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Data Shows 99% Of Applicants For A Student Loan Forgiveness Program Were Denied

Sep 21, 2018
Originally published on September 22, 2018 9:17 am
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ARI SHAPIRO, HOST:

The government made a simple promise to student loan borrowers - work in public service for 10 years, make valid loan payments for 10 years, and the Education Department would forgive the leftover balance on the loan. The program is called Public Service Loan Forgiveness. But borrowers have complained for years that the process has not worked as advertised, and now new numbers for the program tell a similar story. For more, NPR's Cory Turner is here with us. And, Cory, what does this data show?

CORY TURNER, BYLINE: Yeah. Well, it's really important, Ari, because this is the first look we've had at who's actually using this program or trying to use it because in a nutshell, almost no one is getting their loans forgiven. As of this summer, nearly 29,000 applications for Public Service Loan Forgiveness have been submitted and processed. But of those 29,000, just 289 applications were approved. That's a 99 percent denial rate. Now, some experts say the acceptance rate is sure to improve. It's early. But it's also hard to see how it could get much worse either.

SHAPIRO: Early - so this is a new program that has only been in effect a short while.

TURNER: So the program has been in effect since 2007. But since you have to be in it for 10 years, folks really could only start qualifying last October.

SHAPIRO: Can you figure out why people have been denied?

TURNER: Yeah. So there's a little bit of information in the data that requires some unpacking. Roughly a third of applications were turned down because of missing information, basically problems with paperwork. The other two-thirds are murkier, denied for what the department calls not meeting program requirements. That's so big. I could drive a truck through that. The problem here is that many people are in public service - police officers, firefighters, public schoolteachers. But they're not meeting the program's requirements because they're often given insufficient or sometimes bad information by the companies that the government pays to manage these student loans.

SHAPIRO: What do you mean given insufficient or bad information?

TURNER: So last year, the Consumer Financial Protection Bureau issued a report from their student loan watchdog. And it studied these very problems. And it found that many students who actually told their loan servicer, look; I think I qualify for Public Student Loan Forgiveness; what do I need to do, they weren't told that maybe they had the wrong loan type and that they could consolidate and qualify. They just didn't know.

Borrowers often weren't told they were in the wrong repayment plan, which meant that the payments they were making wouldn't count towards Public Service Loan Forgiveness. So some borrowers would actually go years making payments on time, but the payments wouldn't count. In fact, some of these problems were so widespread that recently Congress actually created a new pot of money for some of these people who have been making payments and just got caught up in the confusion.

SHAPIRO: How does the Education Department explain that it has denied virtually everybody who has been participating in this program in good faith for 10 years?

TURNER: Well, so far they haven't. I've submitted several requests. I've heard nothing. It's also important to keep in mind, Ari, this really important context here that I've been reporting on for a while now. Many states right now are really furious over these loan servicers and how they've treated their student borrowers. In Massachusetts, the attorney general - her name is Maura Healey - she's suing the company that manages the Public Service Loan Forgiveness program for misleading borrowers, she says. And today she called this new data alarming and said it's indicative of a massive failure.

And to be honest, the Trump administration through both the Education Department and the Justice Department have made very clear - they have put forth a legal argument that these servicers should be protected from state lawsuits because they say they should only have to answer to the federal government.

SHAPIRO: That's NPR's Cory Turner. Thanks, Cory.

TURNER: Thank you, Ari.

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