The lawsuit centers on four borrowers who claim that the department inexplicably changed the eligibility requirement for employment that counts as public service after approving the work. Each had submitted a certification form verifying their employment that FedLoan approved but was later informed that their work as lawyers did not qualify for the program.
“Though the department’s contractor has made occasional errors in individual notifications to borrowers, it has corrected those errors,” Education Department attorneys wrote in Monday’s filing. “Moreover, it has provided borrowers … ample opportunities to seek reconsideration of its decisions.”
The attorneys said the final decision on forgiveness is, and has always been, in the hands of the Education Department. That means borrowers will know for sure that their loans will be forgiven only after they have completed the 10 years of payments.
“Thousands of young people — teachers, engineers, lawyers, doctors and more — made major life decisions based on inaccurate information provided by the department and its contractor,” said Linda A. Klein, president of the American Bar Association, a party in the lawsuit. “They took jobs and moved their lives based on this information. The plaintiffs followed the rules and are now paying a steep price for the department’s mistakes.”
There are three ways to qualify for Public Service Loan Forgiveness: working for a government organization, for tax-exempt groups known as 501(c)(3) nonprofits or for other types of nonprofit organizations. Participants must make 120 loan payments through the government’s suite of plans, which cap monthly loan payments to a percentage of income. Though borrowers are encouraged to submit an employment certification form every year, people can still qualify without doing so.
Enacted in 2007 under President George W. Bush, the forgiveness program was designed to encourage college graduates to pursue careers as social workers, teachers, public defenders or doctors in rural areas. It is especially enticing for medical and law students who graduate with six-figure debt, but many teachers and social workers whose wages often pale in comparison with the amount of student debt they owe also benefit from the forgiveness program.
The Trump administration rattled many borrowers working toward public service forgiveness when the 2018 White House budget called for the elimination of the program.
Education officials put those concerns to rest by clarifying that the proposal would affect only people taking out loans on or after July 1, 2018. But the viability of the program remains in question in light of the ongoing lawsuit.