The Public Service Loan Forgiveness Program (PSLF), established under the College Cost Reduction and Access Act of 2007, permits Direct Loan borrowers in a qualifying repayment plan who make qualifying monthly payments, while working fulltime for a qualifying employer, to have the balance of those loans forgiven. Based on this promise, many eager law students forged careers in public interest assured that their decision to assume significant debt to pursue careers in public service would be equalized after 120 qualifying payments.
In October 2017, the promise was tested when the first class of eligible borrowers sought to have the remaining balance of their loans forgiven. Based on the data provided by the Department of Education (DOE), an overwhelming number of borrowers who applied for PSLF were denied. To provide redress for the high number of borrowers denied under PSLP, Congress created the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity through the Consolidated Appropriations Act, 2018, which outlined additional conditions under which borrowers may become eligible for loan forgiveness if some or all of the payments made did not initially qualify.
The strikingly high number of borrowers rejected, calculated as close to 99%, has caused many to question the PSLF Program’s ability to meet the promise to additional eligible borrowers in the future.
Law Professor Gregory Scott Crespi is critically exploring the potential factors impacting the extremely high denial rates. Through recent scholarship, Professor Crespi posits that the current situation is due to: (1) the technical statutory and regulatory PSLF program eligibility requirements being difficult for borrowers to understand, (2) imposition by the PSLF program loan servicer, FedLoan, of limitations regarding qualifying employers, and (3) ineffective DOE outreach efforts to inform borrowers of precise eligibility criteria, coupled with lack of sufficient oversight by DOE of the activities of the loan servicing companies, including to inform borrowers of repayment options. (Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change? SMU Dedman School of Law Legal Studies Research Paper No. 424, June 17, 2019.)
Fortunately, there are several steps those hoping to obtain Public Service Loan Forgiveness can take to better ensure they will qualify for loan forgiveness. First, borrowers should verify they are making payments on the right kinds of loans. Generally, only payments made on loans received under the William D. Ford Federal Direct Loan Program (“Federal Direct Loans”) will qualify borrowers for forgiveness. (See Public Service Loan Forgiveness (PSLF) Program Data.) Other types of loans will typically need to be consolidated into Federal Direct loans for payments to start counting toward the requisite 120 qualifying payments. The National Student Loan Data System (nslds.ed.gov) provides resources for borrowers to verify what types of loans they currently hold.
Second, borrowers should verify they are making the right types of payments on their loans. Generally, to qualify for public service loan forgiveness, payments must be made via an income driven repayment plan. Borrowers are encouraged to check (and doublecheck) that their payment plan will qualify them for forgiveness.
Third, borrowers should verify that they are working in qualifying public service positions. Public Service Loan Forgiveness is available to those doing fulltime paid work for the government or a 501(c)(3) organization. A few other organizations may also qualify as public service employers if their primary purpose is to provide certain types of qualifying public service. These positions are few and far between so borrowers should verify that their employer qualifies. Borrowers should also check every time they secure new employment that their new job qualifies as a public service position.
Fourth, borrowers should keep good records. Generally, borrowers may need to submit income documentation, family size verifications, and employment certification forms annually to the Department of Education. These forms can often help to support a case for forgiveness at the end of their 120 qualifying payments.
Finally, borrowers should be wary of bad advice. There have been numerous cases reported of borrowers hoping to achieve Public Service Loan Forgiveness being given misleading and/or incorrect advice by their loan service providers. Borrowers are encouraged to educate themselves on the Public Service Loan Forgiveness process and requirements to ensure they are staying in full compliance with the program’s many requirements.