US Department of Education to reshuffle cancellation of public service loans

The US Department of Education on Wednesday announced a series of major changes to the civil service loan cancellation program that could bring more than 550,000 borrowers closer to debt.

The PSLF program, which was enacted by then-President George W. Bush in 2007, allows nonprofit and government employees to cancel their federal student loans after 10 years, or 120 payments. The Consumer Financial Protection Bureau estimates that a quarter of American workers could be eligible.

However, the program has been plagued with problems, so people who get debt relief are rare. Less than 5% of borrowers who requested relief qualified.

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Instead, hundreds of thousands of people in public service jobs think they are paying for their loan cancellation only to find out at some point in the process that they are not eligible for some technical or other reason. another one. More often than not, the type of federal loans held by a borrower or the repayment plan they signed up for make them ineligible.

Now, the US Department of Education is hoping to give a second chance to many borrowers who have been excluded from relief.

“Borrowers who devote a decade of their lives to public service should be able to count on the promise of the forgiveness of public service loans,” US Secretary of Education Miguel Cardona said in a statement. “The system has not kept its promise to date, but that is about to change.”

Over the next few months, the agency said it will offer a limited waiver so borrowers can have their payments counted, regardless of their type of federal loan or repayment plan.

This change will bring more than 550,000 people closer to the cancellation of their loan and immediately entitle 22,000 borrowers to the cancellation, according to the ministry. So far, only 16,000 people have had their student loans excused under the program.

Consumer advocates have applauded the news.

“It’s a good day for teachers, nurses, the military and millions of workers on the frontlines of the pandemic,” said Seth Frotman, executive director of the Student Borrower Protection Center.

“For too long, those who give the most to our communities and our country have been sidelined and forced to take on debts that should have been canceled.”

The ministry said it would also review rejected pardon requests, improve the application process, and reduce errors that have led many borrowers to complain that the agency’s eligible payments are lower than the number it needs. ‘they performed.

“I’ve seen several examples where borrowers made 120 qualifying payments, but the loan manager said they only made half that number,” higher education expert Mark Kantrowitz said.