), wages, and federal benefits taken as a result. Like many things, the people who are going to be hurt the most by these problems are those who have the least resources. As Ms. Tamar-Mattis aptly noted, “Not everybody has a lawyer to work for them, a lot of people are just counting on the system to work.”
