The Washington PostDemocracy Dies in Darkness

Weeks later, servicers still waiting on Education Dept. guidance for loan-forgiveness expansion

Democratic lawmakers worry that a sloppy rollout could imperil the initiative

Education Secretary Miguel Cardona speaks during a March 17 news conference. (Andrew Harnik/AP)
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Three weeks after the Education Department announced a temporary expansion of a popular debt-relief program for public servants, the contractors charged with guiding borrowers are still awaiting guidance themselves.

Biden administration temporarily expands student loan forgiveness program for public servants

People familiar with the matter, who spoke on the condition of anonymity because they were not authorized to speak publicly, said federal student loan servicers — the middlemen who collect payments on the government’s behalf — to date have only received press materials provided to the public. While those documents captured the basic tenets of the initiative, the people said, they lack specific details that borrowers are requesting.

Insufficient guidance from the Education Department, they said, could slow the time-sensitive initiative, create confusion and further erode public trust in a forgiveness program that has been riddled with problems.

The stakes are high for the Biden administration. Consumer groups and liberal lawmakers are keeping a watchful eye on whether the department can deliver on a pledge to bring more than 550,000 public servants closer to debt cancellation.

The Education Department said it would temporarily allow all payments that borrowers made on federal student loans to count toward Public Service Loan Forgiveness (PSLF), which cancels outstanding debt after 10 years of on-time payments. The decision allows teachers, members of the military and other public servants to sidestep the program’s complex rules to receive debt relief, but only until Oct. 31, 2022.

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Normally, participants must have loans made directly by the federal government and be enrolled in specific repayment plans, primarily those that cap monthly loan payments to a percentage of their income. They also must work for the government or certain nonprofit organizations.

Any misstep can add years to the process, and borrowers have complained that poor advice from loan servicers led them to believe they were making qualifying payments when they were not. Those revelations have led to other temporary fixes that created new problems, making borrowers even more skeptical about the program.

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Against that backdrop, the Biden administration’s waiver is being met with a mix of excitement and concern.

At a House education subcommittee hearing Wednesday, congressional Democrats told Richard Cordray, head of the department’s Federal Student Aid (FSA) office, that their constituents have peppered them with stories of success and questions about the administration of the waiver.

“We’re already hearing from constituents that servicers [say] they don’t have the guidance to implement the PSLF changes,” Rep. Joe Courtney (D-Conn.) said to Cordray at the hearing. “We want to be partners with you to get the word out to people, to make sure they don’t get caught in another sort of bureaucratic gymnastics that would affect their eligibility for discharge.”

Cordray said little time had passed since Education Secretary Miguel Cardona announced the waiver and that the department will work to make sure people have the right guidance.

“Sometimes quick is the enemy of the good,” Cordray said.

In an interview, Courtney credited Cordray for addressing the issue and said he had heard from borrowers who were already receiving credit for their payments. Still, he said he was concerned about administrative hiccups that could result in delays.

“We’re still in month one, but on the other hand, we’ve only got a year for a lot of people to get assistance,” Courtney said. The Education Department has “got to get this right, and they really need to move on it.”

House Education Committee chair Rep. Robert C. “Bobby” Scott (D-Va.) has asked the department for an accounting of the implementation of the waiver.

Because of the scope of the waiver, all the department’s loan servicers will need to be up to date on the parameters of the initiative, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group representing companies who collect education debt payments.

“Having detailed guidance and solid information in advance that partners can then use to educate borrowers is critical before making these kind of announcements,” Buchanan said. “Servicers have been given no ability to offer additional guidance or answer their detailed questions. But there isn’t much we ourselves can do until FSA develops and provides that sufficient and timely guidance to us.”