In an effort to provide relief for military student loan borrowers, the Student Borrower Protection Center (SBPC) has unveiled new suggested guidelines on how the Department of Education (ED) can work to “restore the promise” Public Service Loan Forgiveness (PSLF) for this cohort of borrowers.
With an estimated 200,000 service members collectively owing more than $2.9 billion in student debt, this group of borrowers faces unique challenges when it comes to the PSLF program.
The report from SBPC highlights a number of these issues, including challenges for service members over loan consolidation, employer certification, and servicing errors that can derail a borrower’s progress in meeting their required loan repayment period.
Only Direct Loans are eligible for forgiveness under the PSLF program but Congress allowed borrowers who held older loans — like the Federal Family Education Loan Program (FFELP) — to have the option to consolidate that debt in order to be qualified for forgiveness. However, the borrower must rely on their student loan servicer to provide them with the process for making this consolidation and military borrowers have in many instances been unaware of this requirement.
“Merely through the assistance of an acquaintance, I learned that I must consolidate my loans in order to qualify for PSLF. Nearly two years of payments towards my initial loan payments, paid in the honest and fair spirit of the law, will not count towards loan forgiveness,” reads the testimony from a service member highlighted in the report. “I believe this is truly an unfortunate and saddening realization that clearly thousands of other public servants are facing.”
Even when borrowers take steps to consolidate their loans, servicing breakdowns can delay the process and cost borrowers months of lost credit toward PSLF.
When working to repay their loans, service members also face challenges with their employers, with nearly one-quarter of Employer Certification Forms (ECFs) submitted by service members being denied, despite the employer being clearly identified as a branch of the U.S. military.
While ED requires that ECFs be signed by an “authorized official” of the employer, the report found that the department provides very limited guidance as to who may be considered to have such authority — creating additional burdens for borrowers.
Further, military borrowers have faced a number of documented servicing errors, which make it difficult to obtain the required number of payments to be eligible for relief.
Active duty service members are entitled to military deferment on their student loans, allowing them to postpone payments for a certain period of time. Like forbearance, military deferment is intended to provide active duty soldiers and sailors repayment flexibility in discrete, short-term periods of financial distress.
The Consumer Financial Protection Bureau (CFPB) reported that the average military deferment lasts 30 months, costing the borrower as much as $19,000 in lost savings, since the payment status does not allow borrowers to accrue credit toward PSLF. Had a servicer suggested the borrower enroll in an IDR plan, the borrower would accrue additional payments necessary to meeting their PSLF requirements.
The report calls for ED to immediately forgive loans held by borrowers who have served on active duty for at least 10 years or have served their communities and country for at least 10 years through a combination of military and civilian service. Additionally, SBPC calls on ED to notify borrowers with updated accounting of their qualified payments to date and provide them with additional information about how to earn PSLF.
“Service members relied on the promise America made: after ten years of public service, including service to our country, their student debt would be forgiven,” the report read. “These men and women upheld their end of the bargain and sacrificed in service to our nation. The Secretary can now take action to ensure America upholds its end by providing these borrowers with credit for their service.”
Publication Date: 11/16/2020