More Than 500,000 Public Workers Likely to See Debt Relief Under Student Loan Forgiveness Overhaul

istockphoto.com/Mark Chilton

 

Connecting state and local government leaders

The U.S. Department of Education announced a host of changes Wednesday to the Public Service Loan Forgiveness program, which guarantees debt forgiveness to qualifying public sector employees.

The U.S. Department of Education on Wednesday announced sweeping changes to a student loan forgiveness program, an overhaul officials said could mean financial relief for more than half a million borrowers working for government entities or nonprofits. 

The Public Service Loan Forgiveness program, established in 2007, promised to forgive student loans for qualifying public sector workers who made their federal student loan payments on time for 10 consecutive years. 

But the program was plagued with problems from its inception, drawing criticism from advocates who said the system was difficult to navigate and often left qualified borrowers ineligible for debt forgiveness after a decade of regular payments. More than 98% of people who applied for loan forgiveness under the program were rejected, according to federal data, including thousands of teachers. Many of them were turned away for small mistakes, like checking the wrong box on an application or failing to date a signature.

“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” U.S. Secretary of Education Miguel Cardona said in a statement Wednesday. “The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country.”

Among the changes is a new waiver that allows all payments by student loan holders to count toward forgiveness, “regardless of loan program or payment plan.” That provision is a significant shift from the program’s original criteria, which offered debt relief only to borrowers whose loans were made directly by the federal government. 

All federal student loans have been owned by the U.S. Department of Education since 2010. But before then, borrowers typically had government-guaranteed loans from private banks. Those loans weren’t eligible for forgiveness under the federal program, but borrowers often didn’t know that until they tried to have their debt cancelled after a decade of regular payments.

“People I know in the government and public sectors really started to get nervous when that started happening,” said Ashley Qualls, a management analyst with the Mecklenburg County Department of Public Health in North Carolina. “They’d make their payments and then get 10 years down the road and all of a sudden you don’t have the forgiveness you thought you would.”

The waiver will retroactively count those payments, a change that’s likely to affect upwards of 550,000 borrowers, including 22,000 who will become “immediately eligible for $1.74 billion in forgiveness without the need for further action on their part,” the federal education department said. 

Another 27,000 people may be eligible for up to $2.82 billion in relief by verifying additional periods of employment. The average borrower is likely to receive roughly two additional years of “progress toward forgiveness” under the waiver program alone, the department said. Most will have to apply for the benefits, with applications due by the end of next October.

Other changes include allowing active-duty service members to count loan deferments and forbearances toward the forgiveness program and automatically providing credit for eligible service members and federal employees. The department will also review applications that were denied previously, with an appeals process for borrowers who were rejected from the program. 

The changes come after years of advocacy from employee unions and membership organizations, including more than 200 groups that asked Cardona last month to grant comprehensive and retroactive debt relief for public employees. Their letter, dated Sept. 22, came after the Biden administration launched a probe to investigate the loan forgiveness program, an inquiry that collected personal stories from more than 48,000 borrowers

One submission came from a person with more than 20 years of experience teaching in three public school systems, who consolidated loans only to find out later that the payments would not count toward debt forgiveness.

“The lender...failed to disclose that information prior to my loan consolidation,” it read. “This whole ordeal has been an absolute nightmare.”

Another submission detailed the decades-long public service careers of a couple who opted not to pursue higher-paying jobs at private companies in part because they believed their loans would be forgiven. Their lender assured them they were on track to have their debt wiped away, only to be told after 10 years that they “were ineligible for forgiveness because they were not direct loans.”

“In the current state, this program offers no incentive to remain in low-paying, public-service jobs,” it said. “As our children approach college age, we are left asking whether we should encourage them to avoid public service entirely? Either way, we anticipate paying our student loans while they are in college. This shouldn’t happen to families who simply believed in a flawed program.”

Welcome News for Borrowers

Seth Frotman, head of the nonprofit Student Borrower Protection Center, which previously launched investigations into the program, said the changes were welcome news for thousands of public employees who thought they were already on track to have their loans forgiven.

“This is a good day for teachers, nurses, servicemembers, and millions of workers serving on the front lines of the pandemic,” he said in a statement. “For too long, those who give the most to our communities and our country have been given the runaround and forced to shoulder debts that should have been canceled. The Biden administration is taking a critical step towards alleviating that burden for our public service workers.”

Qualls, who expects to qualify for forgiveness on loans she obtained to get her master’s degree in public administration, said her payment plans likely won’t change as a result of the program’s overhaul. But the restructuring could benefit the public sector as a whole, she said, by allowing relatively low-paid employees to recoup the cost of their educations.

“I think we do miss out on a lot of good candidates because of that cost,” she said. “You do worry how you’re going to pay for it, and you just kind of hope that you can.”

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.