Public Service Loan Forgiveness Gets an “F”

In 2007, the College Cost Reduction and Access Act established the Public Service Loan Forgiveness program (PSLF). PSLF encourages students to work in the public service sector by forgiving federal student loan balances for eligible borrowers. This program requires individuals to make 120 qualifying monthly payments while working full-time in certain public service jobs in the government or nonprofit sector.

According to a recent report by the Government Accountability Office (GAO), over half of borrowers that requested to have their employment and loans certified as of April 2018 either did not meet basic eligibility requirements or had yet to make any qualifying loan payments. This includes over 150,000 borrowers who requested to have their employment and loans certified despite not having qualifying federal loans, which suggests these borrowers either did not know which types of loans they had or which types qualified for the program. According to the report, frontline customer service staff frequently received calls from borrowers who were confused about whether their loans qualified for PSLF and other program requirements. Borrower complaints reported by the Consumer Financial Protection Bureau also indicate confusion with PSLF requirements related to qualifying loans and payments. The Department of Education (ED), which oversees the Office of Federal Student Aid, uses various outreach methods to inform borrowers about PSLF, but the large number of denied borrowers suggests that many borrowers remain confused by the program requirements. Overall, the GAO report recommends process improvements to help reduce borrower confusion.

The abundance of confused borrowers and limited number of approved applications prove that ED does not explain the PSLF program in a way that borrowers understand. The PSLF program therefore does not in align with ED’s strategic goal of “enhanc[ing] students’ and parents’ ability to repay their federal student loans” or “providing accurate… information [and] relevant tools.” More to the point, the program also does not align with Congressional objectives.

In passing the March 2018 consolidated appropriations act, Congress appropriated $350 million to forgive the loans of borrowers who otherwise would qualify for PSLF. Despite these additional funds, ED rejected 99% of loan-forgiveness requests from May 2018 to May 2019. According to the GAO report, of the 54,184 completed requests for temporary expanded public service loan forgiveness, ED only approved 661 requests approved. Given that Congress specifically directed the Secretary to “develop and make available a simple method for borrowers to apply for loan cancellation”, 132 Stat. 753, it would appear that ED has failed in two regards: simplifying the process and providing the financial support required by law.

While there is no sign that ED’s massive failure to implement the PSLF program is being audited by its Office of Inspector General, it clearly should be. The IG’s most recent strategic report makes clear that identifying methods to use federal education funds more effectively is a top priority. Management of the PSLF program would seem to fall into the category of “federal education funds.

Regardless of whether the IG has adequately audited the PSLF program, borrowers should understand program eligibility requirements much better than they do, and not just because Congress required it. Knowledge of the program is important because borrowers have to make decisions about their loans and employment months or years before they even apply for loan forgiveness. And the March 2018 Consolidated Appropriations Act requires the Department to communicate PSLF program requirements to all borrowers and improve outreach and information through calls, electronic communications, and other methods. 132 Stat. 753. The GAO report suggests that once implemented, these provisions could reduce confusion about PSLF requirements and help the Department provide better service to borrowers.

ED should take Congressional direction more seriously. Federal funds are going untapped for other programs as well because the agency is failing to make them more accessible to eligible beneficiaries. More attention to this problem from ED’s OIG might help. For now, ED’s stewardship of the Public Service Loan Forgiveness program receives a failing grade.