FedLoan Servicing, one of the U.S. Dept. of Education’s federal student loan servicers, has been in the news lately due to its messy rollout of the Revised-Pay-As-You-Earn (REPAYE) plan. Administrative and bureaucratic issues led to delays, processing errors, and other problems for thousands of federal student loan borrowers applying for, or switching to, the REPAYE plan.
Now FedLoan Servicing is in the news again for problems related to the Public Service Loan Forgiveness (PSLF) program. PSLF allows borrowers to get their Direct federal student loans canceled after making 120 monthly payments under an income-driven repayment plan while working full-time for a qualifying public service organization. FedLoan Servicing is the agency that the U.S. Dept. of Education has tapped to handle borrowers on track for PSLF. FedLoan Servicing allows borrowers to submit a PSLF Employment Certification Form, which it uses to make an initial determination of an employer’s PSLF eligibility and track a borrower’s qualifying payments.
As you can probably imagine, it’s not going well.
The American Bar Association (ABA) is reporting that FedLoan Servicing has been notifying borrowers that certain organizations that clearly qualify as public service employers under applicable federal regulations are not qualifying employers for the PSLF program. In fact, several of the ABA’s own employees were notified that the ABA itself doesn’t qualify as a PSLF-eligible employer, even though they are paid by the ABA’s 501(c)(3) arm and are clearly engaged in public service activities, such as public education and legal services. The ABA is reporting that this is also happening to employees at state branches of the American Civil Liberties Union (ACLU).
Even more maddening is that many of the employees at the ABA and ACLU who are receiving denial letters had been previously issued approval letters for the same employers in prior years. When employees contacted FedLoan Servicing to protest the new determinations, they were provided with a confusing array of contradictory explanations and non-answers. There was no way to appeal the determinations, either.
This story continues to develop, so stay tuned. But with the first PSLF borrowers reaching the 10-year mark in 2017 (next year), and with FedLoan Servicing tasked with making PSLF determinations, this story is deeply concerning. I fully expect the 2017 rollout of loan forgiveness under the PSLF program to be much like everything else in the federal student loan servicing system: awful.
