It took three years and dozens of calls before anyone told Kyra Hahn that her student loan payments were ineligible for a federal program that forgives the debts of borrowers like her who work in public service jobs.
The librarian was enrolled in the wrong repayment plan, an error the company servicing the loan should have caught, Hahn said. But no one did, even when the account was transferred to another company. That meant Hahn would have to spend several more years making payments before the balance of her education loans could be canceled.
“I thought everything was okay,” said Hahn, 45, who lives in Colorado and has a balance of about $60,000 in federal loans. “What’s frustrating is when I asked to get into the right plan, it took forever and the options cost more a month than my original plan.”
Now, the nonprofit Student Borrower Protection Center and the American Federation of Teachers are investigating why borrowers such as Hahn face so many barriers to public service loan forgiveness, a program that cancels federal student debt after 10 years of on-time payments for people who take public-sector jobs.
The organizations are seeking the release of government audits and correspondence to pinpoint breakdowns since the program’s inception in 2007. Seth Frotman, executive director of the Student Borrower Protection Center, said the groups intend to file two dozen Freedom of Information Act requests, including to the Education Department and contractors it has used to manage the loan forgiveness program.
“For more than a decade, dedicated public servants have paid a heavy price for abuse and mismanagement by the student loan industry," said Frotman, who resigned in August from a senior position at the Consumer Financial Protection Bureau before joining the nonprofit advocacy group. “These failures have ruined student loan borrowers' lives and can’t be swept under the rug.”
The Public Service Loan Forgiveness program has engendered criticism and praise since being introduced by the administration of President George W. Bush. It has been derided as a backdoor subsidy for graduate school and a handout for doctors and lawyers who have the earning potential to repay student loans. The Trump administration has proposed eliminating it, as have House Republicans.
Proponents say the program still lives up to its mission of encouraging college graduates to pursue careers in teaching, law enforcement and government — public service fields that traditionally pay relatively low wages. They argue the program suffers from poor execution that has left thousands of borrowers confused about eligibility or frustrated with a bureaucratic process that has made securing loan forgiveness elusive for many.
To date, the Education Department has approved only 1 percent of the more than 28,000 applications for loan forgiveness under the program. It is unclear how many of those borrowers were in the wrong repayment plan, had late payments or were working in ineligible jobs, but the department said it will soon release more information on the denials.
Ben Miller, senior director for postsecondary education at the left-leaning Center for American Progress, questioned in a recent paper whether the denials are mostly a product of poor communication or if they reflect recurring problems in the program. He suspects it’s a bit of both.
Eligibility for Public Service Loan Forgiveness is complicated. Not only must applicants have at least 10 years of full-time employment certified by a qualifying employer, but they also must be enrolled in specific repayment plans, primarily those that cap monthly loan payments to a percentage of their income.
Until recently, the Education Department did little to help borrowers navigate the program. A congressional spending bill directed the agency to create a tool for borrowers to assess their eligibility.
“The Department recognizes that the requirements — set forth by Congress — to achieve public service loan forgiveness are complex,” Liz Hill, spokeswoman for the Education Department, said in an email. “We are committed to helping borrowers better understand how to qualify, what paperwork to submit, and where they can turn for assistance.”
Though Congress set the parameters of the forgiveness program, critics of the Education Department say it could do a better job of ensuring the companies it pays to manage student loan payments provide accurate information to borrowers. Some teachers, nurses and members of the military have complained about FedLoan Servicing, the company overseeing the program, giving them inconsistent and unclear guidance.
In announcing their plans to file records requests Wednesday, the Student Borrower Protection Center and the teachers union issued a report examining the problems public-sector workers face in seeking loan forgiveness. One nurse, whose employer made extra payments on her federal student loans, complained about FedLoan failing to tell her that the additional money did not count. A member of the military bemoaned the difficulty of certifying his employment, with frequent rejections and requests to resubmit paperwork.
The testimonials mirror complaints borrowers made in a 2017 report Frotman wrote at the Consumer Financial Protection Bureau, which found that botched paperwork, flawed payment processing and inaccurate information from FedLoan had prevented hundreds of public-sector workers from receiving loan forgiveness.
A recent report by the Government Accountability Office highlighted communication breakdowns between the Education Department and FedLoan with troubling implications for borrowers. FedLoan, for instance, has no list of eligible employers. That means the one company in charge of the forgiveness program would be unable to confirm whether someone’s job qualifies as public service, according to the report.
Hahn said her loan servicers have stymied her efforts to seek forgiveness since she first inquired about the program in 2009. Before FedLoan became the sole contractor for the program in 2013, Hahn said other loan-servicing companies led her to believe she was on track to receive forgiveness, although she was in the wrong repayment plan and had to consolidate her loans from a defunct bank-based lending program.
These days, she is frustrated by the inefficiency of the customer support provided by FedLoan.
“If you try a reasonable approach to resolve a customer service issue by asking to speak to the same supervisor or representative that you worked with last time . . . you’re told it’s not possible," Hahn said. “I still get conflicting letters from the loan servicer about my payments.”
Hahn has even requested an audit of her account to make sure there are no further hiccups, but she said the files are incomplete and confusing. The records she received made no mention of her inquiries to FedLoan, which did not respond to requests for comment.
Some would-be applicants for Public Service Loan Forgiveness have accused their student loan servicers of steering them away from the program so that the servicer can hold on to their accounts. Student loan servicers Navient Solutions and Great Lakes are facing separate lawsuits accusing them of misleading borrowers about the program.
The American Federation of Teachers filed a “friend of the court” brief in the Great Lakes case in support of the borrower. Nine of the union’s members are leading the lawsuit against Navient, alleging the company misled borrowers about the public service program because it did not want to see their accounts transferred to FedLoan. Navient denies all charges.
“Hundreds of thousands of our members are being harmed by the current broken system, and that’s why we have joined with the Student Borrower Protection Center to probe what the department knew and when they knew it,” Randi Weingarten, president of the American Federation of Teachers, said in an email. “We launched this investigation because the public has a right to know how loan forgiveness, to which borrowers are entitled under the law, is systematically attacked and undermined.”