Public servants applying to have their federal student loans forgiven through a temporary relief program run by the Education Department are being stymied by its confusing terms, the Government Accountability Office said in a report Thursday.
The study examined the temporary expansion of Public Service Loan Forgiveness, a program that cancels federal student debt after 10 years of on-time payments for people who take jobs in the public sector. Enough public employees complained of receiving bad advice about the program that lawmakers created a temporary fix last year so payments made in the wrong plan could be credited toward forgiveness.
GAO researchers found the Education Department rejected 99 percent of loan forgiveness requests made under the new program. The agency processed 54,000 applications and approved just 661 between May 2018 and May 2019. Of the $700 million Congress gave the Education Department to spend over two years, only $27 million has been used.
The Washington Post first reported in April that while tens of thousands of public employees had applied to have their federal student loans forgiven through the temporary relief program, only a few hundred had succeeded.
The GAO found that nearly three-quarters of rejected applicants were turned down because they had not first applied to the original public service loan forgiveness program. According to the GAO, borrowers were confused about why that requirement was necessary if they were ineligible for the original program.
The government watchdog criticized the Education Department for failing to clearly explain how borrowers can appeal a rejection or dispute an erroneous denial.
The GAO also called on the department to be more transparent about the program’s requirements. It recommended the agency post information about the program on its online tool for people applying for loan forgiveness and require student loan servicing companies to do the same. The watchdog also suggests the Education Department streamline the application process.
In a letter responding to the report, Diane Auer Jones, the Education Department’s principal deputy undersecretary, agreed with all of the GAO’s recommendations. She said the department was improving the application process and communication with borrowers.
Democratic lawmakers have long been critical of the Education Department’s management of the temporary expansion. They complained that the agency created eligibility criteria that were far more rigid than anything Congress envisioned.
The measure in the fiscal 2018 budget that set up the one-time expansion, on the basis of legislation introduced by Sens. Tim Kaine (D-Va.) and Sheldon Whitehouse (D-R.I.), directed the Education Department to develop a simple way for borrowers to apply for forgiveness. Instead, lawmakers say, the Education Department has restricted access with a litany of rules.
“We created a fix to this program and provided the Trump Administration with hundreds of millions of dollars to give borrowers the loan relief they were promised, but instead they’ve left public servants in the lurch again,” Kaine said in an email. “It’s outrageous that they still can’t get this right.”
In June 2018, Senate Democrats wrote to Education Secretary Betsy DeVos urging her to allow people to submit applications to be processed under the new loan forgiveness program regardless of whether they had already applied for public service forgiveness. The department agreed to the recommendation. But lawmakers said they continued to hear from borrowers who had no idea about the two-step process.
“The department’s failure to implement this program is mystifying and unacceptable,” Rep. Robert C. “Bobby” Scott (D-Va.), chair of the House Education and Labor Committee, said in a statement Thursday. “Regardless of whether the administration supports the Public Service Loan Forgiveness program, the Constitution requires the executive branch to ‘take Care that the Laws be faithfully executed.’ ”
The House Education Committee is scheduled to hold a hearing on the Public Service Loan Forgiveness programs this month.