Report: Public Service Loan Forgiveness Program Hasn't Fixed Its Issues

Sep 5, 2019
Originally published on September 5, 2019 7:20 pm
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ARI SHAPIRO, HOST:

A new report from a government watchdog offers some sobering news for student borrowers. The Government Accountability Office reviewed a program that Congress created last year to forgive the student loans of public servants. But the GAO found that so far, 99% of requests for loan forgiveness have been denied.

NPR's Cory Turner is here in the studio. Hi, Cory.

CORY TURNER, BYLINE: Hey, Ari.

SHAPIRO: First, tell us about this program and why so many people were rejected.

TURNER: Yeah, I think we need a quick history lesson first, Ari. So Congress created this program called Public Service Loan Forgiveness back in 2007. It was a promise to student borrowers - basically said, if you work in government or nonprofit, as a teacher or first responder or social worker, you make steady payments on your student loans. Then after 10 years, the Education Department would forgive whatever's left.

Here's the problem. The first several years this program was in effect, the Ed Department and loan companies - they really did a terrible job of managing it and of explaining it to people. So borrowers were often given no advice, or sometimes they were given wrong advice to the point that, in recent years now, we're seeing thousands of borrowers come out of the woodwork and say, wait; I thought I was on track. And instead, they realize they don't even qualify for loan forgiveness.

SHAPIRO: That was a 2007 program, but now we're talking about a program from last year. How does that relate?

TURNER: Exactly. So what we're talking about now is an effort by Congress last year when they heard all of these frustrated borrowers saying, wait; you got to help us. Congress decided to create a kind of fix, a limited expansion that relaxed some of these really rigid rules. They set aside $700 million to help pay for it. And it's this expansion, Ari, that the GAO just found, in its first year, is denying 99% of requests.

SHAPIRO: If the whole point of the expansion was to get more of this money to more people, why has it been such a failure?

TURNER: That is the question.

SHAPIRO: (Laughter).

TURNER: Luckily, the GAO report offers a pretty clear trail of breadcrumbs. The simple answer here is that the vast majority of the requests that are being denied - 71% - they're being denied based on a technicality. People aren't filling out the right form.

SHAPIRO: If 71% of people aren't filling out the right form, my guess is the problem is not with the 71% of the people.

TURNER: Well, yeah. I talked to a lot of borrowers who are brass tacks people. They have budgets for their families. And they could not figure this out. They were baffled. One of the people I spoke with, Jonathan Barnes of Chicago - he told me he believed he had done everything right when he applied for this expansion. But then he got a rejection letter that said this.

JONATHAN BARNES: In all capital letters, you know, I wouldn't be considered for the program at this time because it said I hadn't applied for public student loan forgiveness. It was all very confusing. But at the end of the day, it was another big, giant stop sign that I felt was underneath the bureaucracy that was unwilling to help.

TURNER: Ari, obviously, the bad news here is he's not the only one who feels this way. But the good news is that some folks - including Jonathan, potentially - may ultimately qualify for this.

SHAPIRO: Through what - more congressional action or just filling out the right form or what?

TURNER: Well, some of them by just filling out the right form, frankly. Some are going to require more congressional action. GAO made a couple of recommendations to add. Number one, they said, streamline this process. Obviously, it's not working. You need to make it simpler. They also said the Ed Department has got to improve its messaging, explaining to borrowers how it works, how you qualify and what you need to know before you go through it. And honestly, the Ed Department told me, told the GAO, look; we agree with these recommendations, and we're working hard. A number of these efforts are already underway.

SHAPIRO: That's NPR's Cory Turner. Thank you.

TURNER: Thank you. Transcript provided by NPR, Copyright NPR.