ED and Student Loan Companies Faulted for Denying Borrowers PSLF, New Report Finds

By Hugh T. Ferguson, NASFAA Staff Reporter

Over the course of a decade, a new report has found, the Department of Education (ED) has failed to provide any regulation, guidance, or direction to student loan companies that advise public service workers about their right to Public Service Loan Forgiveness (PSLF).

The investigation, spearheaded by the Student Borrower Protection Center and the American Federation of Teachers, aims to highlight the ongoing challenges that borrowers with Federal Family Education Loans (FFEL) face when seeking to qualify for PSLF and promote a number of policy recommendations for ED, Congress, and law enforcement officials to take to ensure borrowers receive appropriate information about their PSLF eligibility.

“This failure by the Department of Education, combined with efforts by student loan companies to derail borrowers’ efforts to become eligible for PSLF, has resulted in over 70,000 PSLF applicants with FFEL loans to be deemed ineligible and denied access to loan forgiveness,” the investigation found.

Nearly two dozen Freedom of Information Act (FOIA) and state open records requests to ED and state-backed student loan companies that serve as federal contractors and/or participants in the legacy FFEL Program, were included in this analysis. 

Additionally, the report reviewed recent court filings, government reports, government data, and consumer complaints submitted by individual student loan borrowers that had been published in the Consumer Financial Protection Bureau’s (CFPB) public complaint database.

Based on borrower testimony and the collected government data, the Student Borrower Protection Center and the American Federation of Teachers fault ED and student loan companies for failing to grant borrowers PSLF.

In their analysis the groups found that ED has never placed an affirmative duty on the student loan industry to tell borrowers about the availability of PSLF or the need to consolidate older federal loans in order to get on track to receive loan forgiveness.

The groups also determined a conflict of economic interest for the loan companies in administering PSLF. When a public service worker invokes their right to consolidate an older federal student loan to pursue PSLF, creditors and loan servicers who handle these older loans stand to lose all future revenue from that individual. According to the report, this potential loss in revenue thus incentivizes student loan companies to deceive or mislead borrowers about the right to loan forgiveness.

“The federal government trusted the student loan industry to self-regulate and self-police, despite repeated warnings by government watchdogs and legal actions by borrowers and enforcement officials,” the investigation concluded.

Specifically the report calls for ED to ensure that eligible borrowers with loans through the FFEL Program are able to get credit towards PSLF, that Congress ensure ED retroactively count all FFEL borrowers’ past payments as qualifying and that law enforcement, along with regulators and ED, investigate and audit the FFEL Program.

Further, the investigation calls for ED’s Federal Student Aid office to ensure that creditors and servicers in the FFEL Program provide relief to borrowers who missed out on months of credits due to delays and that ED provide loan forgiveness for students when there is a documented audit indicating a borrower with FFEL Program loans has been denied access to PSLF due to loan company deception. 

“Policymakers and enforcement officials must immediately take the steps outlined in this report to finally afford justice to the dedicated public service workers denied the promise of loan forgiveness due to a decade of mismanagement and abuse.”


Publication Date: 1/4/2021

Tina J | 7/26/2021 11:0:04 AM

This forgiveness program is a long term goal which will be affected if any unfortunate lifetime event occurs within 10 years. If one looks at 10 years or 120 payments(month of payments on time), to some would seem impossible or at least nearly impossible and to others like myself may say what's the point? If you do not qualify for another plan that offers a lower than the standard payment plan, then the loan will be paid off in 10 years/120 on-time payments. Those that do not borrow as much, just what is needed will not have a loan period of 120 payments and will never benefit from the program. What a about the person who has the extended loan term (longer than 10 years) or on an income sensitive payment plan and misses one on-time payment say in year 8? Will this person now miss out? What if the program is terminated? This person will be in a worse position with the accrual of interest on the loan because of the extended payment period and the low payment or even $0.00 payment amounts per month.
Why not have short term goals to encourage payments? Eg. 12. on-time payments results in a credit equivalent to next regular payment amount. This way students work to make payments to get a free payment. Set max at receipt of 10 free payments on 10yr loan & 15 on15yr loan. Everyone could benefit. Reduce default rates, debt and collections. Thanks.

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