Panicked Borrowers, and the Education Departmentfs Unsettling Silence
By RON LIEBER
APRIL 7, 2017 - The New York Times
was bad enough late last month when the
in a legal filing, informed the nationfs public servants that they shouldnft
trust its administratorfs word about whether their student
loans qualify for its debt forgiveness program.
the panic among borrowers that the newfound uncertainty unleashed helps
illuminate an additional problem with the public service loan forgiveness
program: Many people who believe that they qualify — and entered graduate
school, borrowed piles of money and chose employers accordingly — may not
realize that they are not making qualifying payments or that certain loans are
not eligible for forgiveness.
The program, which began in 2007, was enacted with what
was supposed to be a clear-cut proposition: People who worked for 10 years in
public service jobs and made regular payments would have the remainder of their
federal student loans forgiven. A wide variety of jobs were supposed to qualify,
from nonprofit work to teaching in a public school or practicing medicine at a
But now, 10 years later, the legal filing has sown all
manner of confusion — which itself comes in the wake of a disheartening amount
of misdirection given to borrowers. The Consumer
Financial Protection Bureau receives plenty of complaints about loan
servicers offering incorrect information. And well-meaning employers may also
pass along bad advice.
gThis is one of the most complex
programs ever concocted by Congress,h said Rohit Chopra, a former Education
Department employee who also served as the student loan ombudsman for the
Consumer Financial Protection Bureau. gSo many people who are counting on
getting some help are going to be flatly rejected on a technicality.h
People who are in the loan
forgiveness program, who think they are or who are contemplating trying to enter
it ought to use this scare as an opportunity to step back and double-check their
At least four basic things need to happen for someone to
get in the program and stay in: He or she must make payments in the right way,
have the right kind of employer, be in the right loan category and have the
right kind of payment plan.
What follows is a mere summary, and the pitfalls,
tripwires and exceptions are legion. Mandatory additional reading includes the
Education Departmentfs fact
list of 56 questions and answers, and the Consumer Financial Protection
kits for employers and employees.
Letfs take those four requirements
THE RIGHT WAY TO PAY For starters, you
need to make 120 payments in order to qualify. They need to be made on time and
in full, and you must be working full time.
The count can get complicated for people in school, or
just getting out, or in financial trouble, as well as for those with qualifying
undergraduate loans who go back to school. Question 21 on the departmentfs
list addresses some of these issues.
THE RIGHT KIND OF
EMPLOYER This is what the
lawsuit is about. All of the Education Departmentfs guidance on the topic
suggests that people who work for the government or for a nonprofit with 501(c)
3 status should be eligible for forgiveness. Anyone who wants to be certain that
an employer qualifies can (and should) file an employment
certification form with a loan servicer. Do it every year, and every time
you change jobs or servicers. Also check to make sure your payments are going
correctly toward that goal of 120.
The lawsuit involved some employers with more esoteric
nonprofit statuses, and the Education Departmentfs filing in response declared
that approval of an employment certification form gdoes not reflect agency
action on the borrowerfs qualificationsh for the public service loan forgiveness
program. Additionally, the brief said that borrowers should not expect a truly
final decision until after their 120 payments were made.
Cross your fingers, everybody! And
cue the justifiable panic. Dr. Jordan Chanler-Berat, 33, an emergency room
physician at a nonprofit hospital in New York City, fired off a letter to the
Education Department demanding final word now about the fate of his more than
$300,000 in student loans. While he had previously received letters saying that
his employer qualified, he was primed to be wary. At one point, his human
resources person mistakenly told him that his hospital might not qualify.
gI was going to throw up,h he
Jessica Schreiber, 28, the founder and sole paid employee
of a nonprofit, has her own concerns. She left New York Cityfs Sanitation
Department last year to start Fabscrap, which helps local
businesses recycle their fabric. Before starting graduate school, she plotted
her loans, payments and career choices according to the rules of the loan
So when she heard the news about
the lawsuit, she posted the following on Facebook: gTHIS IS TERRIFYING.h
She has asked for her servicerfs blessing on the
eligibility of her nonprofit, and has not heard back yet.
Since the legal filing, the
Education Department has told reporters that it cannot comment on pending
litigation. I didnft ask about that. Instead, I simply asked if its servicerfs
letters about whether an employer was eligible were something that borrowers
should believe. Its three spokesmen did not answer by my deadline for this
Letfs call the Education Departmentfs refusal to clarify
the matter exactly what it is: meanness. If the department has made mistakes
with the litigants and misclassified their employers, it can fix them quickly
and settle the suit without freaking out untold numbers of other borrowers.
THE RIGHT KIND OF LOAN The Education
Departmentfs instructions, via another
information page on its website, are pretty clear: You need to have what the
agency refers to as a gdirecth loan. As the site explains, if the word gdirecth
isnft in the title of your loan, it probably doesnft qualify. If you arenft sure
what kinds of loans you have or whether your statement from your servicer
describes them correctly, you can log into the departmentfs
website and look them up.
If youfre making payments on, say, a Federal Family
Education Loan (F.F.E.L.) or a Perkins loan, those are not counted toward your
120 payments, even if you work for a qualifying employer (though the Perkins
loan has its
own cancellation program). You can fix this by consolidating your loans into
a direct consolidation loan. Be careful, though: If you consolidate direct loans
with nonqualifying loans, any forgiveness-qualifying payments you made on that
old direct loan wonft count anymore. The count to 120 resets.
When Dr. Darius Amjadi, a
49-year-old pathologist and Iraq war veteran in Portland, Ore., began his work
with a veteransf hospital, he thought he had a shot at loan forgiveness from the
Veterans Affairs Departmentfs own program. At the same time, his employer
informed him that his loans would be eligible for public service loan
But the departmentfs forgiveness
has not come through. And it turns out he had not been in the right kind of
federal loan to qualify for forgiveness under the public service program,
despite what his employer said. gIf anyone had said, eCheck your loans,f it
would have put me on notice,h Dr. Amjadi said. Now, hefs got a balance of
$40,000 and has missed out on years of eligibility for forgiveness.
THE RIGHT KIND OF
PAYMENTS This is the category that so worries Mr. Chopra, the former
Education Department and Consumer Financial Protection Bureau student loan
expert, who is now a senior fellow at the Consumer Federation of America. For
starters, he points out that if you are not in some kind of income-driven
repayment program (check
the Education Departmentfs website for the names of all of the different
ones), youfre not going to benefit from forgiveness and therefs a good chance
that your payments donft qualify.
A standard repayment term for student loans is 10 years,
or 120 payments. Those payments may be technically eligible if you have the
right employer, but if youfre making them in full (and not on an income-driven
plan), youfll have paid off the loan in 10 years and there wonft be any loan
left to forgive.
Mr. Chopra worries about people
working for eligible employers and making payments in something called graduated
or extended repayment plans that are not income driven. If you think that sounds
like you, call your servicer and ask, then ask again at a different time to be
He points to data in an Education Department presentation
from late last year that is available
online showing that about half of the people enrolled in public service loan
forgiveness have not made a single payment that qualifies toward their goal of
120. He suspects that many just donft realize theyfre in the wrong kinds of
My inquiries to the Education Department about this matter
yielded no replies.
To review, wefve promised to help our public servants by
forgiving their student loan payments after a decade. But the program is
confusing, the governmentfs legal filings contradict its websites, and its
representatives arenft answering questions.
This is no way to treat the people who do some of the most
important work in our country. But itfs also yet another reminder that as we
build more complexity into our financial systems, wefre sending the message to
those who must navigate them that they are on their own.
Itfs a shameful message at any time, but itfs particularly
galling when itfs firefighters, librarians and nurses on the receiving
Stacy Cowley contributed reporting.
A version of this article appears in print on
April 8, 2017, on Page B1 of the New York
edition with the headline: Borrowers Bewildered.