The U.S. Dept. of Education released a report this week on the Public Service Loan Forgiveness (PSLF) program – and the details are rather stunning.
First, some background. To get student loans forgiven under the PSLF program, borrowers must make 120 “qualifying payments,” which are payments that (1) are made on Direct federal student loans, (2) under a qualifying repayment plan – which is either the 10-year Standard plan or an income-driven repayment plan, while (3) working full-time for a qualifying public service employer.
The program was not enacted until October 1, 2007, and it’s not retroactive to before that date. This means that the soonest anyone could have been eligible for loan forgiveness was October 1, 2017. Since so few people knew about the program during the first few years of its existence, not many people have qualified so far. However, nearly 12 months into the “eligibility era” (as I call it), we haven’t had much specific information about the number of people applying.
Until today. The Department of Education’s report says that so far, about 29,000 borrowers have applied to have their student loans forgiven under PSLF. How many have been granted forgiveness? 96.
No, that’s not a typo. 96 (ninety-six) borrowers, out of 29,000, have been approved for loan forgiveness under the PSLF program so far. That means that over 99% of borrowers who applied were rejected. Here’s what we know:
- About 70% of applications were denied because borrowers did not meet at least one element of the PSLF program (either they had the wrong type of loan, they were making payments under the wrong repayment plan, or they were not working in the correct type of employment).
- About 28% of applications were denied because they were incomplete – some component of the application was either missing (such as a signature from a prior employer) or incorrect.
This is certainly very concerning. Is it a reason to completely panic? Not necessarily. Here are some of my thoughts:
- It is not entirely surprising that there would be a high rate of rejection for borrowers applying right now, because so many people were not meeting all of the eligibility criteria back in 2007-2008, as the program was not well-publicized then and IBR didn’t even exist. I would expect the approval rate to go up steadily during the next few years. That said, a 99% rejection rate is awful.
- Some borrowers who were rejected could appeal the decision and be approved under the newly-created Temporary Extended Public Service Loan Forgiveness (TEPSLF) program, which can allow some borrowers to qualify even if they were making payments under the wrong repayment plan. The Dept. of Education says it’s working with these borrowers and encouraging them to appeal.
- Borrowers who have defects in their applications can make corrections and resubmit, so it’s possible that the 28% of applicants who were denied due to a technical defect could still be approved.
All that said, this is certainly concerning for borrowers hoping to get their loans forgiven under the PSLF program, and it’s a signal that many people will encounter problems when they apply. Borrowers presently on track for PSLF should continue to keep up with the annual requirements, and maintain very good records of their payments and employment histories.