Public Service Loan Forgiveness

ABA Reaches Settlement on Eligibility in PSLF Case

On February 18, 2020, the American Bar Association (ABA) reached a Settlement Agreement with the United States Department of Education (“ED”) that resolved a controversy concerning the eligibility of ABA employees for the Public Service Loan Forgiveness (PSLF) Program. Under the settlement, the ED restored its historical recognition of employment at the ABA as eligible for PSLF, while retaining the ability to revisit that decision should the ABA change its work or the ED adopts a new definition for “public service organization.”

In 2015 – eight years after the creation of PSLF – the ED began notifying individuals that all prior approvals of their ABA employment as being eligible for PSLF were being retroactively rescinded. After engagement with the ED, and a subsequent lawsuit in December 2016, it was discovered that the ED’s decision had been based on new criteria for PSLF-eligible employment that exceeded what was required under the statute or regulations. In February 2019, the federal district court judge rejected the ED’s new criteria as “arbitrary and capricious” rulemaking. The ABA appealed an unrelated decision under the court’s ruling, which led to the current settlement agreement. Read the letter here.

CONTINUING RESOLUTION ENACTED

On November 21, 2019, to avoid a federal shutdown, President Donald Trump signed the stopgap spending bill entitled the Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019

Earlier on November 21, 2019, United States Senate had passed the bill by a vote of 74-20, and on November 19th, the U.S. House of Representatives passed the bill by a vote of 231-192.

The legislation serves as a temporary funding bill that continues pre-existing appropriations through December 20th, 2019, at the same rate and level as the previous Fiscal Year 2019.

For Temporary Extended Public Service Loan Forgiveness (TEPSLF), that means funding at $50 million per year. Read more...

HOUSE INTRODUCES COLLEGE AFFORDABILITY ACT

On October 15, 2019, Bobby Scott (VA-03), Chair of the U.S. House of Representatives Committee on Education and Labor, introduced the Democratic proposal for Higher Education Act reauthorization, the College Affordability Act, H.R.4674. The Chairman’s press releases explain that the bill seeks to amend and strengthen the Higher Education Act of 1965 so that “students can spend less and earn more.”

PSLF

In particular, the Public Service Loan Forgiveness (PSLF) program would be improved and expanded. Eligibility for PSLF would be broadened to further incentivize careers in public service. PSLF implementation would be improved. An appeals process would be created by the Department of Education to help borrowers dispute denials of PSLF applications. Moreover, borrowers who were in the wrong payment plan would be able to count their original monthly payments toward the total required for loan forgiveness.

ACCREDITATION

Changes would be made to school accreditation. Certain higher education oversight duties would be reassigned from the accreditors to the states. Accreditors would be required to focus on student achievement outcomes, including completion and workforce participation.

FINANCIAL COUNSELING

The bill would provide stronger wraparound services, including improved financial counseling to keep students in school and on track to graduate.

The House Committee on Education and Labor has not announced a schedule for considering the bill.

HOUSE SUBCOMMITTEE HOLDS HEARING ON FAILED IMPLEMENTATION OF PSLF

On September 19, 2019, the United States House of Representatives’ Subcommittee on Higher Education and Workforce Investment held an oversight hearing titled “Broken Promises: Examining the Failed Implementation of the Public Service Loan Forgiveness Program.”

As explained by Representative Susan Davis (D-CA) in her opening statement at the hearing, what was supposed to serve as a catalyst for young people to channel their expertise into the public sector has turned into a series of denials of the benefits that they were originally promised. Ten years since the passing of PSLF, approximately 99% of applicants have been denied loan forgiveness.

In response to high denial rates and confusion on the part of borrowers, Congress created the Temporary Expanded Public Service Loan Forgiveness program in 2018. However, despite an investment of seven-hundred million taxpayer dollars being provided to simplify and expand the program, the low acceptance rate has held steady.

You can watch the full hearing here.

SENATOR TESTER CALLS FOR RESPONSE TO GAO REPORT

On September 10, 2019, U.S. Senator Jon Tester (MT-D) wrote to Secretary of Education Betsy DeVos demanding a response to the then-recently-released Government Accountability Office (GAO) report.

The report had raised several concerns over the implementation of both the Public Service Loan Forgiveness (PSLF) program and the Temporary Expanded Public Service Loan Forgiveness Program (TEPSLF). Most noteworthily, the report cited significant mismanagement and bureaucratic hurdles that have resulted in a loan forgiveness approval rate of less than one percent in the first year since the creation of TEPSLF.

With the passage of over a month since the release of the GAO report, Senator DeVos has continued to remain silent about how the Department of Education will address the concerns that have been laid forth in the study. Furthermore, Secretary DeVos had earlier blocked the Consumer Financial Protection Bureau from further examinations regarding student loan service companies.

Senator Tester expressed his disappointment with Secretary DeVos’ actions, stating that the process has become “nothing short of a bureaucratic nightmare.” He continues to seek an answer from the Secretary to his letter of 5 weeks prior.

Senator Tester’s full letter to Secretary DeVos can be read here.

ABA EMPLOYEES RECEIVE CONFIRMATION OF ELIGIBILITY FOR PSLF

In August and September of 2019, several employees of the American Bar Association received communications from FedLoan Servicing stating that they qualify for the Public Service Loan Forgiveness Program (PSLF) and that previous determinations that stated otherwise had been in error.

This development came roughly six months after the February ruling made by U.S. District Judge Timothy J. Kelly, who stated that the United States Department of Education (ED) had improperly changed the terms of the Public Service Loan Forgiveness Program (PSLF) for qualified individuals.

In response to Judge Kelly’s decision, ED declined their opportunity to appeal the judge’s finding that they had acted arbitrarily and capriciously.

Represented by Ropes & Grey, the American Bar Association is encouraged by these recent developments in the administration of the Public Service Loan Forgiveness Program (PSLF). ABA Executive Director Jack Rives stated that the ABA “will continue to work with Ropes & Grey to ensure that these and other ABA employees get full credit for their public service work.”

You can read more about the ABA lawsuit here.

U.S. HOUSE APPROPRIATORS PASS A PROPOSED $350 MILLION FOR TEPSLF IN FY2020

On June 19, 2019, the United States House of Representatives passed the Fiscal Year 2020 (FY2020) appropriations bill, H.R.2740, for the Departments of Labor, Health and Human Services, Education, and related agencies. The bill passed the House by a vote of 226-203 and was subsequently sent to the Senate.

For fiscal year 2020, the bill would again appropriate $350,000,000 for the Temporary Extended Public Service Loan Forgiveness (TEPSLF) program. Thus, the House neither increased nor decreased appropriations for TEPSLF from its current funding levels.

It is important to note that the House moved forward with their appropriations bills before the total budget—302(a) spending level—was established. Thus, the House appropriations may need to be redone. For example, the House’s final non-defense discretionary funding will be $15 billion less than the bills that the House passed.

If a different appropriation amount is reached in the Senate, both chambers will then need to conference their amounts to achieve a final FY2020 appropriation for TEPSLF.

You can read more about the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity here.

GAO RELEASES SEPTEMBER REPORT ON PSLF

In September of 2019, the United States Government Accountability Office released a report to congressional requesters regarding the Public Service Loan Forgiveness (PSLF) program.

Data was analyzed from the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) servicer on loan forgiveness requests from May 2017 through May 2019 to examine:

1. The extent to which the process for obtaining TEPSLF is clear to borrowers,

2. What is known about loan forgiveness approvals and denials, and

3. The extent to which Education has conducted TEPSLF outreach.

The main focus of the report was how improvements to the temporary expanded process could help reduce borrower confusion. The GAO found that the Department of Education’s process for obtaining TEPSLF is not clear and could be confusing for borrowers who do not understand why they must apply separately for PSLF to be eligible for TEPSLF.

According to the report, as of May 2019, Education had processed about 54,000 requests for TEPSLF since May 2018. Only around 1 percent of these requests, however, have been approved. Most requests were denied because the borrower had not submitted a PSLF application (71%). Others were denied because the borrower had not yet made 120 qualifying permits (4%) or had no qualifying federal loans (3%).

The GAO made several recommendations to improve the program, all of which have been agreed upon with Education, including that Education:

1. Integrate the TEPSLF request into the PSLF application,

2. Require all loan servicers to include TEPSLF information on their websites, and

3. Include TEPSLF information in its PSLF Online Help Tool.

HOUSE INTRODUCES COLLEGE AFFORDABILITY ACT

On October 15, 2019, Bobby Scott (VA-03), Chair of the U.S. House of Representatives Committee on Education and Labor, introduced the Democratic proposal for Higher Education Act reauthorization, the College Affordability Act, H.R.4674. The Chairman’s press releases explain that the bill seeks to amend and strengthen the Higher Education Act of 1965 so that “students can spend less and earn more.”

PSLF

ACCREDITATION

FINANCIAL COUNSELING
The bill would provide stronger wraparound services, including improved financial counseling to keep students in school and on track to graduate.

The House Committee on Education and Labor has not announced a schedule for considering the bill.

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.

Public Service Loan Forgiveness - Why it Exists

The American Bar Association was a leader in the effort to enact and implement the Public Service Loan Forgiveness program (PSLF), Section 401 of P.L. 110-84. The program provides a needed financial tool to support government and nonprofit service providers who help ensure the delivery of vital services to the public, no matter how rural or remote a community may be. This program helps with recruitment and retention by offering assistance with repayment of a professional’s student loans. Service providers, such as first responders, teachers, social workers, health workers, prosecutors, public defenders, and legal aid lawyers are all examples of people covered by PSLF.

In short, PSLF provides total loan forgiveness for those who make a substantial career commitment to public service, i.e., make 120 monthly payments on eligible loans while employed full time in qualifying public service jobs. Coupled with income-driven repayment options that tie monthly repayment to actual income, PSLF can become a direct recruitment incentive, especially for those seeking low-paying jobs on tribal lands or rural communities.

Prior to PSLF, the nation’s public sector faced a sizeable projected employment gap, meaning that critical positions were going unfilled or subject to high turnover. According to the Bureau of Labor Statistics, there are 500,000 fewer public sector positions than when the program was first authorized, yet with substantially more Americans relying on these services. This is particularly true in the legal profession where a smaller percentage of graduates are going into public service jobs and lawyers make up a smaller percentage of the public sector workforce. This can be particularly troubling when one considers those positions that are not discretionary, e.g., prosecutors and public defenders.

The reasons for these market trends can be complex, but for lawyers the primary obstacle to accepting and remaining in public service positions is the substantial student debt incurred in pursuit of a law degree as compared to lower starting salaries. In 2014, the average law student graduating from a private law school accumulated $122,000 in student loan debt, and the average public law school graduate had accumulated $84,000. This does not include an average of $30,000 in student debt for undergraduate studies. By contrast, according to a 2014 survey by the National Association for Law Placement, the starting salary for a legal aid lawyers was $44,600, and for prosecutors and public defenders, starting salaries for each were approximately $50,000.

PSLF helps close this gap across the public sector by ensuring that those who make laudable career commitments to public service careers have the means. The program incidentally provides a powerful pipeline for students from disadvantaged backgrounds without discrimination, and by serving communities, such public service workers become contributing members of their communities, strengthening the local economy.

So if PSLF is such a great resource benefitting so many, what’s the problem?

Not everyone likes guaranteed programs like PSLF, and the desire to cut the program to free up revenue for other projects comes from both sides. The President in his FY2017 budget request proposed a considerable cut to the program for graduate students, limiting the maximum award to $57.500 – the maximum an undergraduate student could borrow. Also, the House Budget Committee has suggested outright repeal of the program. Neither of these proposals takes into consideration the return on investment communities and individuals are experiencing, nor the economic impact of lost jobs to struggling communities. There are significant data gaps that prevent a meaningful analysis of the program’s benefit, success or cost. The only federal analysis came from a 2015 U.S. Government Accountability Office report that found the program was likely being underutilized.

The ABA’s position

The ABA opposes efforts to make substantive changes to PSLF that undermine the purpose of the program, absent hard data. We agree that there are some places language could be tightened, and we will consider efforts to reach compromise with opponents, but not to the extent it undermines the purpose of the program in the first place. We know from thousands of employers and program participants that PSLF is essential to their success. And we know, unfortunately, that the needs justifying the creation of the program persist. In the margin of this page you will find the original policy resolution supporting the creation of a PSLF program, as well as a recent reaffirmation of the program.