March 28, 2019

Issue Resources: Public Service Loan Forgiveness

Latest Developments

NPR Publishes Article on PSLF Administration

On October 17, 2018, National Public Radio (NPR) published an article regarding PSLF administration. The article focuses on Seth Frotman’s departure from the CFPB and the findings that his team there had discovered related to PSLF administration. These problems are similar to what the GAO study and U.S. Department of Education data found with the program.

Congressional Inquiry about PSLF

On October 17, 2018 over 150 Democrats sent a letter to Education Secretary Betsy Devos to turn over more information regarding the Department’s handling of the PSLF program. Led by Ranking Member Bobby Scott, House Committee on Education and the Workforce and Ranking Member Patty Murray, Senate Committee on Health, Education, Labor, and Pensions, the letter follows the release of a new Government Accountability Office report which showed that many PSLF borrowers had been denied loan forgiveness.

New PSLF Class-Action Suit

On October 3, 2018, student loan borrowers in public service professions filed a federal class-action suit alleging that student loan servicer Navient systematically misrepresented, pedaled untruths, and misdirected borrowers in order to stop them from enrolling in Public Service Loan Forgiveness and to boost Navient’s own profits.

GAO Report on PSLF

On September 27, 2018, the Government Accountability Office (GAO) issued a report announcing that, “Education Needs to Provide Better Information for the Loan Servicer and Borrowers.” The report established that 1,173,420 borrowers requested to certify their employment and loans as eligible for PSLF and 890,516 had their employment and loans certified as eligible. However, of 19,321 borrowers who have ultimately submitted a loan forgiveness application, only 55 or 0.28% were granted loan forgiveness to date. ED concurred with each of GAO’s recommendations and outlined plans to implement them. Prompted by the report, the coalition supporting PSLF plans questions for ED.

PSLF Court Arguments in ABA Suit

On September 26, U.S. District Court for the District of Columbia Judge Timothy Kelly heard motions for summary judgment and for preliminary injunction in the law suit filed by the ABA over the U.S. Department of Education’s (ED) regulations regarding the Public Service Loan Forgiveness (PSLF) program. The judge’s questioning focused on whether ED’s actions amounted to final agency action under the two-pronged Bennett v. Spear test established for the Administrative Procedure Act. The judge recognized that the U.S. Supreme Court has directed consideration of the practical implications of agency actions and consequent hardships on plaintiffs. The government argued that any hardships on plaintiffs were the result of contractor mistakes in preliminary certifications of annual qualification determinations for PSLF eligibility and they did not amount to final agency actions. Chong Park, attorney for the law firm Ropes & Gray handling the case pro bono for the ABA, maintained that ED’s actions bore the hallmarks of final agency action.

Summary

Purpose of PSLF. The federal Public Service Loan Forgiveness (PSLF) program was created in 2007 in response to the concerns of public sector employers over their difficulties attracting and retaining skilled professionals to fill chronically vacant positions. The program provides employers an invaluable resource by lowering the primary barrier keeping new graduates from pursuing public service careers – student loan debt. An advanced degree frequently is a condition of professional licensure, as it is for lawyers, but the higher student debt incurred in obtaining these degrees effectively prevents borrowers from accepting or staying in low-paying public service jobs.

Eligibility for PSLF. Under the program, borrowers who have made 120 timely payments on their federal Direct Loans while employed full-time in qualifying public service jobs are eligible to receive forgiveness of whatever portion of their loan remains after completing the payments. Under the Department of Education regulations, a qualifying public service job is a full-time position working for a federal, state, or tribal government entity (including the military), 501(c)(3) organizations, or other nonprofits that provide specific types of qualifying public services.

Lawyers often incur significant student loan debt that deters them from lower-paying public service jobs. Without PSLF, law school graduates considering public service would face 20 years or more of student loan payments, during which time their loan balance would increase. These men and women would further need to forego major life decisions and expenses, all in the name of pursuing laudable careers.

Eighty percent of law students take out student loans to attend law school. On average, those who graduate from a private law school incur law school debt of $122,000 and those who graduate from public law schools incur $88,000. These sums are in addition to an average of $30,000 in undergraduate debt. The promise of PSLF makes it feasible for a young lawyer with a staggering amount of debt to choose a career as a legal aid attorney, public defender, or prosecutor − jobs with typical starting salaries of $50,000 or less that are essential to the functioning of our justice system.

People in other professions that provide the public with a continuum of care, such as doctors, nurses, teachers, social workers, and first responders, face similar financial obstacles and likewise are eligible for the program.

PSLF is under threat of elimination. PSLF has become caught in the crosshairs of larger discussions about higher education affordability that fail to take into consideration the important purpose of the program. Both the President’s FY 2018 budget and H.R. 4508, legislation known as the PROSPER Act (Foxx, R- NC), would eliminate PSLF as part of a plan to reform federal student lending. An amendment to preserve PSLF under the PROSPER Act, which had bipartisan support, failed by one vote during committee consideration. The legislation was reported by the Committee on Education and the Workforce last December and awaits action on the House floor.

Arguments supporting repeal of PSLF have relied on anecdotes, cost estimates based on inadequate data, and an inaccurate understanding of the program’s purpose and operation.

The first cohort of borrowers became eligible for the program this past fall. At present, there are no statistics with regard to the cost of the program for 2017. Two government studies of PSLF have been completed – one in 2015 by the U.S. Government Accountability Office (GAO-15-663) and the other this past February by the Office of the Inspector General of the Department of Education (ED-OIG/AIG9Q0003) – and both concluded that the Education Department has failed to provide the information necessary to inform decision makers and the public about the program or its cost to the taxpayer.

The American Bar Association urges Congress to preserve the Public Service Loan Forgiveness Program.

  • PSLF serves an important purpose that benefits the public. Repeal of PSLF would harm state, local, and tribal communities by denying them a tool that enables them to provide critical services to their residents.

  • PSLF should be allowed to continue to function as envisioned until there has been an opportunity to assess the impact of the program. Any attempt to reduce or eliminate the program should include an alternative strategy for addressing the underlying problem PSLF addresses.

Resources

ADVOCACY

One Pager

Myths and Frequently Asked Questions about PSLF

February 2018 ABA Letter to the Senate Health, Education, Labor and Pensions Committee urging preservation of PSLF

November 2017 national coalition letter supporting PSLF w/ signatories

November 2017 letter from coalition of military and veteran service organizations supporting PSLF

National Legal Aid and Defender Association 2017 survey report, "Public Service Loan Forgiveness and the Justice System: How Eliminating PSLF Would Harm American Communities"

“Keep the Public Service Loan Forgiveness Program in Place” co-authored by the co-founders of the Congressional Caucus to Preserve PSLF

LEGISLATION AND STUDIES

H.R. 4508, the “PROMOTING REAL OPPORTUNITY, SUCCESS, AND PROSPERITY THROUGH EDUCATION REFORM” (PROSPER) ACT

Committee Report to the PROSPER Act, H.Rept. 115-550

Roll Call Vote, December 12, 2017; unsuccessful (19-20) attempt to amend the PROSPER Act to preserve PSLF

2015 U.S. Government Accountability Office study and recommendations, including that Education Department should do more to study and promote borrower awareness of PSLF.

2016 U.S. Government Accountability Office study and recommendations including questions as to Education Department assumptions on anticipated PSLF usage and inadequacy of available data.

2018 Department of Education Inspector General Report on Department communications about, e.g., PSLF, and the need for the Department to enhance its data clarity and detail to properly inform the public and lawmakers, particularly if costs are expected to increase.

American Bar Association Legal Education Statistics Including Tuition Trends 1985-2013