Biden wants to hear the public’s stories about the student loan forgiveness program with a 98% denial rate

student debt graduation
  • The Education Dept. is launching a public inquiry on the Public Service Loan Forgiveness program.
  • The program, which is supposed to forgive student debt for public servants, rejects 98% of applicants.
  • Anyone can submit comments which the department will consider when implementing improvements.
  • See more stories on Insider’s business page.

If the Public Service Loan Forgiveness (PSLF) program worked as it should, then every qualifying public servant would be able to receive student debt relief after 120 qualifying monthly payments. But complicated paperwork and eligibility requirements have made it so that 98% of applicants have been denied relief, even if they qualify.

That’s why, on Friday, the Education Department launched a public inquiry to fix the program.

“Unfortunately, for too many public service workers, the program has not functioned the way they hoped it would,” Julie Margetta Morgan, senior advisor and acting under secretary for the Office of the Under Secretary of Education, wrote in a blog post.

“Fixing the PSLF Program has been a priority for the Biden-Harris Administration since day one,” she added. “While we have identified many opportunities for improvement by talking to experts and borrowers and reviewing our procedures, we want to hear from you as well.”

President Joe Biden campaigned on reforming PSLF following its high denial rate under President Donald Trump, and fixing the program was even included in the Education Department’s regulatory agenda that was released last month. But implementing changes to the program could take at least a year, and the public inquiry would help the department more easily identify the problems it needs to fix.

Starting next week, anyone can submit comments to the department regarding PSLF, and the department specifically wants to know:

  • What features of PSLF are most difficult to navigate?
  • What barriers are preventing public servants from receiving student loan forgiveness under PSLF?
  • For borrowers who have had loans other than from the Direct Loan program, what have your experiences been trying to access or participate in PSLF?

Many Democratic lawmakers have stressed the need to reform the program to give public service workers the student debt relief they deserve. In May, 56 Democrats sent a letter to Biden urging him to quickly reform the program and eliminate the “extraordinary confusion” it places on borrowers.

They wrote: “The program has been beset by numerous ‘donut holes’ that disqualify certain types of loans, repayment plans and the payments themselves, leading to extraordinary confusion and distrust of the PSLF program and, by extension, the federal government.”

Seth Frotman, executive director of the Student Borrower Protection Center – which advocates for borrowers’ rights – said in a statement that the move by the Education Department to launch a public inquiry “offers hope for public service workers who have been let down and cheated out of promised debt forgiveness.”

“For the first time, the federal government is asking those who depend on the program to help decide what comes next,” he said.

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Biden campaigned on cancelling and reforming student debt. Here’s where those promises stand.

Joe Biden
President Joe Biden.

  • Biden campaigned on cancelling $10,000 in student debt per person and reforming loan programs.
  • He has yet to deliver on those promises, but the government has begun work on reforming student debt.
  • Advocates and lawmakers say borrowers need more certainty from the Education Department.
  • See more stories on Insider’s business page.

President Joe Biden promised to lessen the $1.7 trillion student-debt crisis during his campaign, promising debt cancellation and reforms of key student-loan programs.

While it’s admittedly early, Biden hasn’t fulfilled any of those promises yet. The most that can be said is that his is starting to consider working on them, and it’s going to take a while to see progress.

One of the president’s first actions in office was an extension of the student-loan payment pause during the pandemic, providing relief to the 43 million borrowers. But the pause is lifting come October, and borrowers, experts, and lawmakers worry the Biden administration is not doing enough to protect borrowers when that happens.

On Thursday, the Student Borrower Protection Center (SBPC), which advocates for borrowers’ rights, led 128 organizations in calling for the pause to be extended until Biden follows through on reforming loan forgiveness programs and cancelling student debt.

“There is a very long way to go to deliver on the promises for student loan borrowers, between what was promised and where we are,” Seth Frotman, executive director of the SBPC, told Insider. “A lot of that is obviously because of how broken the system is and how many of the problems we’re facing are decades in the making.”

Here’s what Biden promised on student debt during his campaign, and where those promises currently stand:

Cancelling $10,000 in student debt per borrower

Biden promised to cancel $10,000 in student debt per person. In a speech on November 16, he said student loans are holding borrowers up, and forgiving $10,000 “should be done immediately.”

His campaign website said he’d work with Democrats to “authorize up to $10,000 in student debt relief per borrower” as part of COVID-19 relief, but the $1.9 trillion stimulus package he signed in March didn’t include that.

Once he took office, he said at a CNN town hall in February that he was “prepared to write off the $10,000 debt but not $50 [thousand], because I don’t think I have the authority to do it.”

The Justice and Education Departments are reviewing Biden’s executive authority to cancel $50,000 in debt, but he has yet to cancel even $10,000.

Cancelling debt for students at public colleges and HBCUs

Biden also campaigned on forgiving all undergraduate tuition-related federal student loan debt for borrowers from public colleges and universities earning up to $125,000 per year, and from private Historically Black Colleges and Universities (HBCUs) and minority-serving institutions.

Biden dedicated funding to HBCUs in both his stimulus and infrastructure proposals, but not the wider forgiveness.

Some HBCUs have used Biden’s stimulus money to cancel debt for their own students. But given student debt’s disproportionate burden on Black borrowers, organizations continue to call for the president to cancel their debt.

Reforming student-loan programs

The Public Service Loan Forgiveness (PSLF) program is supposed to forgive student debt for public service workers after 120 qualifying monthly payments, but it is notoriously flawed, continuing to reject 98% of applications. Biden promised to fix the program, and those fixes are currently in the works.

Biden’s regulatory agenda, released earlier this month, included plans to reform PSLF, along with amending the “borrower defense to repayment,” which forgives loans for students who were defrauded by for-profit schools.

The process for implementing these improvements could be lengthy, though, with the department planning to finalize the new rules by April 2022. It held public hearings this week to gather feedback on the loan system, and it will soon determine a path forward for rulemaking.

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Elizabeth Warren said a student-loan CEO gave false information to Congress. A Republican senator agreed.

EW   Photo by Tom Williams Pool:Getty Images
Sen. Elizabeth Warren (D-MA).

  • Elizabeth Warren and John Kennedy said a student-loan servicer CEO may have given false testimony in April.
  • They said PHEAA CEO James Steeley may have lied about the management of a loan-forgiveness program.
  • The lawmakers are holding another hearing to give Steeley a chance to explain his testimony.
  • See more stories on Insider’s business page.

As chair of the Senate subcommittee on economic policy, Elizabeth Warren in April invited the CEOs of the country’s major student-loan servicers to testify on the impact of student debt on borrowers.

She, and the subcommittee’s Republican ranking member, John Kennedy, say that one of them may have given false testimony.

On Wednesday, Warren and Kennedy sent a letter to Pennsylvania Higher Education Assistance Agency (PHEAA) CEO James Steeley regarding “what appear to be false and misleading” statements from his testimony during the hearing. PHEAA administers the Public Student Loan Forgiveness (PSLF) program, which forgives student loans for public services workers after 120 monthly qualifying payments.

Citing data provided by the Education Department, the senators wrote in their letter than Steeley incorrectly stated that PHEAA has not been penalized for mismanaging the PSLF, which they said is a “serious matter.”

“Our hearing was held in part to understand the role of student loan servicers and the extent to which they bear responsibility for the myriad failures of the student loan program,” the senators wrote. “But it appears that you have failed to provide accurate information about your company, undermining the Subcommittee’s fact-finding role and potentially misleading committee members and the public.”

During the testimony, Warren first asked Steeley if PHEAA’s automated system mistakenly disqualifies payments, to which Steeley responded: “I’m sorry, Senator. I don’t believe that that is correct.”

Warren then asked if the Education Department has ever penalized PHEAA for mismanagement, and Steeley said it had not.

But Education Department reviews suggested the contrary. Warren and Kennedy cited nine reviews since 2016 that revealed problems with the servicer’s implementation of PSLF, resulting in four corrective action plans and two fines, each more than $100,000.

“It is not clear how or why you provided information that appears to be inaccurate: while it is inexplicable that you were not aware of this series of Education Department findings and penalties relating to your company, it is equally incomprehensible that you would have subjected yourself to criminal penalties by ‘knowingly’ and ‘willfully’ providing false information to Congress,” Warren and Kennedy wrote.

President Joe Biden campaigned on reforming PSLF, but Insider reported earlier this month that 98% of applicants are still being rejected from the program since Biden took office, according to Education Department data.

Biden’s regulatory agenda also includes reviewing PSLF and “plans to look at these regulations for improvements,” but no further detail was provided on what the mentioned improvements would look like.

The lawmakers will be holding a follow-up hearing to give Steeley the chance to explain the inaccuracies in his testimony.

PHEAA did not immediately respond to Insider’s request for comment.

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Biden promised to reform a student loan forgiveness program that’s still rejecting 98% of applicants

student loan debt
  • Biden campaigned on fixing the Public Service Loan Forgiveness (PSLF) program.
  • But new Education Dept. data shows the program is still rejecting 98% of borrowers.
  • Experts and lawmakers want Biden to fix the “extraordinary confusion” the program has caused.
  • See more stories on Insider’s business page.

President Joe Biden campaigned on reforming the Public Service Loan Forgiveness (PSLF) program, which has been under fire for years for rejecting the vast majority of applicants.

New Education Department data found that 98% of borrowers are still being rejected from the program.

PSLF allows government and nonprofit employees with federally backed student loans to apply for loan forgiveness after proof of 120 monthly payments under a qualifying repayment plan, but it has an extremely high denial rate. Biden campaigned on fixing it. His campaign website said “Biden will see to it that the existing Public Service Loan Forgiveness Program is fixed, simplified, and actually helps teachers.”

But newly released Education Department data found that 97.9% of borrowers had been rejected from the program as of April of this year for failing to meet the program’s requirements. In 2018, 99% of applicants were rejected. The reasoning the department gave for the high denial rate comes down to borrowers not meeting the 120 qualifying payments, but experts say the program itself is to blame – not borrowers.

“Washington has had almost 14 years to get PSLF right,” Seth Frotman, executive director of the Student Borrower Protection Center, which advocates an end to the student-debt crisis, wrote on Twitter on Monday. “Enough excuses. Enough deflecting. Enough of industry cashing in while borrowers struggle and @usedgov sits at the sidelines. It’s time to restore the promise of PSLF,” he added.

Last month, 56 Democrats sent a letter urging Education Secretary Miguel Cardona to fix the loan forgiveness program to get rid of the “extraordinary confusion” the program has caused borrowers, prompting the high rejection rate.

“After the first round of forgiveness initially became available to PSLF borrowers more than three years ago, approval rates for the program have remained below 2.5%,” the letter said. “The program has been beset by numerous ‘donut holes’ that disqualify certain types of loans, repayment plans and the payments themselves, leading to extraordinary confusion and distrust of the PSLF program and, by extension, the federal government.”

A Government Accountability Office report also found that 287 Dept. of Defense personnel had received loan forgiveness as of January 2020, while 5,180, or 94% of DOD borrowers, were denied. Sen. Elizabeth Warren released a statement calling the findings, and PSLF, “nothing short of a disaster.”

Education Secretary Betsy DeVos was even sued multiple times over the program’s high denial rate.

Biden’s Education Department has announced plans to begin working on improving the program. Insider reported last week that Biden’s regulatory agenda includes reviewing PSLF and “plans to look at these regulations for improvements.”

That followed the Education Department’s announcement that it was beginning the process of issuing new higher-education regulations, but no further detail was provided on what the mentioned improvements would look like.

Frotman called on the Education Department to cancel student debt for eligible borrowers who have been rejected form PSLF, writing on Twitter that “it’s time for @usedgov to cancel the debt of public service workers who have paid for 10+ years.”

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A student-loan forgiveness program for public-service workers has a 98% denial rate. 56 Democrats say it’s time for Biden to fix it.

Sen. Kirsten Gillibrand
Sen. Kirsten Gillibrand (D-NY).

  • 56 Democrats urged Education Sec. Miguel Cardona to fix the Public Service Loan Forgiveness program.
  • The letter cited its high denial rate, with fewer than 2.5% of eligible applicants being approved.
  • Biden campaigned on fixing the program to give public service workers needed relief.
  • See more stories on Insider’s business page.

President Joe Biden campaigned on reforming the Public Service Loan Forgiveness (PSLF) program, which he – along with many lawmakers in past years – said is failing borrowers due to its low approval rate.

His campaign website said: “Biden will see to it that the existing Public Service Loan Forgiveness Program is fixed, simplified, and actually helps teachers.”

On Wednesday, 56 Democratic lawmakers urged Biden to follow through on his promise.

Senate and House Democrats, led by Sens. Tim Kaine of Virginia, Kirsten Gillibrand of New York, and Rep. John Sarbanes of Maryland, wrote a letter to Biden’s Education Secretary Miguel Cardona stressing the need to improve the PSLF program to give public servants the loan forgiveness they deserve.

The PSLF program allows government and nonprofit employees with federally backed student loans to apply for loan forgiveness after proof of 120 monthly payments under a qualifying repayment plan, but 98% of all borrowers from the general public have been rejected from the program.

“After the first round of forgiveness initially became available to PSLF borrowers more than three years ago, approval rates for the program have remained below 2.5%,” the letter said. “The program has been beset by numerous ‘donut holes’ that disqualify certain types of loans, repayment plans and the payments themselves, leading to extraordinary confusion and distrust of the PSLF program and, by extension, the federal government.”

The lawmakers urged Cardona to waive barriers in PSLF, including to:

  • Expand the definition of an “eligible loan” to include all federal student loans;
  • Make all repayment plans eligible for PSLF;
  • Waive the restriction that requires a borrower to be in public service at the time of loan forgiveness;
  • And establish data-sharing agreements with the Dept. of Defense and Office of Personnel management to automatically identify public service workers with outstanding student debt.

The letter also called for extensive communication from the Education Department to borrowers to ensure they are aware of any changes that might impact loan forgiveness.

In past weeks, lawmakers from both parties have introduced legislation to reform the PSLF program. Last week, Sen. Marco Rubio of Florida and Sen. Maggie Hassan of New Hampshire introduced the Recognizing Military Service in Public Service Loan Forgiveness (PSLF) Act, which allows service members who deferred their student loan payments while deployed to count that period of time toward their PSLF progress.

This followed a a Government Accountability Office report that found that 287 Dept. of Defense personnel had received loan forgiveness as of January 2020, while 5,180, or 94% of DOD borrowers, were denied. Sen. Elizabeth Warren released a statement calling the findings, and PSLF, “nothing short of a disaster.”

Education Secretary Betsy DeVos was sued multiple times over the program’s high denial rate.

Sarbanes said on Twitter: “We must ensure that America’s teachers, social workers, public defenders, service members and community health care workers – along with many other public servants – receive the student loan forgiveness they have earned.”

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15 major labor unions want Biden to cancel all student debt for public service workers, report says

joe biden
President Joe Biden.

  • 15 labor unions called on the DOE to fully cancel student debt for public service workers through executive action.
  • They cited problems with the Public Service Loan Forgiveness program, in which 98% of applicants were rejected.
  • This follows Biden’s request for the DOE to prepare a memo on his authority to cancel up to $50,000 in debt per person.
  • See more stories on Insider’s business page.

Student-debt cancelation was a major theme of the 2020 presidential campaign, and the issue is only gaining momentum. On Thursday, 15 of the largest labor unions in the country called on Education Secretary Miguel Cardona to fully erase debt for borrowers who have worked in public service for more than a decade.

According to a letter obtained by Politico, the National Education Association, the nation’s largest teachers’ union, led 14 other unions representing more than 10 million public service workers in calling for full student debt cancelation. The letter said the Public Service Loan Forgiveness program has been so mismanaged that 98% of applicants for the program were rejected.

“The COVID-19 pandemic underscores the need for immediate action,” the letter said. “Public service workers who should have already benefited from the Department of Education’s Public Service Loan Forgiveness (PSLF) program are serving on the front lines of our pandemic response – caring for patients, teaching our students, and delivering essential services in communities across the country.”

The letter, which was also signed by the Service Employees International Union and the American Federation of Government Employees, said the federal government has “fundamentally failed” public service workers because of difficulties in navigating the PSLF program.

To qualify for PSLF, a borrower must be employed by a federal, state, local, or nonprofit organization, work full-time, and have direct loans. However, a 2020 report from The American Federation of Teachers and the Student Borrower Protection Center found that due to poor communication from the DOE, only 1% of eligible borrowers were approved for loan forgiveness.

Democratic lawmakers have criticized Education Secretary Betsy DeVos’ oversight of the program, and in 2019, Sen. Elizabeth Warren of Massachusetts, along with other Democratic senators, wrote a letter to the Consumer Financial Protection Bureau requesting further information on PSLF oversight.

“Though one of the primary functions of the CFPB is to regulate the student loan industry, they have failed to adequately address these claims,” the letter said. “In particular, we are concerned that CFPB leadership has rolled back its supervision and enforcement activities related to federal student loan servicers. This suggests a shocking disregard for the financial wellbeing of our nation’s public servants, including teachers, first responders, and members of the military.”

Biden vowed to fix the PSLF program during his campaign, but given its mismanagement, unions want the DOE to use its emergency powers during the pandemic to carry out the loan forgiveness.

In terms of using executive authority, White House Chief of Staff Ron Klain said on Thursday that Biden asked Cardona to prepare a memo looking into his authority to cancel $50,000 in student debt through executive action, which follows Biden’s request to the Justice Department to review his authority to do so. Warren campaigned on the issue of canceling $50,000 per person, while Biden set a $10,000 figure and he has since been repeatedly pressured to revise that upward.

Cardona has already acted to cancel debt for about 72,000 borrowers defrauded by for-profit schools, along with over 41,000 borrowers with disabilities. He also expanded the scope of the pause on loan payments to apply to 1.14 million borrowers with private loans under the Federal Family Education Loan (FFEL) Program.

The DOE has not yet commented on the unions’ request.

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