New Federal Student Loan Forgiveness Program Rejects Almost Everyone

September 6, 2019by Alexa Diaz
Betsy DeVos, secretary of education, speaks during the Wall Street Journal CFO Network conference in Washington, D.C. on Tuesday, June 11, 2019. (Alex Edelman/Zuma Press/TNS)

WASHINGTON — Americans who spend at least a decade in public service jobs and faithfully make their federal student loan payments shouldn’t owe any more. That’s the idea behind a student debt forgiveness program the Education Department launched in the George W. Bush administration.

The first batch of teachers, nurses, military personnel and other public servants got to start applying for forgiveness two years ago, and the department — led by President Donald Trump’s appointee Betsy DeVos — rejected nearly 99% of them. The department said more than half of them were denied for not having 10 years’ worth of qualifying payments. Applicants said that loan servicers had misled them into enrolling in the wrong loan repayment plans, and a consumer protection agency accused the company overseeing the program of botching paperwork.

Congress stepped in and ordered a program expansion in 2018 to offer the applicants another chance to clear their federal student loans through a new program with simpler requirements. But a year later, a new watchdog report has found, the Education Department has rejected 99% of those applicants too.

The Government Accountability Office report released Thursday found that of the more than 54,000 applications to the new program — named Temporary Expanded Public Service Loan Forgiveness — processed through May, only 661 were accepted. Investigators said that of the $700 million Congress gave the department to spend on the new program across two years, it had used less than $27 million.

The biggest reason borrowers were rejected from the new program, the report found, was that they hadn’t separately applied to the original program — a requirement that Congress didn’t order and that applicants found confusing. There’s no formal appeals process, the report said, and key parts of the Education Department website lack information about the new program.

The Education Department failed to offer rejected applicants complete information on how to appeal, the report said. The rejection letter contains a phone number for the relevant loan servicer. The servicer could choose whether to take a second look at the application and could consult the Education Department — but the letter does not say so, the report said. Other avenues to an appeal are to complain to the Federal Student Aid ombudsman group or file a complaint through the Federal Student Aid website’s feedback tool, but the Education Department intentionally does not tell applicants that, the report says.

The absence of information goes further, the report found. It said that the Education Department’s “key online resources,” such as its primary web pages and help tools, lack any information about the new program, and that the information is also missing from almost all loan servicers’ websites.

The Government Accountability Office suggested ways to simplify the process. It recommended combining the applications for the original program and the new program. It also suggested that the Education Department clarify the options borrowers have to appeal decisions, that loan servicers be required to provide online information about the new program and that information about the new program be added to online help tools that are currently geared toward the original program.

“While the loan forgiveness opportunity through (the new program) is only available until the $700 million in funding has been spent, a relatively small amount of total funding has been spent so far,” the report said. “It is possible that the program could continue for years, supporting the case for investing in improvements to the process now.”

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©2019 Los Angeles Times

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