Department of Education Announces Changes to Public Service Loan Forgiveness Program – NBC10 Philadelphia
The Biden administration is temporarily relaxing the rules of a student loan cancellation program that has been criticized for its notoriously complex requirements – a change that could offer debt relief to thousands of teachers, social workers, military and other officials.
The Education Ministry said on Wednesday it would drop some of the more stringent requirements for public service loan forgiveness, a program launched in 2007 to steer more college graduates into the public service but since then has not helped 5,500 borrowers get their loans canceled.
Congress created the program to reward students who enter the public service. As long as they made 10 years of payments on their federal student loans, the program promised to erase the rest.
But more than 90% of the candidates were rejected. After making a decade of payments, many borrowers found they didn’t have the right kind of federal loan or repayment plan to qualify for the program. Thousands of people were left with debts they thought were written off.
Until October 2022, borrowers who have worked 10 years in a qualifying job will be eligible for loan relief regardless of what type of federal loan or repayment plan they have. Previous loan payments that were previously ineligible will now count, bringing some borrowers closer to the finish line.
It was a life-changing offer: Work 10 years in a public sector job and your student loans would be canceled. But the borrowers have said the entrepreneur behind the deal is not playing fair, and now they are stuck in limbo trying to prove that they have kept their end of the bargain. Lisa Parker of NBC 5 Responds has more on their story.
The change will immediately make 22,000 borrowers eligible for loan cancellation, and another 27,000 could become eligible if they get past payments certified, the department said. In total, more than 550,000 borrowers will be brought closer to forgiveness, the agency said.
“Borrowers who devote a decade of their life to public service should be able to count on the promise of forgiveness of public service loans,” Education Secretary Miguel Cardona said. “The system has failed to deliver on this promise to date, but that is about to change for many borrowers.”
This is a particular boon for borrowers on federal family education loans from an old loan program that issued federally guaranteed loans through banks. Loans from this program, which ended in 2010, were previously ineligible, but can now be canceled thanks to the updated rules.
Among other changes, the ministry will allow military members to count active duty time around 10 years, even if they take a break in their payments during that time.
And starting next year, the department will automatically count payments from federal workers and the military within the required 10 years. Under the existing rules, applicants must apply to have their payments certified.
The changes are seen as a short-term solution while the agency considers permanent improvements through a federal rule-making process. The department began holding hearings this week in a process that could bring sweeping changes to federal student aid programs, including public service benefits.
Advocacy groups praised the temporary changes. Aaron Ament, president of the Student Defense legal group, which has represented students in lawsuits over the program, called it “a big step in the right direction.”
Student debt forgiveness talks continue as 45 million Americans receive student loan bills. Some programs already exist to alleviate debt, but are not broad in scope. Hear from Seth Frotman, Executive Director of the Student Borrower Protection Center.
Randi Weingarten, president of the American Federation of Teachers, said the change was welcome.
âToday we breathe a collective sigh of relief as the Kafkaesque system that has shattered the dreams of far too many people finally begins to be dismantled,â she said.
The program has been a source of bipartisan contempt – Democrats and Republicans have agreed the program is flawed and needs to be updated. But Republicans said the Education Department was overstepping its authority by changing a program created by Congress.
Representative Virginia Foxx, RN.C., the top Republican on the House education committee, said President Joe Biden’s administration “is bypassing Congress with executive action.”
âWe agree that this program is in desperate need of reform; however, such reforms require action from Congress, and we encourage you to work with us to correct the federal loan and repayment program, âFoxx said in a letter to Cardona.
This is the last of several attempts to repair the program. In 2018, Congress set aside $ 700 million to temporarily extend the benefits to all types of loans and payment programs, but after a year, most requests were still denied.
A Government Accountability Office report found that President Donald Trump’s administration had created a “confusing and inefficient” process that often disqualified borrowers for rules they were never told about.
In June, a report from the Department of Education drew attention to the program’s shortcomings, saying it “created a lot of confusion and frustration” while forgiving loans to just 5,500 borrowers.