Students Promised Help with Student Loans May Not Get It Due to Agency Error

April 2, 2017 | Posted in Education, Politics | By

Image of students at graduation. Photo by: Spencer Platt/Getty Images

Photo by: Spencer Platt/Getty Images

This is a truly rotten – and inexcusable – situation. Thousands of students entered a government program in which the remainder of their student loans would be forgiven if certain conditions were met after they’d worked in public service jobs and made 120 monthly payments (which would take 10 years.) Be sure to remember that last part – it’ll be important in a couple of paragraphs.

Anyway, they had to use a specific kind of loan and have their job approved through the agency administering the program. Whether a job qualified or not depended on the nature of the organization, and not all non-profit corporations were eligible. They were also told to re-submit their job each year for recertification of eligibility in case anything changed. Even with the red tape, for many, the possibility of having the balance of the loans forgiven was an attractive offer – attractive enough that several took jobs they would have otherwise passed over because they qualified for the program.

Or so they thought.

According to the New York Times

In a legal filing submitted last week, the Education Department suggested that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding and can be rescinded at any time, the agency said.

The filing adds to questions and concerns about the program just as the first potential beneficiaries reach the end of their 10-year commitment — and the clocks start ticking on the remainder of their debts.

FedLoan claims that in some cases, students had been told their job qualified in error and that the denial of certification was retroactive. And here’s where those 120 monthly payments become important. Those payments had to be made while they were working at a qualified job, so when their previously approved job suddenly became retroactively un-approved, none of the monthly payments they made during that time could be counted toward the total 120 monthly payments they had to make for the balance to be forgiven. Worse, they were given no avenue to appeal the decision. As you can imagine, there’s now a lawsuit that’s been filed.

This is a program that started in 2007 and while it may sound like the kind of horror story likely to be told many times and in many ways as long as the Trump administration is in office, but it’s not. This year is the first year any students could receive the promised forgiveness of the balance of their loans, and the announcement that the certifications participants have been getting may be worthless came out in December. The Trump DoE isn’t helping matters by sticking to the decision that the wrongful approvals are retroactive and the documents can’t be relied on, but it’s actually a sad legacy that the Obama Department of Education has left behind.

I hope this situation is worked out fairly – and quickly. I wouldn’t even want to imagine how bewildering – not to mention infuriating – it would be to have worked as many as 10 years at a job that wasn’t my ideal job, but one which I had taken as part of an agreement to provide public service in exchange for the forgiveness for a portion of my loans, only to find out I may have essentially wasted all of that time. These weren’t people looking for a handout or a free ride on the taxpayers dime. They’ve made 10 years of payments on their loans, and they held up their end of the bargain. Now the government needs to do likewise.

More details can be found at this NYT article from when the news first broke in December.

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